Join us for an exclusive seminar designed for residential property developers who want to access development facilitation pathways, streamline approvals and unlock value by integrating affordable housing into their projects
Developers can unlock stalled or underutilised residential projects by engaging with the government-led Development Facilitation Program (DFP), which offer expedited planning pathways or waive or vary mandatory planning scheme requirements relating to building height, setbacks when affordable housing is incorporated into proposals. These initiatives present a strategic opportunity to align commercial outcomes with housing policy objectives across jurisdictions.
Our property expert Sejla Kadric is joined by three industry experts on the topic:
- Michael Henderson – Michael joined Contour in 2018 and was appointed a Director in 2024. Michael has been working as a town planner in both the private and public sectors since 2009; holding senior positions within both sectors. Michael brings enthusiasm and leadership qualities, together with his detailed understanding of Victoria’s planning system and its intricacies, to a wide cross-section of development projects. His expertise includes advice during site acquisition and project design, management of applications and negotiating successful approval outcomes with planning authorities.
- Kate Breen – Kate leads Affordable Development Outcomes, specialising in the development of affordable housing research, policy and precinct and site-specific planning frameworks and delivery strategies. With a strong focus on developing evidence-based and commercially viable strategies that work for all parties, Kate has developed successful approaches supporting major planning scheme amendments and permit approvals, including appearing as an expert witness at Panel. She has also worked extensively with the community housing sector on bids for government land and funding.
- Lucy Simms – Lucy is the Chief Commercial Officer at Women’s Property Initiatives (WPI), where she leads partnerships with developers, government, and philanthropy to deliver affordable housing for vulnerable women. With over a decade of experience in development management, Lucy brings a commercial lens to community housing transactions and an understanding of developer needs, alongside the importance of creating social cohesion within projects.
Our expert speakers will share their insights and guide you through the process from all angles:
- Michael will set the scene by talking through the various opportunities that the DFP offers, how to engage with the DFP and potential outcomes of incorporating affordable housing into residential developments.
- Kate will outline what social and affordable housing is, the key elements needed to plan and deliver it, the requirements for securing planning approval, and examples of effective affordable housing strategies.
- Lucy will round out the conversation by bringing a community housing perspective, demonstrating how collaboration with developers can drive speed and social impact, and outlining WPI’s approach to integrating affordable housing within private developments.
Walk away with clear, actionable knowledge on how to successfully integrate affordable housing into your developments while maximising both community benefit and project outcomes.
Date
Wednesday, 25 February 2026
Industry speaker
- Michael Henderson | Contour Consultants
- Kate Breen | Affordable Development Outcomes
- Lucy Simms | Women’s Property Initiatives
SW speaker
Sejla Kadric
Director, SW
At our annual Employment Taxes update, our experts delve into the ever-evolving world of employment taxes to help you stay ahead in this dynamic field.
Our Employment Taxes Update series is an exclusive event tailored for the Corporate, NFP and Government sectors. In each session, our experts will delve deeper into the ever-evolving world of employment taxes, offering you a unique opportunity to stay well informed to empower your organisation to navigate the complexities of the current tax landscape with confidence.
Session details
Session 1: Payday Super – What you need to know ahead of 1 July
A significant reform to superannuation means the super guarantee will need to be paid in line with salary and wages from 1 July 2026. With the ATO taking a proactive compliance approach, this change will require updates to your payroll processes, systems and internal controls to ensure you remain compliant.
This session will help you understand what these changes mean for your business. Get insights into the broader implications, learn a practical roadmap to help you prepare and walk through the latest compliance details released by the ATO.
Hear from Paul Hum, Tax Director and Employment & Payroll Tax Specialist, who has guided organisations through complex payroll reviews and regulatory changes.
Session 2: FBT update
In this session, our experts Jason Ch’ng and Rahul Sanghani will provide you with an update on:
- New and topical developments including:
- Grandfathering provisions for Plug-in Hybrid Electric VehiclesCourt case – benefits provided to owners
- ATO compliance activity including employee contributions
- FBT recap and savings opportunities for cars, dual cabs, carparking, entertainment, exemptions, combining business & personal travel and exemptions & rebates for not-for-profits
- Use of FBT software to streamline FBT Return preparation process.
Date
Wednesday, 18 March 2026
Location
Online nationally – via Zoom webinar
Time
12pm – 1pm (AEDT)
Session 3: Employee share schemes and reporting obligations, incentives, ESAS
This informative session will provide the benefits of employee share schemes, including different plan structures, designs and alternatives, tax reporting obligations and the employee shares scheme start-up concessions. Kurt Tiam of Dentons Australia Limited will join our tax expert Justin Batticciotto for a discussion on how to design and implement an effective ESS plan and the key terms to consider.
Date
Thursday, 19 March 2026
Location
Online nationally – via Zoom webinar
Time
12pm – 1pm (AEDT)
Session 4: Employer vs contractor
Our tax expert Paul Hum and Vanessa Priest will walk through the latest employment tax and income tax developments, including how the rules treat contractors and what this means for your business. We will touch on current audit activity, the Fair Work and common law changes affecting employee vs contractor assessments, and the practical issues we see when clients get reviewed.
We will also discuss the Commissioner’s updated personal services income guidance, providing context that may assist you when negotiating terms or engaging labour‑based contractors.
We will demonstrate how technology can support better contractor governance, from improving data matching to strengthening review processes and reducing manual work.
This session will provide the latest developments in legislation and case law, regulator practices and leveraging technology to assist with compliance.
Date
Wednesday, 25 March 2026
Location
Online nationally – via Zoom webinar
Time
12pm – 1pm (AEDT)
Who should attend?
- Tax managers and their support staff
- Human resource management/remuneration and benefits managers
- Other staff interested in employer tax compliance, such as CFOs, financial controllers, CEOs and directors
Expert speakers
Jason Ch’ng
Head of Tax Information Solutions
SW
Justin Batticciotto
Associate Director
SW
Date: 9–11 November 2025
Location: Crowne Plaza Hobart, Tasmania
SW will be co-hosting the 2025 Australia National Conference of the CCCA Energy & Resources Committee, alongside the CCCA Melbourne Branch. The event will bring together leaders across government, industry, and academia to discuss developments in the energy and resources sectors, with a focus on sustainability, innovation, and strategic partnerships.
Event agenda
Sunday, 9 November
- Welcome Cocktail Reception
Time: 6pm – 9pm
Offers attendees an opportunity to connect with peers, speakers, and sponsors in a relaxed setting.
Monday, 10 November
- Member Conference (CCCA Members only)
Time: 9am – 12pm
Focused discussions on committee activities and regional updates.
- Networking Lunch
Time: 12.15pm – 2pm
A buffet-style lunch open to all attendees.
- Industry Forum: Transforming Energy & Resources
Time: 2pm – 5pm
Explore how innovation is transforming energy and resources through smart technologies and digital solutions.
- Gala Dinner
Time: 6pm – 10pm
A formal evening featuring a keynote address and networking opportunities
Tuesday, 11 November
- Attendees will have the opportunity to partake in optional activities and tours
Conference details & participation
- The event will be conducted in both English and Mandarin.
- Accommodation discounts are available at the conference venue (Crowne Plaza Hobart) for bookings made before 19 October 2025.
- This event is open to both CCCA members and non-members/the public, though some sessions are members-only
Why it matters
The conference promises to be an engaging day filled with insightful discussions, thought-provoking presentations, and valuable networking opportunities. Attendees will have the chance to share knowledge and connect with industry leaders, as the event explores how innovation, collaboration, and sustainability are reshaping the energy and resources sector – key considerations in future proofing businesses for long-term success.
澳大利亚税务局（ATO）发布了新指南，帮助大型跨国公司履行支柱二税务规则规定的义务。虽然这些公司要处理的文件多了，还有可能面临处罚，但 ATO 会对过渡时期切实开展合规工作的企业宽大处理。
总览
实务合规指南草案 PCG 2025/D3 概述了 ATO 在过渡时期（2026 年 12 月 31 日或之前开始、2028 年 6 月 30 日或之前结束的财政年度）对申报义务和处罚的过渡性合规办法。
澳大利亚实施了 15% 的全球与国内最低税率（支柱二规则），这与支柱二项下的经合组织全球反税基侵蚀（GloBE）规则保持一致。其对象是受测年度之前的四个财政年度内至少有两个财政年度合并收入≥7.5 亿澳元的大型跨国企业（MNE）集团。支柱二规则自 2024 年 1 月 1 日起适用于澳大利亚。
值得注意的是，自 2025 年 1 月 1 日起，未征低税利润规则可能会使澳大利亚的跨国企业集团成员承担其他集团成员的相关补税。这与前者是否对后者拥有任何所有者权益无关。因此，审计人员可能要求对全球集团 2025 财年的情况开展支柱二分析。
澳大利亚的主要申报义务有哪些？
适用的跨国企业集团必须提交以下材料：
- GloBE 信息申报表（GIR）– 经合组织计算税务负债的标准化表格。
- 海外通知表（FNF）– 通知 ATO 海外申报 GIR 的情况。
- 澳大利亚 IIR/UTPR 纳税申报表（AIUTR）– 根据收入包含规则（IIR）和未充分纳税利润规则（UTPR）评估补税。
- 澳大利亚国内最低报税表（DMTR）— 对澳大利亚低征税利润进行补税评估。
AIUTR、DMTR 和 FNF 被并入全球与国内统一最低报税表（CGDMTR）。GIR 仍是一项独立的义务。第一年的申报截止日期为财政年度结束后 18 个月，此后为 15 个月。对于以 2024 年 12 月 31 日为财政年度末的跨国企业集团，申报截止日期为 2026 年 6 月 30 日。
重点注意：跨国企业集团的澳大利亚成员必须在澳大利亚履行申报义务，即使集团母公司所在国没有实施支柱二规则。澳大利亚各实体可指定由一家澳大利亚集团实体（称为“指定本地实体”，简称DLE）代表澳大利亚实体提交报税表。
截至本文件发布之日，澳大利亚尚未签署支柱二项下的《关于全球反税基侵蚀信息交换的多边主管机构协议》（MCAA）。在此之前，必须在澳大利亚向 ATO 提交 GIR，即使该 GIR 已在海外提交。
对纳税人的处罚是否会“软着陆”？
在过渡期内，如果跨国企业集团证明自己采取了合理措施遵守有关规定，ATO 将采用“软着陆”办法（即减免罚款）。
以下对这些合理的措施举例说明：
- 相关实施计划和内部政策有记录可循，
- 系统升级和差距分析，
- 积极主动地配合 ATO 和外部顾问，以及
- 及时纠正错误。
此外，在过渡时期，个别无心之失应该不会被处罚。然而，若以事不关己的态度待之，或未按常理谨慎处理，则可能会受到处罚。目前对大型全球实体实施的行政处罚适用于这些情况。
信永中和如何协助？
我们可以通过以下方式协助贵公司实施支柱二项目：
- 就支柱二对贵集团的影响提供咨询意见，
- 专门制定符合贵集团要求的支柱二实施计划，
- 确定并分类集团内的实体，
- 就收费机制的适用提供咨询意见，
- 协助开展过渡性的国别报告安全港计算，以及
- 采用信永中和的 CTS 支柱二软件进行规划、支柱二计算并提交 GIR 和国内报税表。
The High Court has handed down its long-awaited decision in Commissioner of Taxation v PepsiCo, Inc [2025] HCA 30 (PepsiCo), with a 4–3 majority finding in favour of the Taxpayer in the protracted ‘embedded’ royalty dispute with the Commissioner.
The High Court has, by a 4-3 majority, dismissed the Commissioner’s appeal ruled in favour of the taxpayer.
The majority held that payments for the concentrate were not to any extent for the use of intellectual property (IP). Accordingly, there was no ‘embedded royalty,’ and PepsiCo and Stokely-Van Camp (SVC) had not obtained a tax benefit. Therefore, they were not liable for diverted profits tax (DPT).
Notably, the full Bench agreed that no royalty withholding tax (RWHT) arose as payments were not derived by PepsiCo or SVC.
This outcome followed PepsiCo’s successful appeal in June 2024 when the Full Federal Court overturned the primary Judge’s decision. A summary of the background and earlier judgements is discussed in our previous article.
Due to the High Court decision, the ATO is considering any broader impact the decision may have on the reasoning set out in Draft Tax Ruling 2024/D1. However, this loss will unlikely deter the ATO from reviewing multinationals of their intangible / distribution arrangements.
High Court decision
The High Court majority held that:
Payments were for concentrate only
On the proper construction of the exclusive bottling agreements (EBA), the payments made by SAPL to PBS were for concentrate only, not for trademarks or intellectual property. The High Court gave significant weight to the agreement being entered into between two arm’s length parties. This significantly determined the nature of the transactions and the relevant tax laws. The arm’s length nature of the agreement established that the transactions were conducted on commercial terms, influencing the High Court’s decision on the liability for royalty withholding tax and diverted profits tax.
No royalty withholding tax liability
Even if the payments included a royalty component, such amounts were not income derived by, and were not paid to, PepsiCo or SVC. As payments were made to PBS (an Australian resident) rather than to the US entities, the conditions for RWHT under section 128B of the ITAA 1936 were not satisfied. This aspect of the decision was unanimous across the full bench.
ATO’s argument rejected
The Commissioner argued that unless part of the concentrate price was treated as a royalty, SAPL would have obtained the right to use PepsiCo’s intellectual property for free. The majority rejected this reasoning as the more successful SAPL was in selling Pepsi-branded products, the more valuable the PepsiCo IP became. From a commercial aspect, this was not “nothing,” and there was no legal or economic basis to reallocate part of the concentrate price to a separate royalty component.
No diverted profits tax exposure
On DPT, the majority found the Commissioner’s proposed counterfactuals (e.g. stripping out the royalty-free licence provisions) were not commercially realistic, especially given PepsiCo’s longstanding franchise arrangements since the early 1900s. Furthermore, the arrangements did not meet the principal purpose test under section 177J of the ITAA 1936. Apart from a potential US tax saving, the Commissioner’s case lacked commercial support. The amount of royalty WHT allegedly avoided was negligible for such large multinational businesses.
Key implications for multinational groups
Close result
The High Court decision was delivered by a 4–3 majority, following a 2–1 split in the Full Federal Court and a single judge (in the Commissioner’s favour). This narrow margin at all levels of Courts underscores that the outcome was not definitive and future cases with different facts could be decided differently.
- Entity separation – A key factor was that the entity owning the IP (PepsiCo/SVC) and the entity selling the concentrate (PBS) were different. The outcome may be different if the entity owns both the IP and service / good provided.
Similarly, the majority emphasised the unique and arm’s length nature of the arrangement, suggesting limited relevance of the decision in related-party transactions. - ATO Draft Rulings – The ATO is considering the broader impact of the decision on public guidance and software arrangements, including TR 2024/D1 and PCG 2025/D4. We offer that the following considerations may be relevant:
- Placing more focus on the contractual substance, as the High Court determined that fair market payments should not be divided into notional royalties without a clear contractual basis.
- Evaluating different levels of risk zones based on the nature of the parties involved, whether they are related or third parties.
- Characterisation of royalty – The High Court reinforced that payments under integrated commercial arrangements will not be treated as royalties unless the agreement clearly allocates part of the consideration to IP use. Simply including ‘right to use’ does not imply a royalty unless there is evidence of ‘inflation’.
- Counterfactuals – The Court emphasised that the ATO’s alternative postulates must be commercially realistic and reasonable, considering the business model of a taxpayer. From the taxpayer’s perspective, the ‘do nothing’ counterfactual is still possible but heavily depends on the facts.
- Practical takeaway – Multinationals relying on supply/licensing models should still ensure that their documentation and pricing reflect genuine commercial arrangements. While the decision favours taxpayers, it shows the ATO’s readiness to challenge structures through RWHT and DPT, making strong transfer pricing and intercompany agreement support crucial.
How SW can help
Our experts can assist with advising how this outcome affects your existing and prospective cross-border arrangements. We can also engage with the ATO to deal with potential disputes.
Reach out to your SW advisor for support from our Corporate Tax team.
Contributors
The ATO released new guidance helping large multinational companies navigate their obligations under Pillar Two tax rules. While these companies face additional paperwork and potential penalties, the ATO is taking a lenient approach during the transition period for businesses making genuine compliance efforts.
Overview
Draft Practical Compliance Guideline PCG 2025/D3 outlines the ATO’s transitional compliance approach for lodgement obligations and penalties during the transition period (fiscal years starting on or before 31 Dec 2026 and ending on or before 30 June 2028).
Australia has introduced a 15% Global and Domestic Minimum Tax (Pillar Two Rules) aligned with the OECD’s Global Anti-Base Erosion (GloBE) Rules under Pillar Two. This targets large multinational enterprise (MNE) groups with consolidated revenues ≥ EUR750 million (AU$1.2 billion or US$820 million) in at least two of the four fiscal years preceding the tested year. The Pillar Two rules apply in Australia from 1 January 2024.
It is noteworthy that effective from 1 January 2025, the Undertaxed Profits Rule may subject an Australian MNE group member to top-up tax related to another group member. This is regardless of whether the former has any ownership interests in the latter. Consequently, auditors might require a Pillar Two analysis for the global group for the 2025 fiscal year.
What are the key lodgement obligations in Australia?
Applicable MNE Groups must lodge the following:
- GloBE Information Return (GIR) – OECD- standardised form for calculating tax liability.
- Foreign Notification Form (FNF) – Notifies the ATO of foreign GIR lodgement.
- Australian IIR/UTPR Tax Return (AIUTR) – Assesses top-up tax under Income Inclusion Rule and Undertaxed Profits Rule.
- Australian Domestic Minimum Tax Return (DMTR) – Assesses top-up tax on low-taxed Australian profits.
The AIUTR, DMTR, and FNF are consolidated into the Combined Global and Domestic Minimum Tax Return (CGDMTR). The GIR remains a standalone obligation. The returns are due 18 months after the fiscal year end for the first year and 15 months thereafter. For an MNE group with a fiscal year ending on 31 December 2024, the returns are due on 30 June 2026.
Importantly, the Australian members of an MNE Group must fulfil lodgement obligations in Australia, even if the Parent of the Group is in a country without Pillar Two rules implemented. The Australian entities may nominate one Australian Group Entity, known as the Designated Local Entity (DLE), to lodge the returns on behalf of the Australian entities.
As of the date of this document, Australia has not signed the Multilateral Competent Authority Agreement (MCAA) on the Exchange of GloBE Information (GIR MCAA) under Pillar Two. Until that happens, the GIR must be lodged in Australia with the ATO even if one has been lodged overseas.
Is there a “soft landing” in terms of penalties for taxpayers?
During the transition period, the ATO will adopt a “soft-landing” approach (i.e. penalties remitted) if the MNE group has demonstrated that reasonable measures were taken to comply.
Examples of reasonable measures include:
- documented implementation plans and internal policies
- system upgrades and gap analyses
- proactive engagement with the ATO and external advisors and
- timely correction of errors
Furthermore, no penalties should be imposed for isolated or good-faith errors during the transition period. However, gross indifference or failure to take reasonable care may be subject to penalties. Current administration penalties imposed upon Significant Global Entities apply in these circumstances.
How can SW assist?
We can assist with your Pillar Two project implementation by:
- implementing SW’s CTS Pillar Two Software for planning, Pillar Two calculations, and lodging GIR and domestic returns
- advising how Pillar Two will affect your group
- designing a Pillar Two implementation plan tailored to your group’s requirements
- identifying and classifying the entities within the group
- advising on the application of charging mechanisms
- assisting with Transitional CbCR safe harbour calculations
Contributors
The regulator AUSTRAC has launched civil penalty proceedings against an NSW community club for serious and systemic non-compliance with Australia’s Anti-Money Laundering and Counter-terrorism Financing (AML/CTF) requirements.
Weaknesses of the AML/CTF program:
- Failed to set out clear methods to identify, mitigate, or manage the Money Laundering and Terrorism Financing (ML/TF) risks the club could reasonably faced.
- Did not keep a record of all staff who had completed AML/CTF training, including initial and refresher training dates of completion.
- Failure to apply appropriate enhanced customer due diligence.
- Failure to monitor suspicious customers to identify, mitigate, and manage the ML/TF risk they pose.
- Not conducting an appropriate source of wealth or funds check in relation to suspicious customers.
Each contravention attracts a maximum civil penalty between $21m and $31.3m.
Key learnings include:
- Ensure that you have an AML/CTF program that complies with the AML/CTF requirements.
- Include appropriate risk-based systems and controls to monitor the transactions of customers and clearly identify which staff are responsible.
- Have clear processes for when Enhanced Customers Due Diligence should be applied.
- Ensure AML/CTF training meets the requirements of the rules and comply with record-keeping requirements.
- Relying on a third-party provider to manage aspects of your AML/CTF program does not absolve you from your responsibilities to manage your AML/CTF obligations.
How SW can help
SW will continue to monitor developments in AML/CTF compliance and share insights as they arise.
Reach out to your SW contact or our specialist advisers for guidance on how these learnings may impact your club
Contributors
Never a dull moment in US politics and tax policies – the proposed section 899 has come and gone in a matter of weeks. What are the ramifications for Pillar Two?
Just few weeks after the US Congress passed the One Big Beautiful Bill Act (the OBBBA), including the controversial Section 899 ‘revenge tax’, the Senate has implemented a number of changes to the OBBBA. The revised version of the OBBBA excludes this revenge tax. This change comes after a recommendation from US Treasury Secretary Scott Bessett to remove the tax as part of a deal with the G7 nations (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States). This removal follows widespread concern that the tax was expected to reduce foreign investment into the US costing US jobs.
This version of the OBBBA narrowly passed in the US Senate on 1 July 2025 with Vice President Vance casting the tie breaking vote. Now the OBBBA needs to be reconsidered by Congress prior to the 4 July deadline self-imposed by President Trump.
Arising from the deal with the G7 nations is the newly proposed ‘side-by-side’ solution, whereby US-parented multinational groups would be exempt from the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) under the Organisation for Economic Cooperation and Development’s (OECD) Pillar Two. This is on the basis that the US has its own domestic minimum tax rules.
The removal of proposed Section 899 is great news for Australian entities with investments and/or business interests in the US. This is because there will not be an increase of 5% per annum, for up to an additional 15% beyond the existing reduced treaty rate. Furthermore, no change to the minimum tax of 10% imposed on large corporations per the base erosion and anti-abuse tax (BEAT) regime.
Considering the US parent group exemption is struck between the US and G7 nations (which does not include Australia), the impact on Australia’s implementation of Pillar Two is currently unclear. This is a live issue for multinationals, given the IIR and DMT, and UTPR apply to income years starting 1 January 2024 and 2025, respectively.
G7 statement on global minimum taxes
Following the signing of executive order in January this year by President Trump to ‘defend US tax sovereignty’ and outlining concerns regarding the Pillar Two rules agreed by the OECD/G20 Inclusive Framework (representing over 140 countries), the US and G7 nations came to a joint understanding in their recent summit addressing global minimum tax and tackling tax planning and avoidance. The ‘side-by-side’ arrangement is based on the following principles:
- Multinationals with a US parent will be fully exempted from the application of UTPR and IIR (i.e. 15% minimum corporate tax) with regard to domestic and foreign profits
- commitment to identifying substantial risks, including base erosion and level-playing concerns
- simplifying Pillar Two administration and compliance framework
- considering changes to Pillar Two treatment of substance-based non-refundable tax credits aligning with treatment of refundable tax credits.
In return for the US parented group exemption, the proposed section 899 ‘revenge tax’ has been removed from the Senate bill, which was passed overnight.
What this means to Australia (and Pillar Two)
The removal of section 899 will be welcomed by Australian groups that invest and conduct business in the US. This is particularly relevant for superannuation funds taxed at 15% in Australia, where the additional US tax could not be credited and would have directly and immediately impacted investment returns.
This G7 announcement also represents a landmark change to the international tax environment as Pillar Two was developed due to global concerns over the digital economy and base erosion, which worsened in the past two decades.
Noting the Australian domestic minimum tax and IIR, and UTPR affect income years commencing 1 January 2024 and 2025, many practical issues remain unsolved:
- As this is a G7 agreement, would it be approved under the broader OECD inclusive framework, representing more than 140 countries?
- How would the US entity exclusion play out at the global and Australian domestic level, and will there be roll-back of the legislation, given the intention of these laws is predominantly to target US multinationals?
- What is the adverse impact on Australian multinationals since the exclusion provides a structural tax advantage to US multinationals?
- Would there be any side deals between Australia and other jurisdictions?
- How would the Commissioner (and the ATO) administer the law in the interim while negotiations take place, given a full year has passed since the legislation came into effect?
How SW can help
The ever-evolving nature of US and global tax policies require continued vigilance from Australian entities and their advisors.
SW will monitor and keep you informed as developments happen.
Reach out to your SW contact or our specialist tax contacts listed in this alert for advice.
Contributors
General interest charge (GIC) and Shortfall Interest Charge (SIC) incurred from 1 July 2025 will no longer be deductible, increasing the after tax cost of carrying a tax debt.
Taxpayers have historically been able to claim tax deductions for GIC and SIC imposed by the ATO. This helped offset the financial burden of these penalty interest charges which are designed to encourage timely tax payments.
However, the Treasury Laws Amendment (Tax Incentives and Integrity) Act 2025, which received Royal Assent on 27 March 2025, changes this treatment.
From 1 July 2025, any GIC or SIC incurred will not be deductible regardless of whether the debt relates to an earlier income year. If you have a Substituted Accounting Period (SAP), these changes will apply to you from your next accounting period starting after 1 July 2025.
These changes aim to encourage timely and accurate tax payments by increasing the financial cost of tax debt.
Background
Understanding the nature of these interest charges is fundamental to grasping the significance of this change.
- General Interest Charge applies when any tax liability or related amount remains unpaid beyond its due date, accumulating daily on a compounding basis until the debt is cleared.
- Shortfall Interest Charge operates differently. It applies when tax returns are amended and reveal that insufficient tax was originally paid, with the charge calculated daily from the original due date until the amended assessment is issued.
The timing of when interest charges are “incurred” becomes critically important under the new rules. Interest charges are considered incurred when the ATO issues an assessment, not when they accrue daily. Thus, an amended assessment issued on 30 June 2025 would result in fully deductible SIC, while the same assessment issued two days later would be non-deductible, regardless of how much of the interest period relates to pre-July 2025.
The legislation also addresses the corresponding treatment of remissions, creating a logical symmetry in the tax system. Since GIC and SIC will no longer be deductible when incurred after 1 July 2025, any subsequent remission of these charges by the ATO will no longer need to be included as assessable income.
Who is impacted?
Every Australian taxpayer with a tax debt is affected but the impact depends on individual circumstances.
Small and medium enterprises face the most severe consequences, representing a significant portion of the ATO’s collectable debt and often have limited access to alternative financing. These businesses frequently rely on ATO payment plans during cash flow difficulties, making the increased cost burdensome.
Taxpayers with existing ATO payment arrangements extending beyond 1 July 2025 need particular attention as any GIC accruing after this date will be non-deductible even if it relates to pre-existing debt.
What is the impact?
The financial impact goes beyond the immediate loss of tax deductions. Effective costs of GIC increased to full statutory rates, making the ATO debt among the most expensive forms of financing for businesses, often more costly than loans or credit facilities.
Cash flow planning becomes more complex as businesses must budget for the full cost of any potential tax penalties. The change also affects the strategic value of voluntary disclosures as the cost of resulting SIC cannot be partially offset through tax deductions.
Resultantly, the measure creates hardship for taxpayers already in financial difficulty. Unlike commercial lenders offering payment holidays or restructured terms during hardship, the ATO’s remission process remains rigorous and uncertain. This could force businesses to seek more expensive emergency financing rather than manage their tax debt through extended payment arrangements.
For professional advisors, the change necessitates more proactive tax planning and closer monitoring of compliance deadlines. The increased cost of penalties makes preventive advice more valuable while raising stakes for compliance failures.
Steps to take
Settle outstanding tax debts and review current arrangements
Immediate action is required before 1 July 2025 to minimise exposure to non-deductible charges. Taxpayers should prioritise clearing any outstanding tax liabilities by reviewing and accelerating existing payment arrangements with the ATO.
Where full payment is not possible, exploring alternative financing options with deductible interest should be considered.
Professional review of tax compliance processes can prevent future GIC and SIC charges. You can avoid payment delays by implementing robust systems to meet lodgement deadlines, ensuring accurate self-assessment, and establishing better cash flow forecasting.
Consultation and planning
For taxpayers with complex affairs or with previously incurred regular penalty charges, professional advice should be sought immediately. Consultations should focus on:
- compliance improvements,
- alternative financing strategies,
- and understanding specific timing implications of the new rules.
Businesses should review their financial forecasting and budgeting processes to factor in increased cost of any future tax penalties. Additionally, insurance products or facility arrangements providing emergency tax funding should be explored for comprehensive risk management.
How SW can help
SW can help you navigate this significant transition through urgent pre-30 June 2025 reviews of current tax positions and outstanding liabilities.
We can guide you on opportunities for voluntary amendments remaining fully deductible, assist with clearing your existing debts before the deadline, and analyse more cost-effective financing arrangements that are than extended ATO payment plans incurring non-deductible interest charges from July 2025.
We can also discuss ways to strengthen your tax compliance framework. This includes implementing robust systems to prevent future penalty charges, restructuring cash flow planning to account for the higher after-tax cost of tax debt, and providing expert advocacy when ATO remission applications may be warranted.
Our comprehensive approach ensures clients understand the technical timing complexities of these changes and practical steps needed to minimize their long-term financial impact.