Manor Advisory Newsletters

Discretionary trusts and the proposed 30% minimum tax Discretionary trusts, often referred to as family trusts, have been a popular structure for Australian families and businesses for many decades. They are commonly used to operate family businesses, hold investments and assist with succession planning. Their flexibility, together with asset protection and estate planning benefits, has made them an attractive option for many groups. In the 2026–27 Federal Budget, the Government announced a significant proposed change. From 1 July 2028, trustees of discretionary trusts would generally be required to pay a minimum tax of 30% on the trust's taxable income. According to the Government, the proposal is intended to better align the tax paid on trust income with that paid by salary and wage earners, while reducing opportunities to split income between family members. However, the announcement has generated considerable debate. Professional bodies, business groups and tax advisers have expressed concerns that the changes could increase complexity and compliance costs for many genuine family businesses and investment structures. How the proposal is expected to work Under the proposal, the trustee would generally pay the minimum 30% tax on the trust's taxable income. Where trust income is distributed to individual beneficiaries or certain other non-corporate beneficiaries, those beneficiaries would generally receive a non-refundable tax offset recognising the tax already paid by the trustee. This is intended to reduce the risk of the same income being taxed twice, but while maintaining the impact of the 30% minimum tax rate. Importantly, the minimum tax would not apply to every trust. The Government has indicated that a number of trusts would be excluded, including fixed trusts, widely held trusts, complying superannuation funds, charitable trusts, deceased estates, special disability trusts and genuine testamentary trusts. Primary production income and certain income relating to vulnerable minors would also be excluded. The Government has also stated that more than 90% of small businesses are not expected to be affected. While that may be reassuring for some taxpayers, there are still some important issues that could affect family groups using discretionary trusts. What could this mean in practice? One area likely to receive close attention is the use of companies as beneficiaries of family trusts. Many family groups have historically distributed some trust income to a company. This can provide flexibility in managing cash flow, retaining profits within the business and funding future growth. Under the proposed rules, however, the corporate beneficiary would not receive a tax offset for the tax already paid by the trustee. In many cases this will mean that income distributed from a discretionary trust to a company would be subject to double taxation. Another practical impact of the proposed change is that some family groups may find it more difficult to fully utilise existing tax losses. While the impact will depend on each group's circumstances, the proposed minimum tax is likely to reduce some of the flexibility that currently exists when managing taxable income across a family structure within many groups. The Government has also proposed a temporary three-year rollover period, commencing from 1 July 2027, to help restructure into alternative business structures, such as companies or fixed trusts, without triggering immediate income tax or capital gains tax consequences. While this may assist some groups, restructuring is rarely straightforward. Depending on the circumstances, it might be necessary to consider things like stamp duty, loan approvals, financing arrangements, contract changes, licensing requirements and professional advice. Even relatively simple restructures can involve significant time and cost, so careful planning will be important. The rules are not yet final At this stage, the proposal remains subject to consultation. Treasury released a consultation paper in July 2026 seeking feedback on a range of design issues, including how the new rules would operate in different situations. Final legislation has not yet been introduced, meaning aspects of the proposal could still change before the rules become law. For this reason, most groups utilising discretionary trust structures should avoid making major structural decisions based solely on the announcement. Instead, it is sensible to monitor developments while considering whether existing structures are likely to remain appropriate if the proposal proceeds. What should you do now? For many families, discretionary trusts are about much more than tax. They can continue to provide valuable asset protection, succession planning and business flexibility. The proposed changes do not remove those benefits, nor do they prevent discretionary trusts from continuing to be used. However, the proposal does have the potential to change the tax outcomes for some family groups, particularly those with more complex structures or those that regularly distribute income to companies. With the proposed start date still some time away, there is an opportunity to pause and carefully understand how the changes may affect your circumstances and consider whether any planning or restructuring might be appropriate. As the legislation develops, we can help you assess the impact on your business or investment structure and determine whether any action is warranted. New reasonable travel and overtime meal rates The ATO has released its updated reasonable travel and overtime meal allowance rates for the 2026–27 income year in Taxation Determination TD 2026/4. The overtime meal allowance has increased to $40.00, while the reasonable amounts for domestic and overseas travel have also been updated based on salary levels and travel destinations. Although these figures are widely publicised each year, they are often misunderstood. A common misconception is that employees can automatically claim a tax deduction up to the ATO's published rates. In reality, the rules are much narrower, and applying them incorrectly could lead to deductions being denied as well as interest and penalties. A travel allowance is the starting point The ATO's reasonable amounts only become relevant if an employee receives a genuine travel or overtime meal allowance from their employer. Generally, an allowance should: Be paid specifically to cover work-related travel or overtime meal expenses; Relate to particular work trips or overtime worked, rather than being a general additional payment; Be shown separately from normal salary or wages; and Be intended to help cover expenses the employee is expected to incur. If an amount has simply been built into an employee's normal salary package or is not identified as a separate allowance, the ATO's reasonable rates generally do not apply. Instead, the normal substantiation rules will usually apply to any deduction claimed. The reasonable rates are not an automatic deduction One of the most common misunderstandings is that receiving a travel allowance allows an employee to automatically claim the ATO's published rate as a tax deduction. This is not how the rules operate. Employees can generally only claim the amount they actually spend on deductible work-related travel or overtime meal expenses. The ATO's reasonable amounts simply mean that, in certain circumstances, employees may not need to keep a receipt for every specific expense. Importantly, the expenses must still have been incurred and they must relate to work-related activities. Good records are still essential Even where a genuine travel allowance has been paid, employees should still keep sufficient records to demonstrate that they incurred the expenses and that their claim is reasonable. Useful records may include: A diary recording work trips and overnight travel; Details of meals and incidental expenses incurred while travelling; Bank or credit card statements showing the expenses were personally paid; A representative sample of receipts; and Where travel involves six or more consecutive nights away from home, a travel diary recording the dates, locations and purpose of the travel. While receipts may not always be required, relying solely on the ATO's published rates without any supporting evidence could expose you to unnecessary scrutiny if your return is reviewed. Practical tips for employees and employers If you receive a travel or overtime meal allowance, it is worth checking that the arrangement satisfies the ATO's requirements before claiming a deduction. Some practical steps include: Review your payslip. Check that the allowance is separately identified rather than being included in ordinary salary or wages. Keep records throughout the year. Maintaining a simple travel diary and retaining some supporting documents is much easier than trying to recreate the information months later. Only claim what you actually spend. The ATO's reasonable amounts are not a target or standard deduction. They simply provide a benchmark for when the normal receipt requirements may be relaxed. Take extra care on longer trips. If you are away from home for six or more consecutive nights, additional travel diary requirements will generally apply. A little preparation can avoid problems later The updated reasonable amounts provide a useful guide for employers and employees during the 2026–27 income year, but they should not be viewed as an automatic entitlement to a tax deduction. Understanding how the rules operate, keeping appropriate records and claiming only genuine work-related expenses can significantly reduce the risk of problems if the ATO reviews your tax return. If you or your employees receive travel or overtime meal allowances, now is a good opportunity to review your current arrangements. We can help you confirm whether the allowances meet the ATO's requirements and what records should be kept to support any future claims. Penalty units increase from 1 July 2026 From 1 July 2026, the value of a Commonwealth penalty unit increased from $330 to $364. While this may sound like a minor administrative change, it has a direct impact on many ATO penalties, increasing the cost of a range of compliance failures. A penalty unit is simply the method used under Commonwealth law to calculate many fines and administrative penalties. Rather than specifying a fixed dollar amount, the legislation often refers to a certain number of penalty units. As the value of a penalty unit increases, so too do the penalties that rely on it. The new value applies to breaches that occur on or after 1 July 2026. Earlier breaches continue to be assessed using the previous rate. Where the increase is likely to be felt Many of the ATO's administrative penalties are based on penalty units, meaning the increase flows directly through to the amount payable. Failure to lodge on time One of the most common penalties applies where tax returns, activity statements or other required documents are lodged late. The base penalty is generally one penalty unit for every 28 days (or part of 28 days) that a document remains outstanding, up to a maximum of five penalty units. For a small entity, this means the maximum base penalty has increased from $1,650 to $1,820. Higher penalties may apply to medium and large entities, while significant global entities are subject to much larger penalty amounts. False or misleading statements Providing incorrect information to the ATO can also result in penalties. Where there is no tax shortfall, the law provides for base penalties of 20, 40 or 60 penalty units, depending on the circumstances and the taxpayer's level of care. At the new penalty unit value, these base penalties have increased to $7,280, $14,560 and $21,840 respectively, before taking into account any reductions or increases that may apply. Self-managed super funds Trustees of self-managed superannuation funds (SMSFs) should also be aware of the higher penalty amounts. A range of SMSF administrative penalties are calculated using penalty units. For example, some breaches that previously attracted a penalty of $19,800 (60 penalty units) now carry a penalty of $21,840. Importantly, these penalties are generally imposed on each individual trustee rather than the fund itself. This means the total cost can increase significantly where a fund has multiple individual trustees, and the penalties cannot usually be paid from the assets of the superannuation fund. Other obligations, such as certain record-keeping requirements, tax invoice obligations and some superannuation guarantee penalties, may also be affected by the higher penalty unit value. Why this matters For most taxpayers, these penalties are entirely avoidable. Late lodgements, poor record keeping and incorrect information remain some of the most common reasons businesses and individuals incur ATO penalties. While the increase in penalty units may not seem substantial on its own, the cost can add up quickly where there are multiple outstanding obligations or repeated compliance issues. It is also worth remembering that ATO penalties are generally not tax deductible, meaning they must be paid from after-tax income. The good news is that the ATO will often consider remitting penalties (in part or full) where there are genuine mitigating circumstances, reasonable care has been taken, or a voluntary disclosure is made before the issue is identified by the ATO. Addressing problems early typically results in a better outcome than waiting until formal compliance action begins. Practical steps to reduce your risk There are several simple steps that can help minimise the risk of penalties: Lodge on time. Providing information to us well before due dates gives enough time to prepare accurate returns and meet lodgement deadlines. Keep good records. Accurate and up-to-date records make it easier to prepare returns correctly and support your tax positions if questions arise. Review your compliance regularly. If you operate a business or manage an SMSF, periodic reviews can identify issues before they become costly. Seek advice early. If you think you've made a mistake or have fallen behind with your tax obligations, speaking with us as soon as possible will generally provide more options than waiting for the ATO to contact you. A timely reminder The increase in penalty units is a timely reminder that the cost of tax non-compliance continues to rise. While the higher penalties are intended to encourage timely and accurate compliance, they also reinforce the value of good record keeping and proactive tax management. If you have any concerns about outstanding lodgements, record-keeping obligations or any other tax compliance matter, please contact us. We can help you address issues early and minimise the risk of unnecessary penalties. SMSF and property – preparing for a smooth audit For many SMSF trustees, property is one of the most significant assets held by their SMSF. Unlike personally owned assets, there is a legal requirement that all SMSF assets are valued each 30 June. This can be a simple process for assets that have a ready market like listed shares, however the process for other assets like property can be more onerous. Trustees are responsible for determining the market value of fund assets. After your annual financial statements are prepared your fund auditor will need to see objective and supportable evidence that backs up how you have arrived at the market value.  Trustees have the option to use a qualified independent valuer for this and should consider this where an asset represents a significant part of the fund’s value or might be difficult to value. Where trustees choose not to use an independent valuer, they will need to be able to support asset valuations with evidence from multiple sources. Typically, for property this may include: Recent comparable sales – Generally at least 3 and the properties should be genuinely comparable in terms of size and location. A real estate agent appraisal that also includes comparable sales. Net income yields for commercial property (generally not sufficient evidence on its own). The ATO includes some helpful guidance on this in their Guide to valuing SMSF assets. Where an SMSF holds property that meets the business real property (BRP) definition it is possible that this property can be leased to a business that is operated by a member or a related party of the SMSF. However, the fact that an arrangement like this is permitted does not mean the fund trustees can charge a non-market rate of rent. When a rental arrangement is entered into with a related party of the super fund, that arrangement should be on arm’s length (commercial) terms and this should be supported by a rental appraisal. An easy way to think about this is – do all the lease terms reflect an arrangement that would be agreed to if the tenant was an unrelated third party? To evidence that a related party arrangement is on arm’s length (commercial) terms an auditor should be provided with; A properly documented lease; A rent appraisal when the lease was first entered into; Evidence that the arrangement is operating based on the terms of the lease; and Evidence that where a prior lease term has expired the terms have been reset to market value – backed up by a new rent appraisal. Although your financial year 2026 SMSF audit might not be taking place for some months, the process can be much smoother where SMSF trustees are proactive and start to compile this evidence in advance, rather than waiting for the auditor’s request.

High Court Brings Greater Clarity on Trust Distributions The High Court has recently handed down an important decision that will impact many private business groups using discretionary trusts and corporate beneficiaries. In Commissioner of Taxation v Bendel [2026] HCA 18 (10 June 2026), the Court rejected the ATO’s long-standing view that an unpaid distribution (also known as an unpaid present entitlement or UPE) owed by a trust to a corporate beneficiary will automatically constitute a loan for the purpose of the integrity rules in Division 7A. The rules in Division 7A are aimed at situations where private companies provide benefits to shareholders or their associates in the form of payments, loans or forgiven debts. When these rules are triggered the tax rules apply as if the company had paid an unfranked dividend to the recipient of the benefit. Why this matters Many private business groups use discretionary trusts as part of their structure. It is common for a trust to distribute at least some income to a corporate beneficiary so that this income can be taxed at the corporate tax rate (currently 25% or 30%), while the cash remains within the trust to fund working capital, future investment or business growth. Until now, the ATO's view was that these unpaid distributions would typically be treated as loans under Division 7A. This often meant businesses needed to put complying loan agreements in place, charge benchmark rates of interest and make annual repayments to avoid the risk of deemed unfranked dividends being recognised for tax purposes. For many groups, this created an additional administration burden, reduced cash flow flexibility and increased compliance costs. The High Court has now clarified that an unpaid distribution will not necessarily amount to a Division 7A loan simply because the corporate beneficiary has not demanded payment. While every arrangement will depend on its particular facts, the decision is likely to provide greater certainty for many business groups that have historically retained funds within their trusts. What happens with existing loan arrangements? The ATO has since released a Decision Impact Statement (26 June 2026), confirming that it will generally administer the law in accordance with the Court's decision, while also highlighting that other integrity provisions may still need to be considered. One of the key things that the ATO has clarified is that where formal written loan agreements have been put in place in response to the ATO’s previous views in this area, these can’t simply be unwound just because of the High Court decision. That is, the trust still needs to make minimum loan repayments each year until the loan period ends or the loan is completely repaid to prevent a deemed unfranked dividend from being recognised under the tax rules. Other tax rules still matter Although the decision represents a significant development, it should not be viewed as removing all Division 7A or tax related concerns. The ATO has made it clear that other provisions within Division 7A can still apply in certain situations. For example, if a trustee appoints income to a corporate beneficiary and this is left unpaid, but the trustee subsequently lends money to a shareholder of the company (or an associate of a shareholder), then this can potentially still trigger a deemed unfranked dividend for tax purposes unless appropriate steps are taken. Other integrity rules also need to be considered when trust distributions are left unpaid. For example, the rules in section 100A can potentially trigger adverse tax outcomes in situations where a trustee appoints income to a beneficiary but the real benefit of the funds is enjoyed by another party. These provisions remain highly fact-dependent, making it important to review arrangements carefully rather than assuming the Bendel decision resolves every issue. Looking ahead The decision provides a timely opportunity for private groups to review their trust structures, distribution resolutions and patterns, accounting records and the way unpaid entitlements have been managed over time. However, we also need to keep an eye on the Government's proposed trust tax reforms. The Government announced in the recent Federal Budget that it will be introducing a 30% minimum tax rate for discretionary trusts from 1 July 2028. The Government has also indicated that income distributed by discretionary trusts to corporate beneficiaries will generally be subject to double taxation because companies won’t receive a credit for the tax that is paid at the trust level on its income. This is likely to significantly reshape tax planning strategies over the coming years. A recent consultation paper released by Treasury in connection with the proposed 30% minimum tax rate also suggests that the Government might modify the tax rules to ensure that Division 7A can apply to unpaid distributions. This isn’t law yet, so we will need to monitor developments because this could mean that tax planning strategies need to be revisited before we reach 1 July 2028. Please let us know if you would like to discuss how the Bendel decision and proposed 30% minimum tax on discretionary trust income will impact on your group. Navigating the 2026–27 Car Thresholds If you're thinking about purchasing or leasing a vehicle for your business in the new financial year, it's worth understanding the updated car thresholds that apply from 1 July 2026. While these limits may seem technical, they can have a practical impact on the amount you can claim for tax depreciation deductions, the GST credits that are available, and whether luxury car tax (LCT) could apply. Knowing how these rules work before signing a contract can help you make a more informed decision and potentially improve your overall tax and cash flow position. The car limit – understanding the depreciation cap For vehicles first used or leased in the 2026–27 income year, the car limit is $69,883. This limit generally represents the maximum value that can be used when calculating tax depreciation deductions for a passenger vehicle, regardless of how much was actually paid for the car. From a commercial perspective, this is an important consideration if you're looking at a higher-value vehicle. While purchasing a more expensive car may still make sense for operational or business reasons, the portion of the purchase price above the car limit will generally not attract depreciation deductions. If the vehicle is used for both business and private purposes - which is common for many business owners - you would typically only be able to claim deductions for the business-use portion. Maintaining appropriate records, such as a valid logbook and odometer readings, remains an important part of supporting those claims should the ATO undertake a review or audit. Rather than focusing solely on the purchase price, it is often worthwhile considering the overall after-tax cost of the vehicle. In many cases, a vehicle priced around the car limit may provide similar practical benefits while maximising the available tax deductions. It's also worth confirming which depreciation rules apply to your circumstances, including whether any simplified depreciation concessions are available so that deductions can be claimed at a faster rate. GST credits – also subject to a cap Businesses that are registered for GST may also be entitled to claim GST credits when purchasing a business vehicle. However, where the purchase price exceeds the car limit, the GST credit is also capped. For the 2026–27 financial year, the maximum GST credit available is $6,353 (being one-eleventh of the $69,883 car limit) for passenger vehicles. Even if the vehicle costs considerably more, the GST credit will generally not increase beyond this amount. However, when the vehicle is sold you will normally need to pay GST on the full sale price. For many businesses, GST credits can provide an important short-term cash flow benefit, so it is important to ensure they are claimed correctly and within the relevant time limits through your Business Activity Statement (BAS). Luxury Car Tax thresholds increase The Luxury Car Tax (LCT) thresholds have also increased from 1 July 2026 and are now: $91,661 for fuel-efficient vehicles. $80,809 for all other vehicles. Where applicable, LCT is generally imposed at 33% of the value above the relevant threshold, increasing the overall purchase cost of eligible vehicles. If you're considering a premium vehicle, these thresholds may become an important part of the purchasing decision. In particular, many fuel-efficient vehicles, including a range of hybrid and electric models, benefit from the higher threshold. Depending on the vehicle selected, this could potentially reduce the amount of LCT payable while also delivering lower running costs over the life of the vehicle. Planning ahead can pay off These updated thresholds apply to vehicles first used or leased from 1 July 2026, making now an ideal time to review any planned vehicle purchases. Before making a decision, it may be worthwhile considering: The total after-tax cost of ownership, including depreciation deductions, GST credits and any LCT; Whether purchasing or leasing is likely to be more suitable for your circumstances; The expected business use of the vehicle and the records you'll need to maintain; and How the purchase fits within your broader cash flow and business plans. Whether you're replacing a work vehicle, expanding your fleet or purchasing a new car for client-facing activities, taking these factors into account can help ensure the vehicle meets both your operational requirements and your tax objectives. Key takeaways A business vehicle is often a significant investment, and while tax considerations shouldn't drive the decision, they can influence the overall cost of ownership. Before committing to a purchase, it's worth speaking with your accountant to model the likely tax outcomes based on your individual circumstances. A little planning upfront may help you maximise available tax concessions, avoid unexpected costs and ensure the purchase aligns with your broader business strategy. For more information, refer to the ATO’s Small Business Newsroom: Car thresholds from 1 July | Australian Taxation Office, or contact our team to discuss how these changes may apply to your business. Changes to Self Managed Super Fund (SMSF) borrowing rules To ensure passage of the negative gearing and CGT discount changes that were announced in the May 2026 Federal Budget the Government agreed to make amendments to the SMSF borrowing rules. SMSFs are able to borrow in restricted circumstances which includes borrowing under a limited recourse borrowing arrangement (LRBA) to purchase a single acquirable asset. While there have previously been no specific legislative restrictions on the type of asset a SMSF can borrow to purchase, most commonly we see LRBAs being used to purchase property. Up until this point, this could have been any type of real property. These amendments will mean that when SMSF trustees wish to borrow to purchase a property, it must meet the business real property (BRP) definition. This BRP definition relates to usage of the property rather than zoning or what the property was originally built for. This change became law on 26 June 2026, but the Bill includes a 45 day transitional period which will finish on 10 August 2026. This transitional period may allow for arrangements that are currently being implemented on non-BRP assets to be allowable under the new rules where settlement occurs after 10 August 2026, provided the arrangement to purchase the property was entered into on or before 10 August 2026. We recommend that SMSF trustees who are currently implementing LRBA arrangements on non-BRP assets seek specialist SMSF legal advice to ensure their arrangements meet these transitional rules. While this change has been referred to in the media as a ban on super funds borrowing to purchase residential property, the use of the BRP definition makes the change slightly more complex than this. As this definition relates to usage of the property, it is possible that some residentially designed properties could meet the BRP definition (for example, a medical practice that operates from a residentially designed terrace dwelling). The BRP definition also requires that the property is wholly and exclusively used for business purposes. This could mean that some properties that may initially appear to be commercial in nature may not meet the BRP definition (for example, a mixed use residential and retail property on a single title). We recommend that SMSF trustees entering into new LRBAs seek advice from specialist legal and financial advisers to ensure the new requirements are met. Existing arrangements The updated rules allow for existing LRBAs over non-BRP assets to continue. They also allow for existing arrangements to be refinanced, subject to lender availability and approval.

Updates to Budget Measures and New Developments Since the Federal Treasurer handed down the 2026-27 Federal Budget on 12 May 2026 there has been a significant amount of commentary on some of the more controversial proposals, including the decision to replace the CGT discount with an indexation system and impose a 30% minimum tax rate on discretionary trusts. Since our latest update in this area, the Government has announced some changes to these proposals, as well as some other areas of the tax system that weren’t initially impacted by the Budget. CGT Changes On Budget night the Treasurer announced that the existing 50% CGT discount for individuals and trusts would be replaced with an indexation system and a 30% minimum tax rate on capital gains accruing from 1 July 2027 (with limited exceptions). However, the Government has announced that it plans to introduce a new Innovative Business CGT Concession that would provide a 50% CGT discount to early-stage investors, including founders and employee share scheme participants in innovative start-up businesses. A consultation paper has been released on the design of this concession. In addition, the Government is taking steps to increase the annual turnover threshold that applies in determining whether a small business or its owner can access the existing 50% “active asset reduction” under the small business CGT concessions, from $2m to $10m. This change would apply from 1 July 2027. The existing $2m turnover threshold would remain in place for the other three small business CGT concessions, being the 15 year exemption, retirement exemption and small business rollover relief. Taxpayers who can’t pass the turnover test can still access the concessions if they can pass a $6m net asset value test. Testamentary Trusts In the Budget the Government announced that a 30% minimum rate of tax would apply to the net taxable income of discretionary trusts from 1 July 2028. The Government had indicated that this would apply to testamentary trusts, unless they already existed at 12 May 2026. However, the Government has announced that it will now exempt income from all testamentary trusts from the new minimum tax rate rules, as long as they are established for “genuine testamentary purposes”. The exclusion from the rules will be limited to income from assets of the relevant deceased estate. For discretionary testamentary trusts established on or after 1 July 2028, the exclusion will only apply to trusts that can only benefit individuals and income tax exempt entities. SMSF Borrowing Arrangements As a result of negotiations with the Greens in connection with the changes to the CGT discount and negative gearing, the Government has agreed to remove the ability for SMSFs to borrow to purchase residential property (SMSF borrowing is commonly known as a limited recourse borrowing arrangement). It seems that existing arrangements will be grandfathered. We will keep you updated as more developments occur. However, please don’t hesitate to contact us if you want to discuss how these changes impact on your position. Payday Super Has Arrived – What Employers Need to Know One of the most significant changes to the Australian superannuation system in decades has now commenced. From 1 July 2026, Payday Super requires employers to ensure super contributions reach employee super funds within seven business days of each payday. For many businesses, this represents a major shift from a quarterly payment cycle to a more frequent, real-time obligation. While the Government is aiming to get super into employee accounts faster and help close the national super gap, the new system introduces new compliance, cash flow and administrative considerations for employers. Businesses that have prepared well should find the transition manageable, but those still relying on quarterly processes need to act quickly to avoid significant problems. What Exactly Has Changed? Under the previous rules, employers generally had until 28 days after the end of each quarter to make super contributions. Under Payday Super, the clock now starts on each “Qualifying Earnings” (QE) day — essentially your payday for salary, wages, commissions, bonuses and certain contractor payments. Key Requirements Contributions must be received and allocated to the employee’s fund within 7 business days of payday (there are limited exceptions to this). Shortfalls are now calculated per QE day rather than quarterly. The ATO’s Small Business Superannuation Clearing House has closed, meaning businesses previously using the service must now use a SuperStream-compliant alternative. Penalties are also tougher. The administrative uplift can reach 60% of the shortfall (with reductions available for early voluntary disclosure), although the Superannuation Guarantee Charge itself is deductible in more circumstances. The ATO’s first-year compliance approach (PCG 2026/1) adopts a risk-based view, with businesses that make genuine efforts to comply and promptly rectify mistakes generally treated as lower risk. However, if an employee reports a problem to the ATO then don’t expect the ATO to ignore this. Managing the June – July Changeover There is a technical quirk in the rules which could catch out unsuspecting employers, especially when it comes to SG contributions made across the month of July 2026. If a business has paid employees during the June 2026 quarter then the SG deadline for this quarter would normally be 28 July 2026. However, many employers have decided to pay the SG amount for the June quarter before this deadline to reduce the risk of accidentally triggering a SGC problem. This is because any SG contributions made from 1 July 2026 will reduce the super owing for the June quarter first, before any remaining amount is used to meet Payday Super obligations relating to pay runs that occur in July. The best way to manage this situation to avoid SGC liabilities really depends on the dates of any July pay runs. Please contact us if you need help identifying any potential problems or to help come up with a practical solution. Three Practical Steps to Take Now Review Your Systems: Confirm that your payroll software, clearing house and internal processes are operating correctly under the new rules. If you have not already done so, review pay codes and contribution workflows to ensure QEs are correctly identified. Monitor Cash Flow and Processes: Assess the impact of more frequent super payments on cash flow. Review approval processes, onboarding procedures and the handling of bonuses or out-of-cycle payments. Strengthen Controls and Communication: Ensure payroll and finance teams understand the new requirements and have appropriate controls in place. Ongoing monitoring and periodic reviews will help identify issues before they become compliance problems. The interdependencies between payroll systems, clearing houses and super funds mean small oversights can quickly create larger compliance issues. Businesses that continue to monitor and refine their processes will be best placed to meet their obligations. At Manor Advisory, we are helping clients navigate the practical implications of Payday Super through readiness reviews, payroll process assessments and cash flow planning. Our goal is to help businesses remain compliant while building stronger and more efficient systems. If you would like to discuss how Payday Super affects your business, contact your Manor Advisory adviser. We can help identify any remaining gaps and ensure your systems and processes continue to operate effectively under the new system. ATO Cracks Down on Personal Services Income Arrangements: Is Your Business at Risk? The ATO is sharpening its focus on how taxpayers generating income from personal services deal with that income for tax purposes. In a recent Spotlight bulletin , Small Business Assistant Commissioner Tony Poulakis highlighted the release of Practical Compliance Guideline PCG 2025/5. This guideline clarifies the ATO’s compliance approach to the “alienation” of personal services income (PSI) — essentially, arrangements which involve routing income earned through your personal skills and efforts via a company or trust, rather than receiving it directly. Why the ATO Is Interested Many business owners operate through a company or trust rather than earning income personally. In many cases this is entirely legitimate and provides commercial benefits such as asset protection, flexibility and succession planning. However, where income is generated primarily from the efforts, skills or reputation of one individual, the ATO is concerned about arrangements that divert income away from that individual in order to reduce tax. Even where a business is able to pass certain tests to be classified as a Personal Services Business (PSB) under the tax rules and falls outside the strict PSI attribution rules, the ATO has made it clear that general anti-avoidance provisions in Part IVA can apply if the arrangement is primarily tax-driven. If Part IVA applies then this can lead to higher tax liabilities as well as significant penalties and interest charges. What Does the ATO Consider Low Risk? The ATO's guidance focuses heavily on whether the individual generating the income receives an appropriate share of the profits. Generally, an arrangement is more likely to be considered low risk where: The individual who performs the work receives most of the economic benefit through salary, wages, bonuses, director fees or trust distributions. Profits retained in a company are kept for genuine and short-term business reasons. Family members or associates are only paid reasonable amounts for genuine work performed. For example, retaining profits in a company to fund the purchase of new equipment in the short-term could be viewed favourably if there is evidence supporting those plans and the company actually follows through with these plans. What Will Attract ATO Attention? The ATO has specifically identified a number of higher-risk behaviours, including: Splitting income with family members who have made little or no contribution to earning that income. Retaining substantial profits in a company without a genuine short-term commercial purpose. Directing profits generating from someone’s personal services to entities or beneficiaries primarily because they are taxed at lower rates or because they have tax losses. The ATO’s expectations in this area are very strict. The greater the mismatch between who performed the work and who is ultimately taxed on the profits from that work, the greater the likelihood of ATO scrutiny. A Limited Opportunity to Review Existing Arrangements The ATO has provided a transition period for taxpayers who genuinely review and adjust their arrangements. Businesses that take genuine steps to move from higher-risk arrangements to lower-risk arrangements by 30 June 2027 are unlikely to face Part IVA action in relation to those arrangements if reviewed by the ATO. This is not an amnesty, but it is an opportunity for business owners to proactively assess their position and make changes where necessary. What Should Business Owners Do? Now is an ideal time to review how profits are being distributed within your structure. Questions worth considering include: Are retained profits supported by documented short-term commercial reasons? Are payments to family members commercially justifiable? Would your arrangements withstand ATO scrutiny if reviewed? If you operate through a company or trust and derive income largely from your personal skills or efforts, it is important to review existing arrangements in light of the ATO’s updated guidance. A proactive review today may prevent costly issues tomorrow. Tax Ombudsman Sees 127% Surge in Complaints: What It Means for You The Tax Ombudsman has reported a dramatic 127% increase in complaints about the ATO this financial year (to 30 April 2026), with nearly 3,000 complaints received in the first ten months. Debt collection, penalties, and tax debt interest charges have dominated the issues raised. Tax Ombudsman Ruth Owen has linked the sharp rise directly to the ATO’s intensified focus on recovering outstanding debts amid tighter economic conditions. Many SME owners and individuals are feeling the pressure from cash flow challenges, rising costs, and stricter ATO enforcement. Why Complaints are Rising Debt collection accounted for around 23% of complaints, followed by payment-related issues (16%) and penalties plus interest (15%). Common concerns include: Refund offsets against debts Director Penalty Notices Challenges in setting up or maintaining payment plans The rapid accumulation of General Interest Charge (GIC) on overdue amounts This surge reflects real-world pressures: businesses navigating post-pandemic recovery, higher interest rates, and increased ATO activity to close the tax gap. For many clients, these issues create significant stress and can distract from core operations. Practical wins: Relief is Possible The good news? The Ombudsman’s office is proving effective as an independent escalation point. Around 31% of complaints relating to penalties and interest resulted in some form of debt reduction or remission. This highlights that persistence and proper representation can sometimes deliver favourable outcomes when initial ATO decisions feel overly harsh or inconsistent. Important Developments on GIC Remission A key theme in the complaints data is the GIC – the daily interest applied to unpaid tax debts. In March 2026, the Tax Ombudsman released a major review titled In the Interest of Fairness , which examined the ATO’s handling of GIC remission requests. The review identified inconsistent decision-making, unclear guidance, and communication gaps that left many taxpayers confused about their options. It made several recommendations, including clearer upfront interest-free payment plans for compliant taxpayers. The ATO’s response has been positive. It accepted all recommendations and has already begun implementing improvements, such as: Enhanced website guidance with practical examples New, more user-friendly remission application forms A $2,500 cap on phone approvals with a dedicated review team for larger requests to improve consistency Better support frameworks for vulnerable taxpayers These changes should hopefully make the process fairer and more predictable going forward, but sometimes best intentions don’t translate into practical reality so we will have to wait and see how this plays out. What this Means for You Act early on tax debts: Don’t wait for the ATO to contact you. If you’re facing cash flow pressure, engage proactively before penalties and GIC escalate. Early action often leads to better terms. Keep detailed records: Strong supporting documentation is crucial when seeking remission of penalties or interest. Demonstrate why the delay occurred (eg, unexpected revenue drop, illness, or system issues) and what steps you’ve taken to rectify it. Use professional representation: Tax agents can liaise directly with the ATO on your behalf, prepare strong submissions, and escalate to the Tax Ombudsman where appropriate. This often leads to faster and more commercially practical outcomes than dealing with the matter alone. While the ATO must collect revenue fairly, the Ombudsman plays a vital role in ensuring processes remain reasonable and transparent. With economic headwinds continuing, understanding your rights and options has never been more important. If you’re concerned about a tax debt, penalty notice, or GIC charge, contact our team promptly. Early intervention can significantly reduce costs and protect your business or personal finances. For more information, visit the Tax Ombudsman’s complaints snapshots and reports: Complaints snapshots - Tax Ombudsman Get Ready for 2026–27: Practical Steps SMSF Trustees Must Take Now With the start of the 2026–27 financial year, SMSF trustees should take a proactive approach to ensure funds remain compliant and well positioned. Below is a concise checklist of the key legislative changes, compliance deadlines and practical steps trustees should prioritise. 1. Review Transfer Balance Cap and Pension Planning Indexation of the general TBC: From 1 July 2026 the general transfer balance cap (TBC) increases from $2.0 million to $2.1 million. Members should check whether their personal transfer balance cap is eligible for indexation, particularly if they started a pension before the latest indexation dates. The ATO will calculate a member’s entitlement to indexation of their personal TBC, however, this will be based on reported transfer balance account (TBA) events (eg, commencement or commutation of a pension). It’s important that all TBA events up to 30 June 2026 have been reported to the ATO to ensure an accurate calculation of TBC indexation entitlement. Legacy pensions: The five-year legacy pension exit measure (7 Dec 2024 – 6 Dec 2029) remains available. Where clients hold legacy lifetime, life expectancy or market-linked pensions, confirm deed powers and consider the interaction with Division 296 and commutation rules before acting. 2. Update Contribution Strategies and Caps Higher caps for 2026–27: The concessional contributions cap rises to $32,500 and the standard non-concessional cap becomes $130,000. However, the non-concessional cap is subject the member’s 30 June 2026 total superannuation balance (TSB) being less than $2.1 million. Review your planned contributions to avoid cap breaches. Bring-forward and TSB thresholds: Check each member’s TSB at 30 June 2026 prior to applying bring-forward rules in 2026-27. Thresholds and allowable bring-forward periods changed for 2026–27. The increase to the standard non-concessional cap means the maximum bring forward cap has increased from $360,000 to $390,000. However, if the bring-forward rule was triggered in 2024-25 or 2025-26, the member does not get the benefit of the increase. 3. Pension Minimums, TRIS and ECPI Risks Minimum pension percentages: Check minimum pension percentages for age groups and ensure pensions meet the standards to avoid breaches and potential loss of fund tax exempt income. For a transition to retirement (TTR) pension, in addition to making at least the minimum pension payment, make sure you don’t exceed the 10% maximum. Also, if turning 65 in 2026-27, a TTR pension automatically moves into retirement phase and has TBC consequences. Speak to your adviser about implications and options well before your 65th birthday. Commutations and starting pensions : Follow correct commencement and commutation procedures; incorrect handling can trigger multiple events and adverse tax outcomes. Report all TBA events to the ATO by the due date. 4. Review Related Party Loans and Update Interest Rate The ATO document PCG 2016/5 sets out many of the terms and conditions a related party loan should have, including the interest rate. These are commonly referred to as the ‘safe harbour provisions’. Each year, the interest rate of the loan should be reviewed and updated in line with the relevant rate determined in May immediately before the commence of the financial year. The rate for the 2025-26 year was 8.95% for property and 10.95% for listed securities. As a result of increases in the RBA's cash rate over the last 12 months there has been an increase to the safe harbour interest rates to 9.35% and 11.35% for property and listed securities respectively. The repayments of any related party loans that are complying with the safe harbour provisions will need to be adjusted to reflect these new rates. 5. Check Compliance for Payroll and Contributions (SuperStream 3.0 / Payday Super) NPP readiness: From 1 July 2026 funds and employers must be capable of receiving contributions via the New Payments Platform (NPP). Ensure the SMSF bank account can accept Osko/PayID and other NPP payments. Member Verification Requests (MVRs): Employers will use MVRs to confirm whether a fund can accept a contribution. SMSFs receiving employer contributions should be prepared to respond to MVRs promptly (within required timeframes). Generally, SuperStream messages will be received in the SMSF administration platform that is used by the SMSF’s accountant or administrator. Members should inform their SMSF accountant or administrator if their employer will be sending a message via the MVR to confirm whether their SMSF can accept the contribution. Closely held employees: If your SMSF has related employees, confirm whether SuperStream exemptions apply and ensure payroll systems are updated as late lodgements may result in penalties. Remember the ATO can remove fund details from the SMSF lookup database if tax returns are overdue. This could impact on a fund’s ability to receive employer contributions. 6. Consider the Division 296 Transitional Rules and Tax Traps 2026–27 transitional year treatment: The 2026–27 year has specific transitional rules for Division 296 where the relevant TSB is measured at 30 June 2027. Trustees should assess whether electing to set a Div 296 cost base to 30 June 2026 market values is appropriate. This election does not need to be made until the lodgement of the 2027 SMSF Annual Return (tax return), and if made, applies to all assets and has consequences for capital losses and later adjustments. Seek tailored advice before electing. 7. Practical Housekeeping Deed powers and trustee structure: For SMSFs with individual trustees, consider whether a corporate trustee is a potentially better option. Talk to you adviser about these potential benefits and the process to change. Ensure that any changes to the trustee structure is reported to the relevant authority within the required timeframe (eg, the ATO, ASIC). Document everything: Keep clear records of trustee decisions, valuations used for elections, contribution timing evidence and communications with employers — documentation is key for the annual audit and if the ATO queries an event. Preparing now will reduce 2026-27 year-end stress and help avoid costly compliance issues. Speak to us if you have any questions or wish to discuss any of the issues raised above.

Key 2026–27 Federal Budget tax reforms: What they mean for you The 2026–27 Federal Budget, released on 12 May 2026, has received more attention than most budgets in recent years. With proposed changes to negative gearing, the CGT discount and the taxation of trusts, this is a budget that has the potential to materially impact on property investors, business owners and families using discretionary trusts. However, it is important to remember that the proposed changes are not yet law and we might yet see further developments with some of these key proposals. For example, even though legislation has been introduced into Parliament in relation to some of the measures, there is no guarantee that the Bills will be passed in their current form. While don’t yet have certainty on how this will all play out, we understand that the proposals are causing some confusion and concern and so we have set out below some comments on what we know so far. Negative gearing – changes to apply from 1 July 2027 The Government is planning to tighten up negative gearing on established residential properties. For properties purchased after 7:30pm AEST on 12 May 2026: Rental losses can only be offset against rental income or capital gains from other residential properties. Any remaining losses must be carried forward and applied only against future residential rental income or residential property capital gains. Grandfathering applies. If you already own an established property—or had exchanged contracts before Budget night—nothing changes in terms of negative gearing. You can continue to deduct losses against salary, business profits and other income sources until you sell the property. The explanatory memorandum released with the legislation indicates that existing negative gearing rules will apply to properties that were acquired before Budget night, even if they weren’t used as rental properties at that time. For example, if you own a property that is currently used as your private residence but you later move out and start using it to generate rental income then the Government is indicating that existing negative gearing rules can still be available. However, the position is more complex than this and there is a technical issue that could potentially change this outcome. As a result, please contact us to discuss this further if you are thinking about converting your private home into a rental property. The new restrictions only apply to residential property, so losses relating to commercial property, shares and other asset classes should not be impacted. There are also carve-outs for commercial residential properties such as hotels, motels and boarding houses. ‘New builds’ remain fully eligible for current negative-gearing rules both before and after 1 July 2027, but final details of what will qualify as a ‘new build’ haven’t been released yet. Additional carve-outs apply to build-to-rent projects and certain government-supported housing. CGT discount - changes to apply from 1 July 2027 Individuals who hold an asset for more than 12 months often qualify for a 50% discount to reduce the taxable gain made on sale of the asset. A similar outcome can arise when a trust makes a capital gain and this is distributed to an individual beneficiary. However, from 1 July 2027 the CGT discount will be replaced for individuals and trusts with: Cost base indexation (inflation adjustment), and A 30% minimum tax on capital gains. This change will apply across all CGT asset categories—including residential and commercial property, shares, business assets and even pre-CGT assets. Importantly, gains that accrue up to 1 July 2027 will still receive the existing CGT discount or benefit from the existing exemption for pre-CGT assets. It will be necessary to determine the market value of assets at that date so that CGT calculations can be performed. For new residential properties, investors can choose either the existing CGT discount or the new indexation / minimum tax method. Companies won’t have access to indexation and complying super funds will continue to enjoy the benefit of the existing 1/3 CGT discount. Indexation won’t be available to individuals who have been classified as a foreign resident or temporary resident for tax purposes during the ownership period of the asset. Example Michael owns an investment property purchased before Budget night that is currently negatively geared. He can continue offsetting rental losses against his salary. When he sells: The portion of the gain attributable to ownership before 1 July 2027 receives the 50% CGT discount. The portion accruing after that date is subject to indexation plus the 30% minimum tax. Michael’s overall tax outcome will depend on his marginal rate and how long he holds the property, but in a situation like this we would typically expect Michael to pay more tax overall as a result of these changes compared with the current rules. Practical issues While it isn’t time to panic, a review of your investment portfolio is essential. Existing assets bought before Budget night will typically receive more favourable tax treatment compared with newer assets, but the overall impact of the proposed changes will vary depending on your situation. Discretionary trusts – changes to apply from 1 July 2028 The introduction of a 30% minimum tax rate on the taxable income of discretionary trusts would represent a fundamental change to the way the tax system operates at the moment. The Government is indicating that the 30% tax would initially be paid by the trustee, with beneficiaries (other than companies) receiving a non-refundable tax credit for the tax paid at the trust level. This measure is aimed at curbing income splitting to lower-taxed family members and corporate beneficiaries (often known as bucket companies). Some exemptions would apply, including for fixed and widely held trusts, superannuation funds, special disability trusts, deceased estates, charitable trusts, primary production income and some other specific trust types. While the Government has indicated that existing discretionary testamentary trusts would be exempt from these changes, concerns have been raised about the application of the changes to testamentary trusts that come into existence after Budget night. However, reports in the media suggest that the Government is open to reconsidering this aspect of the changes, but we will have to wait and see how this plays out. To assist with transitions, three years of roll-over relief will be available for restructures into companies or fixed trusts. Example (adapted from budget materials) Kurt operates his business through a discretionary trust and makes a profit of $300,000. Kurt pays himself a salary of $100,000 and distributes the remaining $200,000 to four family members who have no other income. In total, Kurt and his family members pay around $42,000 in tax on this income. If the 30% minimum tax rate rules are introduced then Kurt and his family members would pay around $86,000 in tax on this income. This is a significant increase in the total amount of tax paid on the same level of profit. In situations like this there might be scope to restructure the business into a company to potentially access a lower 25% tax rate or pay salary / wages to some family members who are genuinely working in the business. Practical issues Many business and investment structures will face higher effective tax rates under the proposed changes, although the Government is planning to undertake a consultation process to refine the rules. It is possible that the final version of the rules will look a bit different to the proposals announced in the Budget. While the start date for this measure isn’t until 1 July 2028, now is the time to start modelling scenarios and comparing the pros and cons of other options. In some cases the overall impact of the changes might be minimal and no material changes will be required. In some cases it might still make sense to continue utilising discretionary trust structures, but with some alternative distribution strategies in place. In other cases it will make sense to explore whether a restructure might provide better long-term outcomes. Other measures worth noting $250 Working Australians Tax Offset (from 2027–28) – increases the effective tax-free threshold for wage earners and sole traders. $1,000 standard deduction for work-related expenses (from 2026–27) – simplifies tax time for many employees. Small business measures – a permanent $20,000 instant asset write-off for plant and equipment. What to do next The proposed reforms are significant, but the practical impact will depend on your situation. While we are still waiting to see how this all plays out, if you have concerns in the meantime feel free to contact us. We can review your situation, run tailored projections and help you make informed decisions. We will also keep you up to date as further details emerge and legislation progresses. Ending card surcharges: What you need to know before 1 October 2026 The Reserve Bank of Australia (RBA) has confirmed that all surcharges on credit and debit card payments — across eftpos, Mastercard and Visa — will be banned from 1 October 2026. This represents one of the most significant updates to Australia’s payments landscape in years and will have a direct impact on businesses and consumers. Why this matters Australians pay an estimated $1.6 billion in card surcharges every year. At the same time, businesses collectively bear even higher card-acceptance costs behind the scenes. Under the new rules, total merchant payment costs are expected to fall by around $910 million per year, with small businesses likely to see the largest percentage savings. For many businesses this will mean simpler pricing, fewer compliance headaches and potentially better margins — but it also means some preparation is needed. What’s changing? The RBA’s reform package has three key components: 1. Surcharges banned From 1 October 2026, businesses cannot add any surcharge — percentage or flat fee — for payments made using eftpos, Mastercard, Visa or related networks. Customers must see and pay one final price, whether they purchase online, at the counter, or via mobile payment. 2. Lower interchange fees Interchange fees (the wholesale fees charged between banks when a customer pays by card) will be reduced, with new caps for foreign-issued cards. This should directly lower the cost that a business needs to pay to accept card payments. 3. Greater transparency Banks, card schemes and payment providers must publish clearer information about fees and margins. They must also demonstrate how reductions in wholesale fees are being passed through to retailers. This gives businesses more power to compare providers and negotiate. These changes are supported by oversight from the Australian Competition and Consumer Commission (ACCC) and guidance from the Australian Small Business and Family Enterprise Ombudsman. What your business should do now 1. Review your merchant fees Look at your recent statements and determine: How much you currently pay in card-acceptance fees; and Whether you have been relying on surcharges to offset part of those costs. If surcharges are part of your pricing strategy, you may need to adjust prices to maintain margins, where commercially appropriate. 2. Speak to your payment provider With lower interchange fees coming and more transparency required, it’s a good time to negotiate: Better merchant service fees Updated pricing plans POS or terminal upgrades Small businesses often pay closer to the current fee caps, so they stand to gain the most. 3. Update your pricing and POS systems You’ll need to remove: Surcharge signage Online checkout surcharges Automatic percentage add-ons All displayed prices must become all-inclusive. 4. Build changes into your cash flow Lower merchant fees won’t appear immediately, but most businesses should see reduced costs flow through during the 2026–27 financial year. This is a good time to revisit budgets, especially for cafés, retailers, trades and service-based operators that have a high proportion of small card transactions. 5. Watch customer behaviour Businesses might find that the removal of surcharges encourages more customers to pay by card. Higher card usage is often positive for convenience and transaction speed, but keep an eye on total acceptance costs as patterns shift. The broader commercial picture This reform levels the playing field to some extent. Businesses that never applied surcharges will simply benefit from lower underlying fees. Those that did add a surcharge will enjoy simpler operations, less admin and fewer compliance risks. Over time, the changes should encourage more competition among payment providers, potentially leading to better products and lower fees across the market. There may be secondary adjustments (for example, banks reviewing rewards programs), but the combined effort of the RBA and ACCC aims to ensure that cost savings are passed through fairly and transparently. Final thoughts This is ultimately a practical reform: fewer add-ons at the checkout, simpler pricing for customers, and lower complexity for businesses. Some businesses will see this as an opportunity to improve margins, streamline processes and enhance the customer experience. We recommend reviewing your payment arrangements in the coming months. Our team can help analyse your current merchant fees, model the likely impact of the changes, and support negotiations with providers. If you’d like tailored advice on how the end of card surcharges affects your business, please reach out — now is the ideal time to prepare. Government to wind back electric vehicle FBT exemption in three stages The Government has announced a staged wind-back of the current Fringe Benefits Tax (FBT) exemption for electric vehicles (EVs), following recommendations from the Statutory Review of the Electric Car Discount released in May 2026. While the policy continues to support EV uptake, it also aims to make concessions more sustainable and better targeted. The changes are expected to save the Budget an estimated $1.7 billion over five years from 2025–26. Importantly, nothing changes immediately—the existing full FBT exemption for qualifying EVs continues until 31 March 2027. Three-phase transition Phase 1 — Now until 31 March 2027 The current rules remain fully in place. Eligible EVs below the Luxury Car Tax (LCT) threshold (approximately $91,387 for fuel-efficient vehicles in 2025–26) continue to enjoy a complete FBT exemption. For businesses and employees using novated leases or salary packaging, there is no change during this period. Phase 2 — 1 April 2027 to 31 March 2029 The concession begins to narrow, with a focus on more affordable vehicles: EVs costing $75,000 or less: Full FBT exemption continues if the eligibility conditions are met. EVs priced above $75,000 and below the LCT threshold: A 25% FBT discount applies when calculating the FBT liability. This phase is intended to encourage manufacturers to continue supplying competitively priced EVs into the Australian market, complementing the Government’s New Vehicle Efficiency Standards. Phase 3 — From 1 April 2029 All eligible EVs under the LCT threshold will receive a flat 25% FBT discount, regardless of price. The import tariff exemption for qualifying EVs remains permanently in place. Grandfathering of existing leases The Government has indicated that existing arrangements will be protected: current leases will not be affected by the new rules. Draft legislation will clarify the precise scope of this grandfathering, but businesses and employees can take some comfort that current packages will continue to qualify for existing FBT concessions. What this means for your business and your employees The FBT exemption has been one of the most effective incentives driving EV adoption, particularly via novated leasing, allowing employees to access EVs using pre-tax income. The Review found that the exemption: Led to around 64,000 additional battery EVs in its first three years Reduced emissions and improved fuel savings Increased EV uptake across metropolitan, regional and outer-suburban areas However, it also highlighted equity concerns (higher-income employees benefited disproportionately) and noted that costs to the Budget were growing quickly. The new phased approach aims to balance continued access to lower-cost EVs with long-term fiscal sustainability from the Government’s perspective. Practical considerations for businesses and individuals Consider acting before 31 March 2027: Anyone thinking about packaging an EV may benefit from entering arrangements while the full exemption still applies. Timing of orders and leases will be particularly important. Review fleet and salary packaging models: From 2027 onwards, the value proposition will shift. EVs at or below $75,000 will remain highly attractive under the full exemption in Phase 2. Commercial fleets: Businesses with high work-use vehicles may see limited impact, but reviewing total cost of ownership (including FBT, running costs and charging infrastructure) remains essential. Second-hand EVs: A growing used-EV market may provide cost-effective alternatives, particularly where new-vehicle thresholds become restrictive. EV momentum remains strong. EV/PHEV sales reached 22.9% of new vehicles in March 2026, up from just 1.8% in May 2022, with an increasing number of models now available in the $30,000–$40,000 range. Next steps These reforms maintain support for cleaner transport while tightening the focus of concessions. As always, the fine print in the amending legislation will matter, especially when it comes to transitional rules. If you are considering acquiring an EV—personally or for your business—or want to understand the impact on salary packaging and fleet costs, our team can model the outcomes and advise on the optimal timing. Please let us know if you would like some assistance with working through your options. SMSF year end reminder — what to check before 30 June The end of the financial year is fast approaching. For SMSF members and trustees, a few timely checks now can avoid headaches later and help preserve valuable tax and contribution opportunities. Below is a checklist of the things members and trustees should consider before 30 June. Contributions — timing matters Get contributions into the fund by 30 June: For both tax deductibility and contribution cap purposes, cash and electronic transfers generally need to be received by the SMSF’s bank account on or before 30 June. When transferring amounts between different banks allow extra days for bank processing times. Personal deductible contributions: If you want to claim a tax deduction for a personal contribution, you must notify the fund and receive the fund’s acknowledgement by the required deadline (usually before the earlier of lodging the tax return or 30 June the following year). If you’re looking to start a pension early in the new year, you’ll need to get your notice of intent to claim a deduction processed even earlier (ie, before you start the pension). Otherwise, you may miss out on the opportunity to claim a deduction for the contribution made. Contribution strategies you might use Carry forward concessional amounts: Eligible members with lower total super balances (less than $500,000) at 30 June in the prior year may be able to use unused concessional caps from previous years to make larger deductible contributions this year. This may be useful if you have a larger capital gain in your personal name for the 2025/26 financial year. SMSF‑only 28‑day allocation rule: SMSFs can temporarily hold a June contribution in an unallocated reserve and allocate it to a member in July so it counts for the following year’s caps — but this must be done correctly, documented in minutes and the fund’s deed must allow it. Commonly referred to as a contribution reserving strategy. Again, this may allow members to take advantage of claiming a larger tax deduction this year. Post‑tax personal contributions and limits Non‑concessional contributions and bring‑forward: Whether a member can use the bring‑forward rule depends on their total super balance on the prior 30 June. Opportunities may be available for some members to make contributions this year, including bringing forward and taking advantage of future year contribution amounts. Spouse contributions and government co‑contribution: Contributions made by a member for their spouse can attract a tax offset in some circumstances; low‑income members may qualify for a government co‑contribution if they make post‑tax contributions and meet the income test. Increase in contribution caps Current year (2025/26) contribution caps are: Concessional contributions: $30,000. Non-concessional contributions: $120,000. These caps will increase from 1 July 2026 to: Concessional contributions: $32,500. Non-concessional contributions: $130,000 Pensions and the transfer balance cap Minimum pension payments: If your fund is paying account‑based pensions, make sure the minimum pension for each member has been paid by no later than 30 June 2026. Failing to pay the annual minimum pension for the financial year can create administrative complications and loss of tax concessions. Other types of pensions will also have minimum or set amounts that must be paid. Certain pensions also have maximum limits that should not be exceeded, as this will also have adverse outcomes. Transfer balance cap timing: Indexation to the general transfer balance cap will apply from 1 July 2026. Members thinking of starting a pension around the end of the 2025-26 financial year should consider timing carefully, as commencing before or after 1 July 2026 can affect how much can be moved into a tax‑free retirement pension. Current year (2025/26) general transfer balance cap is: $2.0 million. This is set to increase to $2.1 million from 1 July 2026. Not everyone will have access to the general transfer balance cap, and an individual’s personal transfer balance cap may be lower than this. Records, valuations and audit readiness Market valuations: Ensure all assets are valued at market on 30 June (or as close to as possible) and supporting evidence is retained — especially for property, related‑party assets and unlisted holdings. Related‑party arrangements: Confirm leases, rents and services with related parties are documented and commercially reasonable. Pension paperwork and minutes: Check that pension commencements, commutations and lump sums are supported by correctly signed documents and trustee minutes.

What the New Div 296 Tax Means for Individuals with Large Super Balances The Better Targeted Superannuation Concessions measure (known as the Division 296 tax) is now law and takes effect from 1 July 2026. For those with large super balances, it’s important to understand what the new tax does, why it’s been introduced, and the practical steps you and your financial adviser should consider. The Purpose of the Tax Division 296 is designed to make superannuation tax concessions fairer and more sustainable. Rather than changing the way super is taxed for everyone, the law targets a small group of people who hold large super balances, ensuring they pay more tax on the portion of investment earnings that relate to those large balances. Who it Applies to — Thresholds and Rates This new measure, starting 1 July 2026 (first year is 2026-27), applies to an individual with total superannuation balances (TSBs) in excess of the following thresholds: Large balance threshold: $3.0 million Very large threshold: $10.0 million. Both thresholds will be indexed in future years. This will mean that the overall tax imposed on superannuation fund earnings will be as follows:

This month we focus on key developments and practical guidance for business owners, property holders, and SMSF trustees navigating complex tax obligation s. We begin with a deep dive into Director Penalty Notices (DPNs), highlighting the Tax Ombudsman’s review in response to a 136% surge in notices and the personal risks directors face if company taxes go unpaid. Next, we clarify the ATO’s updated position on capital gains tax for home-based businesses, emphasising when small business CGT concessions apply—and when they don’t. We also examine the ATO’s draft ruling on inherited homes, exploring how changes to main residence exemptions could affect family estates and estate planning strategies. Finally, we provide practical reminders for SMSF trustees on maintaining compliance, focusing on the sole purpose test and arm’s length requirements for related-party arrangement. Director Penalty Review Running a successful business is hard work—and sometimes, despite best intentions, tax obligations slip. If the business is being operated through a company structure, then the ATO can potentially issue a Director Penalty Notice (DPN), holding company directors personally liable for unpaid taxes. In 2024–25, DPNs skyrocketed by 136%, reaching over 84,000 notices, affecting directors of around 64,000 companies. The stakes are high, and now the Tax Ombudsman is reviewing how the ATO issues and manages these notices—a development all directors should take seriously. So, what exactly is a DPN? Put simply, if your company fails to pay certain taxes—like PAYG withholding, GST, or Superannuation Guarantee Charge (SGC)—the ATO can target directors personally. There are two types: Non-lockdown DPNs: These apply if the company has lodged its activity statements or SGC statements but hasn’t made the relevant payments. In this case directors have 21 days to take appropriate action, such as arranging for payment of the debt, appointing an administrator, or entering liquidation. Acting promptly may allow the penalty to be remitted. Lockdown DPNs: These apply if reporting deadlines are missed as well. In this scenario directors can’t avoid personal liability by putting the company into administration or liquidation. The intent is to protect government revenue and employee entitlements—but for directors, the impact can be severe. Why the Ombudsman is Involved The review, announced in December 2025 by Tax Ombudsman Ruth Owen, responds to a surge in complaints, with DPNs topping the list. It will examine: How effectively the ATO uses DPNs to recover debts ($54.2 billion in collectable amounts by mid-2025) The fairness of selecting cases for enforcement How directors are notified and communicated with Treatment of vulnerable directors, including those coerced into roles or facing financial abuse The review also aligns with broader government initiatives, including support for gender-based violence survivors and more empathetic engagement with business owners. While timelines are flexible due to resources, the review is part of the 2025–26 work plan, alongside assessments of ATO services for agents, First Nations engagement, and interest charge remissions. Commercial Takeaways for Directors DPNs are more than a compliance issue—they’re a real commercial risk. Ignoring a notice can disrupt personal finances, damage credit ratings, and even trigger bankruptcy. At the same time, the Ombudsman review could improve transparency and fairness, giving directors a clearer understanding of options if financial stress arises. Practical steps to protect yourself now Stay on top of obligations: make sure the company lodges returns and pays liabilities on time. Lodge statements even if payment isn’t possible: Failing to lodge activity statements just makes things worse. Consider using ATO payment plans if cash flow is tight but remember that this won’t necessarily enable directors to escape personal liability if a DPN has been issued already. Monitor company cash flow and tax health closely, especially during economic dips. Act fast if you receive a DPN: Consult immediately your accountant or lawyer to explore options because strict deadlines might apply. Consider director insurance or business structuring to limit personal exposure—but compliance always comes first. The Ombudsman’s review is a timely reminder: tax is a key business risk, not just paperwork. Being informed, proactive, and prepared can protect both your business and your personal assets. If you’re concerned about DPN exposure, reach out for a tailored review—we can help you stay ahead of risk, so your business thrives rather than just survives. Navigating CGT on Your Home: New ATO Clarity for Home-Based Businesses Running a business from home—whether as a sole trader, freelancer, or small operator—has many perks. But when it comes to selling your home and potentially saving on tax, recent guidance from the ATO serves as a reality check. The ATO has provided its views on how home-based businesses interact with the small business capital gains tax (CGT) concessions, providing a warning on how the ATO approaches a long-standing area of confusion. See: Home-based business and CGT implications | Australian Taxation Office The Key Issue: Active Asset Test When an individual sells their main residence, they will often enjoy a full CGT exemption. However, if part of the home is used for business purposes, this can potentially impact on the scope of the exemption. If a full exemption isn’t available under the main residence rules then we typically look to other CGT concessions, including the CGT discount for assets that have been held for more than 12 months or the small business CGT concessions. The small business CGT concessions can potentially reduce or eliminate a capital gain made on sale of a property, but only if certain conditions are passed. One of the key conditions is that the property must pass an active asset test. In very broad terms, to pass the active asset test you need to show that the property has been actively used in a business activity for at least 7.5 years across the ownership period or for at least half of the ownership period. The ATO is clear: the active asset test applies to the entire property, not just the business portion. When you are applying the active asset test, an asset either passes this test or fails it. It is not really possible for an asset to partially pass the active asset test. The entire property is either an active asset or it is not. Simply having a home office, workshop, or even being able to claim home occupancy expenses as a deduction does not necessarily make your home an active asset. Where business use is incidental to the home’s primary residential purpose, the ATO’s view is that the small business CGT concessions generally do not apply. Rus v FCT The view that the entire property must qualify as an active asset—and that incidental or minor business use (such as a home office or storage in a largely residential setting) is insufficient—draws support from case law, particularly the Administrative Appeals Tribunal (AAT) decision in Rus and Commissioner of Taxation [2018] AATA 1854 (Rus v FCT). In that case, a taxpayer sought access to the small business CGT concessions on the sale of a 16-hectare largely vacant rural property, where only a small portion (less than 10% by area) was used for business purposes: a home office, shed for storing tools/equipment/vehicles, and related supplies tied to a plastering and construction business operated through a controlled company. The balance of the land remained vacant or used residentially. The AAT upheld the ATO's ruling that the property as a whole did not satisfy the active asset test, reasoning that the business activities were not sufficiently integral to the asset overall. Minor or incidental use did not make the entire property an active asset, especially where the business was primarily conducted off-site. This precedent reinforces the ATO's strict approach in home-based business scenarios: the property is assessed holistically. This means that limited business use typically fails to tip the scales toward qualifying for the concessions. Practical Examples Let’s take a look at how the ATO approaches some common scenarios. Minor home-based business : Harriet runs a hairdressing salon in a spare room, using 7% of the total floor space of the property and seeing clients eight hours a week. She claims deductions for occupancy expenses and gets a 93% main residence exemption. However, because her business use is minor, she cannot access small business CGT concessions. The 50% CGT discount can still apply. Significant business use : Sue and Rob own a two-storey building, with the ground floor operating as a takeaway store (50% of the total floor area of the property) and the top floor as their private residence. The business has been running for decades with employees. Here, the property qualifies as an active asset, potentially giving them access to the small business CGT concessions for the portion of the capital gain that isn’t covered by the main residence exemption. What This Means for You A partial main residence exemption doesn’t necessarily mean you have access to the small business CGT concessions. Many homeowners mistakenly assume that business deductions or a home office automatically open the door. The ATO clearly doesn’t share this view. Seek advice before changing the way your home will be used. Starting to operate a business from home can impact on deductions, CGT calculations and access to CGT concessions. We are here to help you make fully informed decisions. Keep thorough records. Floor plans, hours of business use, and detailed deductions can help strengthen your position and may help in any future planning or audits. Consult your accountant. If selling your home is on the horizon, professional advice is critical to assess any potential CGT exposure and explore concessions that might be available. The Bottom Line The ATO’s updated guidance suggests that many home-based business owners won’t have access to the small business CGT concessions on sale of their home, but this always depends on the facts. Business owners need to plan proactively, rather than assume that tax relief will be available. By understanding how your home’s business use is treated, you can make smarter decisions. For example, will the profits generated from a small business operated at home end up being wiped out by a higher CGT liability on sale of the property down the track? After all, when it comes to CGT, every dollar you keep counts toward your next venture or your retirement nest egg. ATO Update on Inherited Homes: What it Means for Your Family’s Wealth The ATO has issued a Draft Taxation Determination TD 2026/D1 which looks at how inherited family homes are treated for CGT purposes. Some industry commentators have dubbed it a “death tax by stealth”, but it is a bit more complex than this. The draft guidance focuses on a specific aspect of the rules around applying the main residence exemption to inherited properties, potentially exposing deceased estates and beneficiaries to significant tax if not planned correctly. Here’s what you need to know in practical terms. Why TD 2026/D1 Matters Under current law, deceased estates or beneficiaries can potentially sell a deceased individual’s former family home without paying CGT if certain conditions can be met. This exemption is particularly valuable for properties owned long-term, where unrealised gains could be substantial. In order to access a full exemption you normally need to ensure that the property is sold within 2 years of the date of death (but the ATO can potentially extend this deadline) or that the property has been the main residence of certain qualifying individuals from the date of death until the property is sold. These qualifying individuals can include the surviving spouse of the deceased individual, the beneficiary selling an interest in the property or someone who has a right to occupy the dwelling under the deceased’s will. The draft ATO guidance focuses on this last point. That is, what does it mean for someone to have “a right to occupy the dwelling under the deceased’s will.” In summary, the ATO’s view is that: The right to live in the home must be explicitly granted in the will to a named individual. Broad discretionary powers given to trustees, separate agreements, or even testamentary trusts (TTs) are not sufficient in the ATO’s view. For example: A will giving an executor discretion to allow a family member to occupy the home does not meet this requirement. A trustee of a TT who allows a beneficiary to live in the house is seen as separate from the will and may trigger CGT on sale. Some legal and real estate experts warn this could force families to sell homes within two years of death to avoid CGT, especially in high-value areas. Consider this: inheriting a $2 million home with a capital gain of $1.5 million could expose the beneficiaries to $300,000–$600,000 in tax, depending on discounts and tax brackets. However, it is important to remember that there are still other ways for the sale of the property to qualify for a full exemption. Practical Steps to Protect Your Estate While we are waiting for the ATO to finalise its guidance in this area, there are steps you can take to protect your family’s assets: Review and update your will, especially if you are planning to provide certain individuals with the right to occupy a property. Does the will currently provide this right to specifically named beneficiaries? Plan the timing of sales – The two-year exemption window remains, but if you inherit a property and intend to hold it longer than this, weigh any potential CGT exposure against future rental income or family needs. Partial CGT exemptions might still apply, but the rules and calculations can be complex. Seek professional advice, especially if your estate plan uses TTs. You will normally need to work closely with tax and legal advisors to structure the plan appropriately. Be market aware – Estate planning can intersect with market timing. Quick sales may preserve CGT exemptions, but this needs to be weighed up against non-tax factors. The key takeaway is clear: estate planning is a complex area and needs to be navigated carefully to preserve family wealth and avoid unintended tax implications. Keeping Your Self-Managed Super Fund Compliant Self managed superannuation funds (SMSFs) can offer significant flexibility, allowing the members to make investments and enter arrangements that may not be available through retail or industry superannuation funds. However, being an SMSF trustee does come with important responsibilities to ensure that all dealings comply with superannuation law. Two critical areas to keep front of mind are: The sole purpose test, and The arm’s length requirements in both superannuation and taxation law. The Sole Purpose Test The sole purpose test requires that superannuation funds should be managed for the sole purpose of providing retirement benefits to fund members. While some SMSFs may have dealings with or/investments in related entities, these are subject to strict limits and when arrangements are entered into it is important that first and foremost SMSF trustees are considering the retirement benefits of the fund members rather than the needs of any external parties. The example below illustrates how SMSF trustees should apply the sole purpose test when looking at making a related party investment. Example: Investing in a Related Business? Sachin and Deepthi have an SMSF which has a total balance of $1.2m. Their son Hardik commenced a business 3 years ago using a company structure. Hardik has approached his parents to invest $50,000 into his company via their SMSF. Although Hardik is passionate about the business it has not grown as he would like, and Sachin and Deepthi are aware that the business has had cashflow issues and profits are not at a point where the business is growing or generating a profit. Although the proposed investment amount is within the 5% in-house asset limit would Sachin and Deepthi invest member funds in an unrelated business knowing the business was in this same situation? That is, would they be placing their son’s interests ahead of the interests of the fund members? Based on Sachin and Deepthi’s knowledge of the business, if the SMSF was to go ahead and make this investment they as trustees may have contravened the sole purpose test. Arm’s Length Requirements In addition to the sole purpose test there are superannuation and taxation law requirements that SMSF trustees always deal on arm’s length commercial terms. This is again particularly important when arrangements are with fund members and/or related parties. Where arrangements are not at arm’s length, SMSF trustees can be liable for superannuation law penalties and in some cases fund income may be taxed at a higher rate. Some common examples and key issues are discussed below. Example: An SMSF Owns a Commercial Property Which is Leased to a Related Party Business The rent should be on commercial terms and this needs to be evidenced by a rental appraisal from a professional such as a real estate agent when a lease is entered into. The lease agreement should: Be in writing; Clearly cover who is responsible for particular outgoings and maintenance; and Be prepared by a legal professional. Example: A Member of the SMSF or a Related Party Completes Work on an SMSF Property SMSF trustees should seek professional advice before commencing any work on SMSF properties where the work may be performed by a member or a related party. All arrangements with related entities should be commercial, including: If a related building company is used, the SMSF must pay market rates (same as the general public) and this should be supported by documentation to satisfy the fund auditor. If members (who are also trustees) perform work personally, strict rules apply to whether they can be paid for their services. All materials should be purchased directly by the SMSF, not by individual members. Please contact us to discuss these rules further if you are considering entering into any transactions or projects involving SMSF-owned property and related parties.

This month we look at the ATO’s sharpened compliance focus across property, business incentives and emerging technologies. New draft guidance on holiday homes signals a much tougher approach to deductions for short-term rentals, particularly where lifestyle use blurs with genuine income-earning intent. The Federal Government’s review of the Electric Car Discount also places current EV tax benefits under the spotlight, prompting businesses and employees to revisit timing and eligibility. We then turn to the rise of AI-generated tax “advice” — and the costly traps emerging as the ATO cracks down on misinformation. Finally, we unpack the nuances of downsizer contributions and the main residence exemption, highlighting key conditions and misconceptions that frequently trip up retirees. Electric Car Discounts Under Review: What It Means for Your Business (and What You Should Do Now) Electric vehicles (EVs) are no longer a niche choice. By late 2025, they account for more than 8% of new car sales in Australia, driven in no small part by generous tax incentives. One of the most significant is the Federal Government’s Electric Car Discount, introduced in mid-2022. For many businesses and employees, it has materially reduced the cost of owning or leasing an EV. That said, the rules are now under review. While no immediate changes are proposed, this is an important moment to understand the benefits, assess whether they suit your circumstances, and consider timing. How the Electric Car Discount Works (in Plain English) The discount is not a cash rebate. Instead, it operates through tax concessions that can significantly reduce the real cost of an EV: 1. Fringe Benefits Tax (FBT) exemption Where an eligible EV is provided to an employee as a fringe benefit, private use is exempt from FBT. This is often the biggest saving. Without the exemption, FBT is effectively charged at up to 47%. For many employees, the exemption can reduce the annual after-tax cost of a vehicle by thousands of dollars. Important points: The exemption applies to battery electric vehicles and hydrogen fuel cell vehicles. Plug-in hybrid vehicles lost eligibility for new arrangements from 1 April 2025. The car must be first held and used after 1 July 2022 and be below the luxury car tax threshold at first purchase. 2. Higher luxury car tax (LCT) threshold Fuel-efficient vehicles, including EVs, benefit from a higher LCT threshold ($91,387 for 2025–26, compared to $76,950 for other cars). This can prevent the 33% luxury car tax applying to part of the purchase price. 3. Reduced import costs Certain EVs are also exempt from the 5% customs duty, reducing upfront acquisition costs. Commercially, these settings have made EVs very competitive. Lower running costs (electricity versus fuel, fewer servicing requirements) and solid resale values have strengthened the business case, particularly for salary packaging and small fleets. Why the Government Is Reviewing the Rules A statutory review of the Electric Car Discount has now commenced. The key reason is cost. Uptake has exceeded expectations, and the projected cost to the budget has increased significantly over the forward estimates. The review will examine: Whether the concession is still required to encourage EV adoption. Whether eligibility settings should be tightened (for example, limiting benefits to certain vehicle types or price points). How the discount interacts with other policies, such as the National Vehicle Emissions Standard commencing in 2025. Public consultation is underway, with a final report not due until mid-2027. Importantly, there is no suggestion of immediate changes, and any reforms are more likely to be prospective. Practical Takeaways for Business Owners and Employees While uncertainty always creates hesitation, the current rules are clear and legislated. From a practical perspective: Now is a good time to review fleet or salary packaging arrangements, particularly if you are considering replacing a vehicle in the next 12–24 months. Existing arrangements are expected to be grandfathered, reducing the risk of retrospective changes (although we can’t guarantee this). Ensure vehicles are clearly under the LCT threshold at first purchase and meet all eligibility criteria if you want to access the FBT exemption. Check the tax treatment of charging infrastructure provided in connection with an eligible EV, this won’t necessarily qualify for an FBT exemption. Final Thought The Electric Car Discount remains one of the most valuable concessions available for employee vehicles. While a review introduces longer-term uncertainty, the commercial reality today is that EVs can deliver genuine tax and cash-flow savings when structured correctly. If you are considering an EV—either personally or through your business—now is the right time to run the numbers. Please contact our team if you would like tailored advice on whether an electric vehicle strategy makes sense for you under the current rules. AI Tax Tips: Helpful Shortcut or Costly Trap? As a business owner or investor, time is always tight. So it’s no surprise many people now turn to AI tools like ChatGPT for quick answers on tax deductions, super contributions or structuring ideas. The responses sound confident, arrive instantly and cost nothing. What could go wrong? Plenty. The Australian tax and super system is complex, highly fact-specific and constantly changing. While AI can be a useful starting point, relying on it for decisions can expose you to audits, penalties and poor financial outcomes. We’re increasingly seeing the clean-up work when AI advice goes wrong. Where AI Can Help (and Where it Can’t) AI is quite good at explaining basic concepts in plain English. It can help you understand what “negative gearing” means, outline the difference between concessional and non-concessional super contributions, or prompt you to think about record-keeping. Used this way, it can save time and help you ask better questions. The problem starts when AI moves from explaining concepts to giving “advice”. Tax and super outcomes depend on your specific facts: your income levels, business structure, age, residency status, assets, timing and future plans. AI does not know these details unless you provide them—and you generally shouldn’t. Even then, it cannot exercise judgement or balance competing risks the way an experienced adviser can. The Accuracy Risk: Confident, but Wrong AI tools are known to “hallucinate” – that is, provide answers that sound authoritative but are incorrect or incomplete. In practice, this can mean: Claiming deductions that don’t apply to your circumstances Miscalculating capital gains tax or ignoring integrity rules Suggesting super strategies that breach contribution caps or eligibility rules Quoting legislation, cases and rulings or concessions that don’t exist or are out of date. These errors are rarely obvious to a non-expert, but they are normally obvious to the ATO, courts and experienced advisers. A recent decision handed down by the Administrative Review Tribunal highlights some of the key problems. In Smith and Commissioner of Taxation [2026] ARTA 25 the taxpayer appeared to rely on AI tools to identify cases which supported their argument, but this approach was shot down by the Tribunal. Some of the cases didn’t exist and others were simply not relevant to the matter being considered. If the person using the AI tool doesn’t verify the existence of the cases provided by the tool and read them to ensure their relevance then “the Tribunal’s resources are being wasted, as the Tribunal must look for cases that don’t exist and read cases that have no relevance at all”. ATO Scrutiny is Increasing, not Decreasing The ATO isn't anti-AI—they use it internally for fraud detection and analytics. But for you? The ATO’s misinformation guide makes it clear that AI tools can provide false, inaccurate, incomplete or outdated information. The ATO’s message is to verify everything, or face the music. Surveys reveal 64% of businesses seek AI accounting help first, only for pros to unscramble the mess—wasting time and money. Related links: Downsizer super contributions Downsizer contributions and capital gains tax ATO AI transparency statement | Australian Taxation Office Protect yourself from misinformation and disinformation | Australian Taxation Office When something is wrong, the ATO will generally amend the return, charge interest and may apply penalties—even if the mistake came from AI advice rather than intent. We are seeing this play out most clearly with work-from-home claims, property deductions and SMSF compliance. Superannuation: High Stakes, Little Margin for Error Super is an area where AI advice can be particularly dangerous. Self-managed super funds, in particular, operate under strict rules. AI often overlooks key issues such as eligibility, timing, purpose tests and investment restrictions. The result can be non-compliance, forced unwinding of transactions and penalties that run into thousands of dollars. Super mistakes can also permanently damage your retirement savings. Data Security and Privacy There is also a practical risk many people overlook: entering personal or financial information into AI platforms. Once data is entered, you lose control over how it is stored or used. This creates privacy and fraud risks that are simply not worth taking. A Smarter Approach: AI Plus Professional Advice AI is best used as a support tool, not a decision-maker. It can help you understand the landscape, but important tax and super decisions should always be reviewed in light of your full circumstances. At our firm, we encourage clients to bring questions early, test ideas and have conversations before acting. That approach almost always costs less than fixing problems after the fact. The bottom line: AI can be a helpful assistant, but it is not your accountant. When it comes to protecting your wealth and staying compliant, tailored professional advice remains essential. Downsizer Contributions and the Main Residence Exemption When clients sell a long-held family home, they may be able to channel part of the proceeds into superannuation by using the downsizer contribution rules. Basic Eligibility Conditions To qualify, the seller must meet a number of conditions: They must have reached the eligible age of 55 years (at the time of making the contribution). The eligible dwelling must be located in Australia and have been owned for at least 10 years. The disposal of the dwelling must be exempt from CGT under the main residence exemption to some extent (full exemption not required). The contribution must be made within 90 days of settlement, and an election form must be lodged with the fund no later than when the contribution is received. The downsizer contribution can only be used once per individual and is limited to the lesser of the gross sale proceeds or $300,000 per person. Does the Sale Need to be Fully CGT-exempt? A common question is whether the sale must be fully exempt as the main residence. Importantly, a full exemption is not required. Even if only part of the capital gain is exempt under main residence rules, the property may still qualify — provided all other conditions are met. Is the Property Required to be the Main Residence at Sale? Equally important: the property does not need to be the seller’s principal residence at the time of sale. Living in the property for some years and renting it out later does not disqualify it, as long as the ownership and residence history supports at least a partial main residence exemption. Special Rules for Pre-CGT Properties Where a property was acquired before CGT began, the rules look at whether part of the gain would have been disregarded had CGT applied. A key requirement is that there is a dwelling that qualifies as the main residence. Disposal of vacant land will generally not satisfy the test and therefore will not meet downsizer requirements. Eligibility of a Non-Owning Spouse It is common for only one spouse to be listed on the property title. A non-owning spouse may still qualify for a downsizer contribution if all other requirements are met, apart from ownership. However, a spouse who never lived in the property and could not reasonably have treated it as their main residence is unlikely to be eligible. Preservation and Access to Funds A downsizer contribution is subject to the standard preservation rules. Once contributed, the amount cannot be accessed until: You reach preservation age (60) and retire, or You reach age 65, regardless of retirement status. Consider future cash-flow needs before making the contribution. Before you Contribute Although seemingly straightforward, downsizer contributions involve several nuances. Please contact us if you have any questions. Holiday Homes Under the Microscope: What the ATO’s New Guidance Means for You For many Australians, a holiday home does double duty. It’s a place to escape with family and friends, and during the rest of the year it’s listed on Airbnb or Stayz to help cover the costs. Until recently, many owners assumed they could claim most of the usual deductions for the property without much trouble, as long as appropriate apportionments were made. However, that position is now under more scrutiny than ever following the release of some new draft guidance documents by the Australian Taxation Office (ATO) - TR 2025/D1, PCG 2025/D6 and PCG 2025/D7. The ATO is looking to significantly tighten the rules around holiday homes that are used to derive some rental income. While the documents are still in draft form, they clearly signal the ATO’s compliance focus going forward. What is the ATO Concerned About? In simple terms, the ATO wants to distinguish between properties that are genuinely held to maximise rental income and those that are primarily lifestyle assets with some incidental rental use. The ATO confirms that all rental income must be declared, even if it is occasional or earned through informal arrangements. However, if the property is really a holiday home and isn’t used mainly to produce rental income during the year then the owner can’t claim any deductions for expenses such as interest, rates, land tax, repairs and maintenance. That is, the ATO might not allow any of these expenses to be claimed as a deduction, even if the property is used to generate taxable rental income for some of the year at market rates. If the property is classified as a holiday home by the ATO then owners can only claim deductions for limited direct expenses such as cleaning or advertising. The ATO is particularly focused on properties that: Are blocked out for private use during peak periods (for example, school holidays or ski season), Are advertised inconsistently or at above-market rates, Generate ongoing tax losses year after year. How Expenses Must be Claimed Even if the property isn’t classified as a holiday home, it will often still be necessary to apportion expenses if the property is only used partly for income producing purposes. PCG 2025/D6 outlines how expenses should be apportioned. The key principle is that claims must be “fair and reasonable”. Common methods include: Time-based apportionment (for example, based on days rented or genuinely available for rent), and Area-based apportionment (where only part of a property is rented). Getting this wrong, or failing to keep evidence, increases audit risk. The ATO has access to booking platform data and can easily compare listings, calendars and reported income. The Financial Impact can be Significant Consider a holiday unit that earns $30,000 a year in off-peak rent but is kept for private use during peak holiday periods. Under the new approach, the ATO may conclude the property is really a holiday home and could reduce deductible expenses from tens of thousands of dollars to only a small fraction, resulting in a materially higher tax bill. Co-ownership also needs care. Income and deductions are generally split according to ownership interests, regardless of who uses the property more. Renting to relatives at discounted rates can further limit deductions. Practical Steps you Should Take Now Although the guidance is proposed to apply from 1 July 2026 (with transitional relief for arrangements in place before 12 November 2025), now is the time to review your position: Are you holding and using the property to genuinely maximise rental income? Is the property advertised broadly and consistently, including during peak periods? Use market pricing: Set rent in line with comparable properties in the same area. Keep strong records: Retain booking calendars, advertisements, enquiries, and a diary showing private versus rental use. Review ownership and strategy: In some cases, changing how a property is operated can improve its commercial profile and tax outcome, but beware of CGT liabilities, duty and legal fees. Document existing arrangements: If you may qualify for transitional relief, evidence is critical. The Bottom Line The ATO is not banning deductions for holiday homes, but it is drawing a firmer line between genuine investment properties and lifestyle assets. With the right structure, pricing and record-keeping, many owners can still claim appropriate deductions and improve cash flow. If you own a holiday property, a proactive review could save you from an unpleasant surprise later. Please contact us if you would like us to assess your current arrangements and help you plan ahead.

Christmas Parties, End of Year Events & Employee Gifts As the year comes to a close, it is important to consider the FBT implications of Christmas parties, events, and gifts. LAST DAY OF WORK LUNCH A light staff lunch such as sandwiches, muffins, pastries held on your business premises, during normal working hours, and attended only by employees are generally exempt from FBT under the property benefit exemption providing alcohol is not served and it is not a social function. The exemption does not apply if the party is held after hours, on a weekend, or off-site. Providing staff with end of year gifts, including beer, wine or spirits is fine, providing the staff do not consume the alcohol at work. See paragraph below regarding non-entertainment gifts. Note: The event is exempt from FBT, and the business can claim a tax deduction and GST credits. This is the most tax effective way to reward staff with no FBT implications. Christmas Parties PARTIES HELD ON THE BUSINESS PREMISES DURING A NORMAL BUSINESS DAY Christmas parties held on your business premises, during normal working hours, and attended only by employees are generally exempt from FBT under the property benefit exemption. Alcohol may be served and FBT will not apply. The exemption does not apply if the party is held after hours, on a weekend, or off-site. Employees may bring an associate (e.g. partner or child). Where the cost per associate is less than $300 including GST, the minor benefits exemption will usually apply and no FBT is payable. There is no limit on the number of attendees. Note: While the event is exempt from FBT, the business cannot claim a tax deduction and GST credits as a Christmas party is regarded as entertainment. PARTIES HELD OFF-SITE (RESTAURANTS, VENUES, CORPORATE EVENTS, RECREATION DAYS) F or Christmas parties held away from your business premises, FBT may apply unless each employee’s cost is: Less than $300 including GST, and Infrequent and irregular, and You are using the actual expense method (calculate the actual cost of each benefit each employee received). There is no limit on the number of attendees. If the cost is $300 or more per person, FBT is likely to apply. Note: Even when the minor benefit exemption applies, the business cannot claim income tax deductions or GST credits, as the expenses relate to entertainment Christmas Gifts NON-ENTERTAINMENT GIFTS  Examples include hampers, gift cards, wine, perfume, books, store vouchers. Less than $300 including GST - Usually exempt under the minor benefits exemption. If not treated as a minor benefit, the cost is tax deductible and GST is claimable. The exemption applies per item, so a $250 store voucher and a $200 hamper will each be exempt. These are generally the most tax-effective gifts for employees. ENTERTAINMENT GIFTS Examples include concert tickets, theatre passes, and sporting events. Less than $300 including GST - May still qualify for the minor benefits exemption and avoid FBT. Regardless of FBT outcome, these items are not tax deductible and no GST credits can be claimed due to these examples being entertainment. Tip: Maintain clear records of costs and the number of employees and associates receiving benefits. Super on Payday: Fundamental Changes for Employers If you run a business, you already know the juggling act that comes with managing the payroll process — paying staff on time, managing cash flow, and staying compliant. From 1 July 2026, there’s a major change coming that will reshape how you handle superannuation contributions for staff. It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees — especially casual and part-time workers — get their retirement savings when they get paid. What’s Changing? From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds. If payments are late, the Superannuation Guarantee Charge (SGC) will apply — that means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full. Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible. On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought. The change isn’t just about compliance — it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700. Why It’s Good for Business This reform might sound like extra admin, and it might take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer. Less admin – Paying super when you run payroll means no more quarterly payment crunches. Fewer compliance risks – ATO data-matching will pick up issues faster, helping you avoid penalties before they snowball. Stronger employee trust – Staff can see their super growing in real time, which might help with engagement and retention. Smoother cash flow management – Paying smaller, regular amounts of super is often easier to manage than large quarterly sums. The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks. How to Get Ready — Practical Steps to Take Now You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how: 1. Check your payroll software. Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed. 2. Map your pay cycles. Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each. 3. Brief your team. Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help. 4. Plan your cash flow. Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks. 5. Monitor and review. Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released. If you outsource payroll, contact your provider soon — many are already updating systems for Payday Super and can help you make a seamless switch. The Bottom Line Payday Super isn’t just a compliance change — it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed and just over 6 months to prepare, it’s time to get ahead of the curve. If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team — we can help you make sure your business is ready to go when Payday Super commences. Unlocking Tax Savings: Can Your MBA (or Other Studies) Pay Off at Tax Time? If you’ve invested in further study — an MBA, a leadership course, or a postgraduate qualification — you might be wondering: can this help at tax time? For many professionals, the answer is yes — but only if the right boxes are ticked. The ATO’s rules on self-education expenses are strict, and the line between “deductible” and “non-deductible” can be thin. Getting it right could mean thousands back in your pocket; getting it wrong could mean an ATO adjustment, plus interest and penalties. Let’s unpack how it works with a real-world example and some practical takeaways. The Scenario: Sarah’s MBA Sarah works in the Department of Defence and recently completed an MBA through a private provider. Her employer supported her studies with a $40,000 study allowance, and the course fees totalled $18,000. She deferred payment using the FEE-HELP loan system and declared the allowance as taxable income in her return. Now she’s asking: Can I claim a deduction for my MBA fees? Does it matter that I used FEE-HELP? Does the employer allowance change things? The Type of Loan Matters First, not all funding for education courses is treated equally. HECS-HELP - no deduction: If your course is a Commonwealth supported place (most undergraduate and some postgraduate university programs), you can’t claim a deduction. There is specific legislation in the tax system which denies deductions for fees covered by HECS-HELP — even if you pay them upfront and even if the course is closely related to your work. FEE-HELP - potential deduction: If you’re in a full-fee course, your tuition fees might be deductible if the study directly relates to your current employment or business activities. The ATO doesn’t allow a deduction for loan repayments later on — just the course fees themselves. Practical tip: Check your course statement or loan confirmation to see if you’re under HECS-HELP or FEE-HELP. Only FEE-HELP (or private payment) gives you potential deductibility. The “Nexus” Test — Linking Study to Your Current Work Even if the funding passes the first test, the purpose of the study is key. The ATO will only allow deductions if the course maintains or improves the skills you already use in your job, or is likely to increase your income in that same role. It won’t apply if you’re studying to move into a new field or start a different career. The ATO issued a detailed ruling on this topic in 2024 which provides some clear examples: Allowed: A store manager doing an MBA to strengthen leadership and business operations skills. Denied: A sales rep doing an MBA to change careers into consulting — the link to the current role was too weak. For Sarah, the deduction depends on whether her MBA subjects (like strategy, policy or management) build directly on her current Defence role. The fact that her employer funded the course helps demonstrate relevance, but it’s not proof on its own. In some cases you might find that specific subjects or modules are sufficiently linked with current income earning activities, while other subjects are too general in nature for the fees to be deductible. Employer Allowances and HELP Repayments The $40,000 allowance Sarah received is assessable income — it’s taxed just like salary. But that doesn’t stop her from claiming eligible self-education deductions for the course fees. HELP loan repayments later on are not deductible — they’re simply a repayment of debt. The timing of the deduction is based on when the course expense was incurred (not when the loan is repaid). Making It Practical If you’re planning further study or reviewing a recent course, here’s how to make sure you get it right: Check your loan type – FEE-HELP or private fees can be deductible; HECS-HELP cannot. Gather evidence – Keep course outlines, job descriptions, and any correspondence showing the study supports your current work. Claim what’s relevant – You can only claim expenses directly connected to your current job (fees, books, and possibly travel). Be ready for review – Large claims often attract ATO attention. A private ruling can provide peace of mind if the amount is significant. Key Takeaways For many professionals, postgraduate studies like an MBA can deliver both career and tax benefits — but only if they relate directly to your current role. Handled correctly, self-education deductions can return thousands in tax savings. For Sarah, that could mean a refund of over $5,000 on an $18,000 course. If you’re considering further study, talk to us before you enrol or claim. A quick chat could ensure your next qualification delivers the best return — professionally and financially. Know the Rules Before You Break Them: Why SMSF Education Matters More Than Ever Running, or deciding to set up a self-managed super fund (SMSF) gives you control, but it also brings legal responsibilities. The Superannuation Industry (Supervision) Act 1993 (SISA) contains detailed rules on trustee duties, investments, borrowing, payments and recordkeeping. Simply put, you cannot identify or avoid breaches you don’t know exist. For trustees, this should mean education is not optional but rather, is essential for risk management. Why understanding SISA matters You can’t comply with what you don’t know: Many common breaches arise from misunderstanding basic SISA duties (for example, sole purpose, arm’s length dealings, or in-house asset limits). Awareness of the rules is the first step to spotting a problem early. Early identification reduces harm: Knowing what to look for, incorrect benefit payments, related party transactions that aren’t on commercial terms, or records that are incomplete, lets you seek advice before small errors become reportable contraventions. Education protects members: The consequences of a breach can include loss of tax concessions, penalties and remediation costs that reduce retirement savings for members. The ATO’s Focus on Education — What Trustees Need to Know The ATO has recently published a draft Practice Statement (PS LA 2025/D2) explaining when it might issue an education direction under section 160 of SISA. These directions give the ATO power to require trustees (or directors of corporate trustees) to complete specified education, where trustees’ knowledge or behaviour poses a risk to compliance. The draft statement sets out the ATO’s approach and the kinds of circumstances that may lead to an education direction. However, trustees should not wait for an ATO directive before getting educated – such a directive means the trustees have already breached the rules. The draft Practice Statement is intended to support compliance and public confidence, but it is not a substitute for proactive trustee learning. Acting early and voluntarily is both safer for trustees and viewed more favourably by regulators. Practical Steps Trustees Can Consider Use ATO’s official SMSF guidance Start with the ATO’s SMSF courses on the lifecycle of an SMSF, setting up, running and winding up. These courses are written for trustees and prospective trustees: Setting up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/setting-up-a-self-managed-super-fund-smsf Running an SMSF: https://smallbusiness.taxsuperandyou.gov.au/running-a-self-managed-super-fund-smsf Winding up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/winding-self-managed-super-fund-smsf Complete the ATO’s ‘knowledge check’ The ATO provides an online “knowledge check” for each course designed to test trustee understanding. It’s a useful starting point, but note a pass mark of 50% should not be taken as a guarantee of safety. Trustees should consider whether aiming for a much higher standard, even 100% comprehension of core duties, is a more appropriate target to reduce risk. Seek timely professional advice If a knowledge check or your reading flags uncertainty, contact us early to discuss your concerns. Timely, qualified advice often transforms a potential contravention into a routine fix and may mitigate potential penalties or ATO enforcement action. Document your learning and decisions Keep records of training completed, who provided advice, and why investment or payment decisions were made. Good records are persuasive evidence of a trustee’s intent to comply. Final Word SMSF trustees hold both opportunity and responsibility. Learning the SISA rules and the ATO’s expectations is the most practical way to prevent costly mistakes. The ATO’s draft Practice Statement shows the regulator is prepared to use education directions where trustees’ knowledge gaps pose risks, but you shouldn’t wait to be told. Build your knowledge, use the ATO’s resources, complete the knowledge check, document what you learn, and seek professional help confidently and early. That approach better protects your fund and retirement outcomes. Cash is Making a Comeback – Is Your Business Ready to Take It? For years, businesses have been moving away from cash – and for good reason. Digital payments are quick, traceable, and cut down on the risk of theft or counting errors. But that tap-and-go world might soon have to make room again for notes and coins. The Government has released draft regulations that would require certain retailers to accept cash payments, ensuring Australians can still buy essential goods like groceries and fuel – even when technology fails. The change aims to stop people from being excluded when power, internet, or card systems go down, or when they simply prefer to pay in cash. Who Will Need to Accept Cash – and Who Won’t The new rules are targeted and, importantly, practical. They’ll apply to fuel stations and grocery retailers, including both major supermarket chains and independent operators, but only for in-person transactions under $500. That means you won’t have to accept someone paying for a $700 tyre replacement or bulk farm supplies in cash – it’s about the everyday essentials. If your business (or franchise group) has an annual turnover of less than $10 million, you’ll be exempt. That’s good news for most small businesses such as family-run grocers, local cafés, and corner stores already managing tight margins and staffing challenges. The regulations are expected to take effect from 1 January 2026, with a review after three years to see how the system is working in practice. Why It’s Happening The move comes as part of a broader push to maintain access and fairness in Australia’s payment system. The Government and industry groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash – particularly older Australians and those in regional or remote areas. There’s also a resilience angle: during bushfires, floods, or power outages, card networks can go offline. In those moments, cash becomes essential. What This Means for Your Business For larger retailers, this change will mean dusting off cash-handling policies and reintroducing processes that many have phased out. That may include: Re-establishing cash floats and tills Staff training to handle and verify cash More frequent bank deposits and reconciliation procedures For small businesses that fall under the $10 million exemption, the key step will be to document your turnover clearly so you can demonstrate that the exemption applies. We can help ensure your records and structures support that. There may also be commercial upside. Accepting cash could attract a segment of customers who’ve drifted away as stores went digital – especially in regional areas where cash use remains strong. A small business that promotes “cash welcome” could even gain new loyal customers who value convenience and personal service. Preparing for the Change With final regulations expected soon, it’s worth starting to plan now. Review your payment policies, assess whether you’re likely to be caught by the new rules, and budget for any setup or compliance costs. If you’re exempt, ensure your records are watertight. If not, look for ways to streamline cash handling – for example, by using digital cash counters or smart safes to reduce errors and time spent on reconciliations. Looking Ahead Cash isn’t going away just yet. This reform is about maintaining choice, resilience, and fairness in how Australians pay – and ensuring businesses are ready when customers want to use it. If you’d like help assessing how these rules could affect your operations or what the exemption means for your business, get in touch with our team.

Super Tax Shake-Up: Big Balances Beware If your super balance is comfortably below $3 million, you can probably relax — the proposed changes to the super rules shouldn’t adversely affect you (yet). But if your super is nudging that level, or if you’re clearly over, the Treasurer’s latest announcement could change how you think about super’s generous tax breaks. For some time now the Government has been planning to introduce targeted measures to reduce tax concessions for those with superannuation balances over $3 million. This has commonly been referred to as the Division 296 tax. However, the Government has reworked the proposed new tax — part of the Better Targeted Superannuation Concessions (BTSC) policy — attempting to make it simpler, fairer, and more practical. After a wave of industry criticism, the revised version keeps the broad policy intent (reducing tax concessions for very large balances) but removes some of the more problematic features. Let’s break down what’s changed and what it means for you. What’s Changing — and Why It’s Simpler The original 2023 proposal aimed to apply an extra 15% tax on “earnings” from super balances above $3 million. The big flaw? “Earnings” included unrealised gains — paper profits on assets like property or shares that hadn’t been sold. This meant some people could have owed tax on increases in value they hadn’t actually received in cash. The reworked model drops unrealised gains from the equation entirely, taxing only realised earnings — actual income and capital gains when assets are sold. This makes the system far more practical and aligned with everyday tax rules. No more worrying about funding a tax bill on assets you haven’t sold. A Fairer, Tiered Approach The new rules introduce a two-tier system for high balances: Tier 1 ($3m–$10m): Extra 15% tax on earnings from this portion (making a total rate of 30%). Tier 2 (over $10m): Extra 25% tax on earnings above $10m (for a total rate of 40%). Both thresholds will be indexed annually to inflation ($150,000 steps for the $3m tier and $500,000 for the $10m tier), which should prevent “bracket creep” over time. Importantly, the start date has been pushed back to 1 July 2026, with the first assessments expected in 2027–28. The Government estimates less than 0.5% of Australians will be affected at the $3m level, and fewer than 0.1% at the $10m mark. What This Means in Practice Here are a couple of examples from Treasury to help you get your head around this. Consider Megan, who has a $4.5 million super balance split between an SMSF and an APRA fund. She earns $300,000 in realised income for the year within the super system. The super balance above $3m represents is one-third of the total balance, so she’ll pay $15,000 in additional Division 296 tax (15% × 33.33% × $300,000). Emma, on the other hand, has $12.9 million in her SMSF and $840,000 in earnings. She pays 15% on the Tier 1 portion and an extra 10% on the Tier 2 portion—a total of around $115,000 in extra tax. These examples show how the tax scales up progressively. The ATO will calculate each individual’s total super balance across all funds (SMSFs and APRA funds) and determine the proportionate amount of earnings to be taxed. Why It’s Still Good News (for Most) For many SMSF members, this update is a relief. By removing unrealised gains, it eliminates valuation headaches and liquidity pressures — particularly for those holding property or unlisted assets.. That said, individuals with super balances above $10m will face a higher overall rate (up to 40%), which may prompt a rethink of long-term strategies. However, remember that updated legislation relating to this measure hasn’t been introduced to Parliament and things could change before the proposed rules become reality. Low Income Superannuation Tax Offset In addition to introducing the revamped Division 296 tax, the Government has announced that it will increase the Low Income Superannuation Tax Offset (LISTO) from $37,000 to $45,000 from 1 July 2027. The maximum payment will also increase to $810. Treasury estimates that the average increase in the LISTO payment will be $410 for affected workers. What to Do Now Check your total super balance (TSB) now and project where it may be by 2026. Seek advice early — strategies like managing liquidity, reviewing asset allocations, and timing asset sales could make a real difference. Stay informed — draft legislation is expected in 2026. We’ll keep you updated through our newsletters. Overall, the Government’s revised approach strikes a more balanced tone: fewer administrative headaches for most, but less generosity for the ultra-wealthy. If your balance is near or above $3 million, now’s the time to plan ahead — not panic. Your future self (and your accountant) will thank you. Proposed Extension of the Instant Asset Write-Off and Other Tax Measures A new Bill before Parliament – the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 – proposes several key changes that could affect small businesses, listed companies, and the not-for-profit sector. The headline measure is the proposed extension of the $20,000 instant asset write-off for another year, to 30 June 2026. Small Business Boost: $20,000 Instant Asset Write-Off Extended If the Bill passes, small businesses with an aggregated annual turnover of less than $10 million will continue to be able to immediately deduct the full cost of eligible assets costing under $20,000 (excluding GST) through to 30 June 2026. The threshold applies per asset, meaning multiple purchases can qualify if each individual item is under the limit. To claim the deduction, the asset must be first used or installed ready for use by the new deadline. This measure remains one of the simplest and most practical tax incentives available to small businesses. It provides a direct cash-flow benefit by allowing the full deduction in the year of purchase instead of spreading depreciation over several years, as long as the taxpayer would actually have a tax bill for that year. For example, a tradesperson upgrading tools, or a café purchasing a new fridge or coffee machine, can immediately claim the full deduction – freeing up cash for reinvestment elsewhere in the business. While the proposal still needs to pass Parliament, now is the time to plan. If you are considering new equipment or technology upgrades, budgeting early ensures assets can be delivered and installed before the cut-off date once the law is enacted. Strengthened Corporate Disclosure The Bill also proposes tighter disclosure rules for listed companies. Changes to the Corporations Act 2001 would require the disclosure of equity derivative interests – such as options, swaps, and short positions – under the substantial holding regime. These reforms are designed to improve market transparency and make it harder for significant shareholdings or control interests to remain hidden. For listed entities, this will increase compliance obligations and may require updates to internal monitoring and reporting systems. Investors with substantial positions in listed companies should also review their current arrangements to ensure future compliance. Greater Transparency for Charities For the not-for-profit sector, the ACNC Commissioner would gain the power to publicly disclose “protected information” such as details of investigations, provided it meets a public harm test. This aims to strengthen public confidence in the charity sector by showing that the regulator is taking action where misconduct occurs. For well-run charities, stronger transparency can enhance community trust – but it also highlights the need for robust governance, record-keeping, and compliance processes. Financial Regulator Reviews Simplified Finally, the Bill would reduce the frequency of reviews of ASIC and APRA by the Financial Regulator Assessment Authority from every two years to every five. While largely administrative, this signals a shift toward streamlined oversight to allow regulators to focus on core functions. What You Should Do Now Although these measures are still before Parliament, it’s wise to start planning. For small businesses, consider your 2025–26 capital expenditure needs and make sure any planned purchases can be installed and ready for use by 30 June 2026 if you are hoping to rely on the upfront deduction. For charities and listed entities, review governance and reporting frameworks to prepare for greater transparency requirements. We’ll keep you updated as the Bill progresses. In the meantime, contact us if you’d like to discuss how these proposed changes might fit into your business or investment strategy. Cyber In Accounting: Safeguarding Financial Data in a Digital Age Cybersecurity is fast becoming a critical business strategy – and if it’s not, it should be. Many businesses hold critical data that poses significant risk to both businesses and their customers if the data they hold is not safeguarded from cybersecurity threats. The largest threats to businesses come from external entry points exposed by staff, through phishing links, malware being downloaded and payment fraud. The valuable information held by some businesses (such as professional firms) make them prime for cyber attacks, which can have devastating impacts on businesses and their customers. Outside of Government organisations, the financial services sector was the most targeted industry in Australia in FY 2024/25, with the cost of these cybercrimes increasing up to 55% for small and medium businesses. People: The Biggest Cyber Risk But where does your cyber strategy start, and how do you know what the risks are? The biggest risk to Australian businesses is its people. More than 85% of all cybersecurity incidents are caused by human error. The top three incident types all rely on staff and business decisions to gain access into systems, meaning it is more important than ever to conduct regular staff training. Staff training should focus on identifying phishing attempts, understanding what to look for in malicious emails and content and how to maintain healthy password practices. Technology and Updates: Don’t Let Legacy Systems Create Weaknesses Another considerable business risk is legacy hardware and software being used in your environment. It might seem like a small frustration, turning your computer off for updates regularly, and using the latest versions of software, replacing hardware to align with required standards, but it works to close the gaps of security vulnerabilities. Recommendations aligned with the Australian Signals Directorate’s Essential 8 Framework are that all critical vendor patches are applied within 48 hours of release, and any non-critical patches are applied within two weeks. This method applies to networking equipment, third party vendor software and device operating systems. Recently, Microsoft have made the Windows 10 Operating System End of Life (EOL) which means that devices still running on this operating system can no longer receive security updates, a vulnerability that malicious actors will no doubt use to their advantage. Visibility and Monitoring: Detecting Threats Early Realistically, you cannot defend what you cannot see. An important safeguard is event logging, reporting and alerting being setup in your environment. Just by way of example, the average breach for financial services businesses in Australia takes 288 days to detect. 288 days of unmitigated breaches, access to customer and staff data, contact lists, patterns of behaviour and possibly already setting up rules and routing inside the environment that the business is entirely unaware of. Setting up appropriate logging and alerts to ensure that you are notified when something risky, like logging in from Australia at 10am and Japan at 11am, is happening inside your environment. Understanding when unauthorised access to systems has occurred is critical in being able to then assess the potential scope of an incident, so it can then be managed. The Importance of a Cyber Incident Response Plan A Cyber Incident Response Plan (CIRP) might seem like another piece of paper, but it is critical in defining the steps that your organisation needs to take to act, mitigate and respond to a cyber event. An adequate CIRP will include several critical components, but the incident management team, detection methods, incident categorisation, evidence process and resolution plans form the baseline of what will help an organisation act swiftly, and appropriately for the event type. A CIRP that has been tested regularly ensures that in the event of a cybersecurity incident, your organisation has a prioritised and effective response that deals with the technical concerns, the potential data breaches and any ongoing communications required either internally or externally with customers and stakeholders. Protecting Your Business, Clients, and Reputation In today’s digital world, it is never more important for businesses to ensure their data, systems, staff and clients are protected from threats. Cybersecurity and risk strategies are critical in this landscape and should consider different components, including staff training, technology strategies, data and information handling policies, and incident response plans. Considering cybersecurity as a business strategy is how organisations will survive, and thrive, and ensure that their reputation, financial security and customers are protected. When Medical Bills Meet Tax Rules – Lessons from a Heartbreaking Case Imagine this: after years of hardship and illness, you’re forced to retire early on a Total and Permanent Disability (TPD) pension from your super fund. It’s your only income stream. Then come the medical bills – tens of thousands of dollars in treatments to manage the very conditions that ended your career. You might assume those costs are tax deductible as the TPD pension was payable because of this disability. Unfortunately, a recent tribunal case shows it’s not that simple. In Wannberg v Commissioner of Taxation [2025] ARTA 1561, the Administrative Review Tribunal (ART) upheld the ATO’s decision to deny nearly $100,000 in medical deductions. The case is a stark reminder that the tax system draws a sharp line between earning income and dealing with your health. The Story Behind the Case The taxpayer, Mr Wannberg, had left the workforce due to severe mental and physical health issues caused by years of abuse. His TPD pension from his super fund was his only income. In 2024, he applied to the ATO for a private ruling, asking whether about $98,000 in medical expenses – including psychotherapy, residential treatment, and dental work – could be claimed as deductions. His argument was heartfelt and logical: these treatments were essential to manage his disabilities and sustain his eligibility for the pension. He compared his situation to a 2010 High Court case (Anstis), where a student was allowed to deduct self-education costs linked to her Youth Allowance. But the ATO said no – and the tribunal agreed. Why the Deductions Failed The key issue came down to a single piece of tax legislation: section 8-1 of the Income Tax Assessment Act 1997. To be deductible, an expense must be incurred “in gaining or producing your assessable income” and must not be of a private or domestic nature. The tribunal found no direct link – or “nexus” – between the medical treatments and the pension income. The TPD pension was payable because of his disability, not because of any ongoing effort to maintain it. As the tribunal put it, the medical costs helped him live with his condition, but didn’t produce the pension. In other words, while staying healthy might be personally essential, it doesn’t make those expenses tax-deductible. The costs were considered private in nature – similar to most therapy, medical, or dental bills. What This Means for You This decision offers a few key takeaways for anyone receiving disability pensions, super income streams, or other support payments: Understand the “nexus” test: An expense must directly help you earn your income. Medical costs for managing a condition usually don’t meet that test. Recognise the private line: Even if a treatment relates to your ability to work, it’s likely still “private” unless it directly relates to producing income. Treatment vs assessment: Some taxpayers are required to obtain certificates from medical practitioners to maintain a licence so that they can continue with their current income producing activities. These costs are often deductible, unless the individual receives medical treatment. Plan for non-deductible costs: If you rely on disability or super pensions, factor medical expenses into your financial plan. Consider insurance options, offsets, or rebates (like private health or Medicare levy exemptions) to ease the load. Seek advice early: Before spending large sums, get an ATO private ruling or professional advice. The Wannberg case is a tough reminder that the tax law cares more about how income is produced than how life is lived. The system draws a firm line between personal wellbeing and income generation – and unfortunately, even genuine medical needs often fall on the wrong side of that line. If you’re unsure whether an expense might be deductible, don’t guess. Talk to us first. We can help you plan ahead, stay compliant, and make the most of the rules that do work in your favour.