September 2025 Essential Tax Summary

This month, the ATO reminds tax practitioners about some situations when they need to apportion interest deductions for rental properties.

The ATO is also reminding taxpayers to be careful with the main residence exemption and to ensure that CGT events are disclosed correctly in the tax return, even if an exemption is available.

We also take a look at the Goldenville Family Trust case, which highlights why it’s essential for trustees to make distribution decisions by the relevant deadline and ensure that there is appropriate evidence of this taking place. The Tribunal also looked at the substance of certain types of income over its form, with timing, evidence, and documentation all playing a key role in the outcome.

As changes occur, we’ll keep you posted through Fortis’ social media accounts.

From the Government

Consultation on Reforms To the Retirement Phase of Superannuation

The Government has released two consultation papers about reforms to the retirement phase of superannuation:

1. Best Practice Principles – Superannuation Retirement Income Solutions
   • Consultation closes: 18 September 2025
   • This paper provides guidance for superannuation funds on how to design and deliver high-quality retirement income solutions for their members.
   • The Government is seeking feedback on three key areas:
     • Understanding the needs of members
     • Making retirement products and features more accessible
     • Communicating effectively with members
2. Retirement Reporting Framework
   • Consultation closes: 5 September 2025
   • This framework aims to report on the products and outcomes delivered to members during retirement.
   • The Australian Prudential Regulation Authority (APRA) will collect and publish data, including:
     • Available retirement products
     • Outcomes for members
     • How members are grouped (cohorting) for reporting purposes

These consultations are an opportunity for super funds, advisers, and members to provide their views on how retirement income solutions can be improved.

From the Regulators

Denying Deductions for ATO Interest

The ATO has released a detailed fact sheet explaining recent changes to tax rules that stop taxpayers from claiming deductions for certain interest charges from 1 July 2025. These interest charges include:

• General Interest Charge (GIC)
• Shortfall Interest Charge (SIC)

Key Points:

• Interest before 1 July 2025: Deductions can still be claimed.
• Interest on or after 1 July 2025: Deductions are no longer allowed.
• The main challenge for many taxpayers will be determining when the interest is incurred, which is based on when there is a current liability to pay.

Examples:

• Unpaid income tax debts (GIC): Interest isn’t incurred until a notice of assessment is issued. If an assessment is amended, the interest only starts after the due date (usually 21 days after the amendment).
• Shortfall interest (SIC): Usually incurred on the day the notice of assessment is issued, even if it relates to a past period.

The fact sheet also provides guidance for:

• Taxpayers with substituted accounting periods
• Remission of GIC or SIC amounts
• Interest on borrowings used to pay tax, which may still be deductible if the taxpayer runs a business and the tax relates to that business activity.

This fact sheet helps taxpayers understand when they can and cannot claim interest deductions and how to handle special situations.

End of Paper Lodgments for TPAR

The ATO is reminding taxpayers that paper lodgments for Taxable Payments Annual Reports (TPAR) will no longer be accepted after 28 August 2025.

The paper form is being phased out, so all TPAR submissions must now be made electronically.

Remember, the TPAR is due by 28 August each year.

Upcoming Due Dates for NFPs

The ATO is reminding Not-for-Profits (NFPs) about upcoming reporting obligations and due dates. Different dates apply depending on the type of NFP—taxable, charitable, or income tax-exempt—and whether the NFP employs staff or has obligations such as GST, PAYG instalments, PAYG withholding, or FBT.

Key Points:

1. Non-charitable NFPs with an active ABN
   • If they self-assess as income tax-exempt, they must lodge the annual NFP self-review return by 31 October.
2. Charitable NFPs
   • Cannot self-assess as income tax-exempt.
   • Must be registered with the Australian Charities and Not-for-Profits Commission (ACNC) and endorsed by the ATO.
   • Registered charities do not need to lodge an NFP self-review or income tax return but must meet annual reporting obligations with the ACNC.
3. Taxable NFPs
   • NFPs that are not eligible to self-assess or are not charitable must either:
     • Lodge an income tax return, or
     • Notify the ATO using a non-lodgment advice.
   • Based on income:
     • $416 or less – submit a non-lodgment advice.
     • More than $416 – lodge a company tax return for that year.

Other Important Reminders:

• BAS agents cannot legally charge fees to lodge an NFP self-review return.

Claiming Fuel Tax Credits When Rates Change

The ATO is reminding taxpayers that fuel tax credit (FTC) rates have changed:

• 1 July 2025 – for heavy vehicles travelling on public roads, due to an increase in the road user charge.
• 4 August 2025 – due to an increase in the Consumer Price Index (CPI).

Key Points:

• Different rates apply depending on:
  • The type of fuel used
  • When the fuel was acquired
  • What activity it was used for
• For taxpayers who claim less than $10,000 in FTCs each year, the simplest approach is to use the rate that applies at the end of the BAS period.
• The ATO also provides an FTC calculator to help with calculations.

Important BAS Tips:

• Ensure fuel purchases are apportioned correctly where required.
• Keep clear records of fuel purchases and how the fuel is used in the business.

Property and Construction

The ATO is focusing on ensuring accurate reporting in the property and construction industry. They’ve noticed several common issues among small businesses:

1. Omitting Income

• Failing to report all income, whether received in cash or bank deposits
• Misclassifying income from property development
• Contractors not reporting income that has been submitted to the ATO through the Taxable Payments Reporting System (TPRS)

2. Overclaiming Expenses and GST Credits

• Claiming private expenses as business expenses
• Failing to apportion expenses correctly between business and personal use
• Claiming assets or items used for personal lifestyle tax-free

The ATO encourages businesses in property and construction to keep accurate records and report income and expenses correctly to avoid penalties.

Apportioning rental interest expenses

The ATO has issued guidance on how to apportion interest expenses for rental properties. Apportionment is generally required in the following situations:

• The property is co-owned, unless there is a separate legally enforceable written agreement
• The mortgage has been increased for private purposes
• The property is used partly for private purposes or rented out for only part of the year

Co-ownership and Apportionment

• Expenses are normally claimed in proportion to ownership interest:
  • Joint tenants – equal ownership
  • Tenants in common – ownership may be unequal (e.g., 20%/80%)
• If another person (e.g., a spouse) is added to the loan but has no other connection to the property, your client can create a separate legally enforceable written agreement (witnessed by a Justice of the Peace) stating they are 100% responsible for repayments, interest, and expenses.

Private Use of Loan Funds

• Interest on the portion of the loan used for private purposes is not deductible.
• It’s important to check whether clients have:
  • Included private items in their rental property loan
  • Refinance or drawn down funds for private purposes
• Once a loan has been used for private purposes, interest must be apportioned for the life of the loan, except in very limited circumstances.

Short-Term Private Use

• Clients cannot claim a deduction for periods the property is used privately, even if it’s only for a short time.

Property Sold or Changed Purpose

• If the property is sold part-way through the year or its use changes, interest must be apportioned according to the period the property was rented.

Study and Training Support Loan Changes

The ATO has updated its guidance on study and training support loans following recent changes, including a 20% reduction to all loans that existed on 1 June 2025, which is now law.

Key Points:

1. 20% Loan Reduction
   • The reduction applies automatically and is backdated to 1 June 2025, before indexation.
   • Indexation will be recalculated on the reduced loan amount, and any excess indexation will be credited back to the loan.
   • The ATO will contact clients once the reduction has been applied.
   • Most reductions will be applied before the end of 2025, with some complex cases completed in early 2026.
   • Clients who have already paid off part or all of their loan after 1 June 2025 may receive a refund if they don’t have outstanding tax or government debts. Refunds will be sent to the bank account the ATO has on file. Clients should check and update their account details if necessary.
2. Tax Returns
   • Clients should lodge their 2025 tax returns as normal, even if the reduction is pending.
3. Minimum Repayment Threshold
   • For the 2025–26 income year, the minimum compulsory repayment threshold has increased to $67,000.
   • A new marginal repayment system applies: repayments are only required on income above $67,000.
   • PAYG withholding schedules will be updated later in the year to reflect this change.
4. PAYG Instalments
   • Instalment rates and amounts for clients who pay PAYG won’t be updated until the 2026–27 income year.
   • Clients may ask for advice about varying their instalments, but variations must stay within 85% of total tax payable. Underestimating instalments could result in a tax bill and interest charges at year-end.

Due Dates

The ATO sets tax return due dates based on factors such as:

• Type of entity
• When they were added to the client list
• Whether they are new registrants
• Whether prior year returns were overdue
• Whether the last return was taxable or non-taxable

Examples of General Due Dates:

31 October

• Entities with overdue prior year returns
• Entities added to client lists after 13 October
• Entities advised by the ATO of this due date (e.g., prosecuted for non-lodgment or new SMSFs under review)

31 January

• Taxable large and medium entities (excluding individuals) based on their latest lodged year
• Taxable head company of a consolidated group (including new registrants) with a member deemed large or medium in the latest year lodged

28 February

• Non-taxable large and medium entities (excluding individuals) based on their latest lodged year
• New registrant large and medium entities (excluding individuals)
• Non-taxable head company of a consolidated group, including new registrants, with a member deemed large or medium
• Any member of a consolidated group that exited the group during the year
• New registrant SMSFs

31 March
Applies to entities excluding large and medium taxpayers:

• Individuals and trusts with a latest return showing a tax liability of $20,000 or more
• Companies and super funds with total income over $2 million in the latest year lodged
• Head company of a consolidated group with a member having total income over $2 million in the latest year lodged

15 May

• Applies to all entities that do not have an earlier due date and are not eligible for the 5 June concession

Small Business Superannuation Clearing House (SBSCH) Closing

The ATO has updated its guidance to reflect that the Small Business Superannuation Clearing House (SBSCH) will close on 1 July 2026 as part of the Payday Super reforms.

Key Dates and Details:

• From 1 October 2025, new users will no longer be able to register for the SBSCH.
• Employers who are not already using the SBSCH will not be able to register after this date.
• Existing users will continue to have access until 30 June 2026.

This change is part of the broader transition to Payday Super, which will require superannuation contributions to be paid at the same frequency as employees’ wages.

Australian Financial Crimes Exchange (AFCX) Data-Matching Program

The ATO has expanded its data-matching capabilities through the new Australian Financial Crimes Exchange (AFCX) program.

About AFCX:

• AFCX is an independent, not-for-profit organisation formed by major banks.
• Its purpose is to help businesses combat financial crimes.

Objectives of the AFCX Data-Matching Program:

1. Protect taxpayer records from identity theft and unauthorised access by detecting and preventing fraud in registrations, lodgments, and refunds.
2. Build intelligence on scams, fraud, and other criminal activities in the financial system to improve the integrity of tax and superannuation systems.
3. Address emerging risks with enhanced intelligence to reduce the impact of financial scams and crimes, protect taxpayers, and safeguard tax revenue.
4. Detect, investigate, and prosecute financial crime, including identity theft, money laundering, and serious or organised crime.

How It Works:

• AFCX data is matched against ATO records and other data sources.
• This allows the ATO to:
  • Identify bank accounts used in fraudulent activity
  • Monitor unusual activity through bank accounts and IP addresses
  • Stop fraudulent registrations and lodgments
  • Prevent fraudulent refunds from being issued

This program strengthens the ATO’s ability to protect taxpayers and the integrity of the tax and super systems.

PAYGW Reminders for Activity Statement Lodgments

The ATO is sending letters to certain employers to remind them of their activity statement lodgment obligations.

What the reminder includes:

• PAY withheld amounts reported through Single Touch Payroll (STP)
• Any other pre-filled amounts, such as GST instalments and PAYG instalments

The reminder also provides a timeframe for employers to review and, if needed, correct these amounts before lodging their activity statement.

What happens if clients don’t lodge by the due date:

• The ATO will assume the amounts on record are correct and complete
• These amounts will be added to the employer’s account as due and payable
• The ATO may finalise the activity statement and consider it lodged, unless there are other obligations (e.g., GST) to report

For registered agents:

• The ATO will provide a list of clients who have been sent this reminder
• This helps you know which clients need to take action

If no changes are made:

• Once the activity statement is finalised in the ATO system, clients will need to lodge a revised activity statement to adjust amounts
• If the information is already correct, no further action is required

Tips to Get the Main Residence Exemption Right

The ATO has noticed recurring issues with capital gains reporting and applying the main residence exemption when properties are sold. Here are key tips to help get it right:

1. Ask About Property Transactions
   • Check if clients bought or sold property in the past income year.
   • Determine the property’s use:
     • Solely as primary residence
     • Earning income (rental or business)
     • Vacant land
2. Explain Record-Keeping Requirements
   • Ensure clients keep proper records of property transactions, including purchase and sale documents.
3. Use Pre-Fill Property Transfer Information
   • Available in Online Services, it includes:
     • Property address
     • Contract date
     • Settlement date
     • Sale price
4. Check if clients disposed of vacant land – typically not eligible for the main residence exemption, even if they intended to build on it.
5. Check Eligibility for the 6-Year Absence Rule
   • Can only be used if the property was your client’s main residence before renting it out.
   • If used, the election must be made in the tax return under the CGT section.
6. One Main Residence at a Time
   • Ask if clients owned more than one property during the ownership period.
   • The exception is a 6-month period when moving from one home to another.
7. Check Tax Residency Status
   • Changes in tax residency while owning the property can affect exemption eligibility.
8. Include the Main Residence Exemption in the Tax Return
   • Use the Capital Gains Tax exemption, rollover or additional discount type code:
     • Select Main residence exemption (Subdivision 118-B) from the drop-down list.

SMSF Bank Accounts

The ATO reminds SMSF trustees that only authorised parties should have access to the fund’s bank account. Trustees should:

• Regularly review who has access to the account
• Notify the ATO immediately if the fund’s bank account details change. Notifications can be made via:
  • A registered agent
  • Online Services for Business
  • Calling the ATO on 13 10 20

Key Rules:

• SMSFs must have a unique bank account to protect members’ retirement benefits.
• Fund money and assets must be kept separate from personal or related-party assets.

Leaving a Professional Services Partnership

The ATO has noted that many individuals retiring or exiting partnerships fail to meet their ongoing tax obligations. Even after leaving a partnership, individual professional practitioners (IPPs) must include any assessable distributions related to the partnership’s net income in their personal tax return.

Common Reporting Issues:

1. Omissions of Final Partnership Income or Distributions
   • Payments received after leaving the partnership are assessable income in the year they are derived.
   • Some former partners incorrectly report these as capital amounts or omit them entirely.
2. Incorrect Treatment of Retirement Payments or Deferred Entitlements
   • Distributions are often profit allocations and must be reported as assessable income.
   • They should not be incorrectly classified as “pension” type payments.
3. Misreporting Capital Account Adjustments
   • The capital account reflects a partner’s equity in the partnership.
   • Changes may result in losses, but not all are deductible or result in a capital loss.
   • Accurate record-keeping is essential.
4. Overlooking Service Trust or Related Entity Obligations
   • The ATO highlights concerns around service fees paid to service trusts or associated entities (see RT 2006/2).

Why Errors Happen:

• Misunderstanding partnership agreements or retirement deeds
• Uncertainty about final year entitlements or delays in receiving information
• Changing financial advisers or record-keeping practices
• Misunderstanding how retirement payments are taxed

ATO Recommendations for Exiting Partners:

• Review agreements and final statements carefully
• Seek early advice from a tax professional familiar with professional firm structures
• Use updated ATO guidance or your firm’s finance team resources
• Keep records of all communications and payments post-exit
• Accurately report all income and distributions received, including amounts applied or dealt with on their behalf
• Include any capital gains or adjustments related to the exit
• Ensure retirement payments are correctly classified

Rulings, Determinations & Guidance

Correcting Wine Equalisation Tax Errors

The Commissioner has issued Legislative Instrument LI 2025/12 – A New Tax System (Goods and Services Tax) (Correcting Wine Equalisation Tax Errors) Determination 2025. This sets out when errors relating to wine tax or wine tax credits can be corrected.

Key Points:

An error in an earlier tax period may be corrected if all of the following apply:

1. The error relates to an amount of wine tax or wine tax credit under the Wine Equalisation Tax Act 1999.
2. The earlier tax period started on or after 1 July 2012.
3. You lodge the GST return for the relevant tax period within the period of review for the net amount of that earlier period.
4. At the time of lodging:
   • The error is not subject to a compliance activity, and
   • The error was not made in calculating the net amount for another period under compliance review, or
   • The Commissioner has given written approval under this instrument to correct it.
5. The error has not already been corrected in calculating the net amount for another tax period.
6. If the error is a debit error, the additional conditions in section 7 are met.
7. The client is registered for GST.

Thin Capitalisation – Third Party Debt Test (PCG 2025/2)

The ATO has released PCG 2025/2, which sets out its finalised compliance approach and risk assessment framework for restructures and refinancing arrangements made in response to the thin capitalisation reforms under the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share – Integrity and Transparency) Act 2023.

Purpose of PCG 2025/2:

• Provides guidance on the application of anti-avoidance provisions to restructures.
• Sets out a risk assessment framework for ATO compliance activity.

Schedules in the PCG:

1. Schedule 1: Examples where the debt deduction creation rules (DDCR) may apply.
2. Schedule 2: Compliance risks from restructures responding to the DDCR.
3. Schedule 3 (draft): Targeted compliance approaches for the third-party debt test, to be finalised with draft TR 2024/D3.
4. Schedule 4: Compliance risks from restructures responding to the thin capitalisation rules.

Note: Schedules 3 and 4 should be read alongside draft TR 2024/D3, which outlines the ATO’s preliminary views on the third-party debt test. Schedule 3 and TR 2024/D3 will be finalised shortly.

Risk Assessment Framework for Restructures:

• DDCR-related restructures: Use the risk assessment framework with Schedule 2.
• Thin capitalisation-related restructures: Use the framework with Schedule 4.

Risk Zone	Characteristics of Restructures	Risk Level
White	– Settlement agreement with the ATO covering Australian tax outcomes – Court decision on Australian tax outcomes – ATO review or audit gives a ‘low risk’ rating – Section 820-35 applies (de minimis)	No further risk assessment required
Yellow	Restructures not in the green or red zones	Compliance risk not assessed; ATO may engage with the client to understand risks
Green	– Covered by low-risk examples in Schedules 2 or 4 – Exhibit features set out in paragraph 202 of PCG	Low risk; ATO may only verify self-assessment to obtain comfort
Red	– Covered by high-risk examples in Schedules 2 or 4 – ATO review or audit gives a ‘high risk’ rating (or ‘low assurance’ under Justified Trust review)	High risk; ATO will review or audit the arrangement

The PCG applies to restructures entered into on or after 2 June 2023.

Ignoring Division 7A Loan Repayments with Interposed Entities

The ATO has finalised Tax Determination TD 2025/5, which explains its views on section 109R of the ITAA 1936. This determination clarifies when loan repayments can be disregarded for Division 7A purposes in arrangements involving interposed entities.

Key Points:

1. Application of Section 109R:
   • Actual loan repayments can be disregarded when a shareholder or associate is deemed to have received a loan from the company under the interposed entity rules in sections 109T and 109W.
   • Notional loan repayments (deemed under section 109W(3)) can also be disregarded when calculating how much of the notional loan has been repaid.

In Effect:

• Section 109R allows the ATO to ignore:
  1. Actual repayments where the borrower is deemed to have obtained the loan via interposed entities.
  2. Notional repayments deemed under section 109W(3).

This determination provides clarity for advisers and taxpayers on how repayments are treated in Division 7A arrangements involving interposed entities, reducing uncertainty in compliance and reporting.

Low-Risk Software Arrangements – Draft PCG 2025/D4

The ATO has released draft PCG 2025/D4, which explains when it will not review software arrangements to determine whether any cross-border payments to a non-resident are royalties and therefore subject to withholding tax.

Purpose of the Draft PCG:

• Provides a risk assessment framework for software arrangements.
• Arrangements that fall within the “white” or “green” zone are considered low risk, meaning the ATO generally will not allocate further compliance resources to review them.

White Zone

An arrangement falls in the white zone for an income year if any of the following apply:

• There is a settlement agreement or Advanced Pricing Arrangement (APA) with the ATO that expressly covers Australian withholding tax outcomes, and the conditions have been met.
• A court or tribunal decision confirms whether a payment under the arrangement does or does not constitute a royalty.
• The income year has already been subject to an ATO review or audit, and the arrangement was given a “low risk” rating (or “high assurance” under a justified trust review).

Green Zone

An undissected payment falls in the green zone if it is made solely in relation to:

1. Software for private or domestic use only.
2. Business software that is:
   • Installed and used in the course of the taxpayer’s business
   • Generally available to the public, not substantially customised, and not further sold
   • Licensed or exploited as a primary object of the taxpayer’s business
3. Finished tangible goods that include software as an inseparable part, where the software enables the goods to perform their intended function, and the goods are resold to retail customers.
4. Software copies stored on physical media for the purpose of reselling the copies, where the taxpayer and associates do not require rights to offshore intellectual property (e.g., sublicensing rights).

This guidance helps taxpayers and advisers identify software arrangements that are low risk for royalty withholding purposes, reducing the need for ATO review and giving clarity on cross-border payments.

Cases

Trust resolutions for distributions not valid

The Administrative Appeals Tribunal (AAT) recently considered a case involving the Goldenville Family Trust (GFT) and held that certain trust distributions were not valid. As a result, default beneficiaries were taxed on the trust’s net taxable income for the relevant years.

Case Background

• For the 2015, 2016, and 2017 income years, the GFT passed written resolutions to distribute interest income to two beneficiaries, including a foreign resident, aiming for a more favourable tax outcome.
• Normally, interest paid to a non-resident is subject to a 10% withholding tax.
• The ATO disputed the distributions, arguing the resolutions weren’t valid and that the income should not be classified as interest.

Tribunal Findings

1. Trust Resolutions Were Invalid
   • For a trust distribution to be effective for tax purposes, the trustee decision must be made before 30 June of the relevant income year.
   • The Tribunal found insufficient evidence that the decisions were made by 30 June. In fact, evidence suggested the decisions were likely made after year-end.
   • As a result, default Australian resident beneficiaries became entitled to the income.
2. Characterisation of Income
   • Even if the resolutions were valid, the Tribunal questioned whether the income was properly classified as interest.
   • While the amounts were income and assessable, there wasn’t enough evidence to prove they were interest.
   • The Trustee’s characterisation of the income was rejected.

Key Lessons for Accountants and Advisers

1. Timing of Trust Resolutions
   • Trust resolutions must be made before 30 June to achieve the intended tax outcome.
   • Documents prepared after year-end can only record decisions already made before year-end.
   • Backdating documents or using informal/incomplete resolutions increases risk and is likely to fail.
2. Characterisation of Income
   • The label used by the trustee is not conclusive.
   • ATO and courts focus on the substance over form to determine the nature of income.
   • Accurate, contemporaneous documentation is crucial, especially when the income characterisation can materially impact tax outcomes.

This case reinforces the importance of timely decision-making, proper documentation, and substance-over-form assessment in trust income distributions.

No Royalty Withholding Tax or Diverted Profits Tax for PepsiCo

The High Court has dismissed the Commissioner’s appeals and ruled in favour of PepsiCo, holding that the arrangements in question did not attract royalty withholding tax (WHT) or diverted profits tax (DPT).

Case Background

• The dispute involved an Exclusive Bottling Agreement (EBA) between PepsiCo Inc (US) and Schweppes Australia Pty Ltd (SAPL), an unrelated Australian bottler.
• Under the EBA:
  • SAPL obtained a licence to use PepsiCo’s intellectual property (including trademarks).
  • SAPL agreed to purchase flavour concentrate from PepsiCo Beverage Singapore Pty Ltd (PBS).
  • Payments were made only to PBS, with no direct royalty paid to PepsiCo.
• The Commissioner argued that part of the concentrate payments should be treated as royalties for the use of PepsiCo’s IP and thus subject to withholding tax.

High Court Findings

1. Royalty Withholding Tax (WHT)
   • The Court held that PepsiCo did not derive any royalty income, so no WHT liability arose.
   • Majority view (4:3): Concentrate payments were for concentrate only, and PepsiCo’s IP licence was part of a broader commercial arrangement. Payments at arm’s length for concentrate could not be considered royalties.
   • Minority view: The licence and concentrate supply were a single integrated transaction, implying some payment could be a royalty.
   • Outcome: Despite differing reasoning, the Court unanimously ruled that payments to PBS were not paid to or derived by PepsiCo, so WHT was not payable.
2. Diverted Profits Tax (DPT)
   • The Court found that PepsiCo did not obtain a tax benefit under a scheme within the meaning of section 177J of the ITAA 1936.
   • As a result, DPT did not apply.

Key Takeaways

• Payments for goods or services may not be treated as royalties simply because intellectual property is involved in the broader arrangement.
• Arm’s length pricing for goods supplied under a commercial agreement can prevent parts of the payment from being recharacterised as royalties.
• The DPT applies only where a taxpayer obtains a tax benefit from a scheme; commercial transactions with arm’s length pricing may fall outside its scope.

Uber payments to drivers subject to payroll tax

The NSW Court of Appeal has ruled that payments made by Uber to drivers are considered taxable wages for payroll tax purposes. This decision has attracted attention because it could influence how Federal and State tax authorities view similar arrangements in the gig economy.

Background

• Uber previously successfully challenged an $81.5 million payroll tax assessment by Revenue NSW. The initial court held that Uber acted as a payment collection agent, passing on payments from riders to drivers, and that these payments were not made for performing work under section 35(1) of the Payroll Tax Act 2007 (NSW).
• Revenue NSW appealed, bringing the case to the NSW Court of Appeal.

Court of Appeal Findings

1. Substance Over Form
   • The Court examined the actual nature of the arrangement, rather than just the contractual wording.
   • Drivers were performing services for Uber, not merely receiving payments for use of their vehicles.
2. Definition of Relevant Contracts
   • The drivers’ services fell within “relevant contracts” under section 32 of the Payroll Tax Act.
   • The exclusion for services that are ancillary to supplying goods did not apply.
3. Payment Connection to Work
   • Payments to drivers were linked to the work performed (trip duration, distance, and time).
   • Uber’s service fee did not break the connection between work and payment.
   • Therefore, the payments were taxable wages for payroll tax purposes.
4. Rejection of Collection Agent Argument
   • The Court overturned the previous ruling that Uber was merely a payment facilitator.
   • Even though Uber collected payments from riders and passed them to drivers, the payments were still for services performed by drivers.

Implications

• This ruling could lead tax authorities to reassess employment-related tax obligations in the gig economy, including rideshare, food delivery, and other service industries (e.g., medical centres, brokers).
• Businesses in these sectors should review arrangements with contractors or service providers to ensure compliance with payroll tax and related obligations.

Legislation

Student Loans and Repayments

The Bill providing a 20% reduction to student loans has now passed both Houses of Parliament and received Royal Assent on 2 August 2025.

Key Changes

1. 20% One-Off Reduction
   • Applies to HELP debts and other student loans under the Student Loans Acts.
   • Covers loans incurred on or before 1 June 2025.
   • The reduction is applied automatically by the ATO.
2. Increase in Minimum Repayment Threshold
   • The repayment threshold rises from $54,435 in 2024–25 to $67,000 in 2025–26.
   • The threshold will continue to increase each year in line with wage growth.

If you have any questions regarding the above information, please do not hesitate to contact our office to speak to one of our team.