Treasury has released draft legislation that would materially widen the scope of assets subject to Australian capital gains tax by broadening the definition of taxable Australian real property. This would extend beyond land and buildings to a wider range of land‑connected assets, including infrastructure, energy projects, and certain water rights and entitlements.

The proposals include ‘clarifying’ amendments with retrospective effect and would significantly reshape exit economics for foreign investors – particularly in sectors where value is derived from Australian land or natural resources. While a temporary concession is offered for renewable energy investments, the overall policy direction is toward tougher enforcement, a broader CGT base, and reduced structural certainty for inbound capital.

What is being proposed

A broader CGT net focused on energy and infrastructure assets

The reforms retrospectively (from 2006) expand the definition of Taxable Australian Real Property (TARP) beyond traditional land and buildings to capture assets with a close economic connection to Australian land or natural resources. In practical terms, this significantly widens the CGT net over energy and infrastructure assets, including solar farms, wind projects, battery energy storage systems, and associated transmission assets, many of which have historically been treated as outside the foreign resident CGT regime.

The expanded definition also extends, on a prospective basis, to other land‑connected resource interests such as water rights and water access entitlements, particularly where these are integral to the productive use or value of land.

Federal tax law to override state property concepts (retrospective)

The draft legislation confirms that state and territory property law concepts – such as severance rules or statutory characterisations of fixtures, chattels, or resource rights – do not determine whether an asset is real property for federal CGT purposes.

Tightened rules for indirect interests

The principal asset test for indirect interests in companies and trusts is refined, moving from a point in time (CGT event date) to a 365-day test, reducing the ability to manage CGT exposure through timing or balance‑sheet structuring.

Time-limited concession for renewable energy assets

A targeted concession provides a 50% CGT discount for qualifying disposals of renewable energy assets (and certain indirect interests) by foreign residents, available only until 30 June 2030. While it offers transitional relief for solar, wind, and battery projects, the concession is expressly temporary and does not alter the longer‑term expansion of the CGT base.

The concession does not extend to other natural‑resource interests, such as water rights, and does not mitigate any historical exposure arising from the retrospective asset‑definition changes.

Treaty impact

Treasury proposes to amend the International Tax Agreement Act to ensure that the definition of real property and immovable property in Australia’s double tax agreements (DTAs) will be in line with the proposed domestic definition.

Most of Australia’s treaties already permit Australia to tax capital gains derived from real property situated in Australia, including gains from indirect interests in land‑rich entities. The reforms operate by materially expanding the domestic definition of ‘real property’, meaning that a broader range of assets is more likely to fall within those existing treaty taxing rights. As a result, while treaty protection remains available in principle, fewer assets will qualify for it.

Importantly, the retrospective nature of the domestic law changes will impact investors in various jurisdiction differently, depending on the allocation of taxing rights to income not expressly mentioned in DTAs.

Who is most affected

Investments in Australian land‑connected assets may now be subject to Australian CGT, and may, in some cases, have already been subject to CGT even where they were previously treated as outside the regime.

Taxpayers most affected by these proposals include:

• foreign investors in energy and infrastructure assets, including solar, wind, battery energy storage projects, transmission assets, and other land‑connected infrastructure
• investors holding interests in land‑rich companies, trusts, or stapled structures, particularly where value is driven by fixed assets installed on Australian land
• foreign investors relying on state‑law characterisation or treaty assumptions to support CGT outcomes for land‑connected assets
• funds with near‑term exit, refinancing, or portfolio rebalancing events, where CGT now affects pricing and internal rates of return
• investors in agricultural or farmland assets where water rights or water access entitlements are a significant component of asset value, particularly where those rights are economically integrated with land use or productivity.

Timing and transitional snapshot

The proposed statutory definition of ‘real property’ (including assets with a close economic connection to Australian land) is intended to apply retrospectively to CGT events occurring on or after 12 December 2006, except for water rights, which will apply prospectively.

By contrast, the broader net‑widening reforms to the foreign resident CGT regime generally apply prospectively to CGT events occurring from the quarter following when the Bill receives Royal Assent.

The 50% CGT discount for renewable energy assets applies only from commencement until 30 June 2030 of the legislation and does not provide relief for any historical or retrospective exposure.

How SW can help

We can assist you in understanding the proposed reforms and their potential impact on existing and future investments. In particular, we can help you to:

• map assets and investment structures against the expanded definition of taxable Australian real property
• re‑model exit scenarios on the basis of full Australian CGT exposure
• reassess reliance on treaty protections and state‑law concepts in light of the proposed changes
• identify eligibility and timing constraints associated with the renewable energy CGT concession
• engage early in transaction planning and, where appropriate, prepare submissions as part of the consultation process
• incorporate CGT risk more explicitly into acquisition, holding, financing, and exit decisions.

Contributor

Ned Galloway

The post Foreign investors in the firing line: Treasury’s expanded CGT regime appeared first on SW Accountants & Advisors.

Following public consultation and the release of Taxpayer Alert TA 2026/1, which we discussed in a previous alert here, this new draft guideline focuses on PDAs where a landowner engages a related-party developer in projects spanning more than one income year.

These structures are not uncommon in the property industry and are not inherently problematic when used for commercial reasons. However, the ATO is concerned about non-arm’s length PDAs under common ownership that are designed to defer payment of tax.

Key compliance framework: green vs red risk zones

PCG 2026/D2 divides arrangements into two risk zones – green (low risk) and red (high risk) – based on the features of the deal and how income is recognised for tax purposes. The risk categorisation will determine the ATO’s level of compliance scrutiny:

Green zone (low risk)

Characterised by profit recognition during the project. Common green zone features include instances where:

• progress payments are made by the landowner to the developer as the project progresses, and the developer correspondingly returns income progressively over the project’s life
• no progress payments are made, but the developer still recognises income in stages, similar to an estimated profits basis under Taxation Ruling TR 2018/3 for long-term construction contracts
• annual land value increases are returned as income under trading stock rules, where the landowner holds the land as trading stock for tax purposes and annually includes any increase in the land’s value due to development work, in their assessable income.

Red zone (high risk)

Characterised by arrangements that artificially defer or mismatch income and deductions. Common red zone features include all the following:

• related parties and non-arm’s length terms
• use of a separate developer entity as a ‘buffer’
• timing mismatch, with deductions upfront and income deferred
• no trading stock income recognition by the landowner
• group-wide tax benefits arising from losses.

The ATO has provided several examples of high-risk structures. One such structure is shown below.

If the ATO is successful in applying Part IVA, the structure will be disregarded from an income tax perspective. From the ATO’s perspective, the key issue is the timing of income and deduction recognition, as the overall tax cost will be the same. However, if Part IVA applies and the tax benefit is denied, a taxpayer that previously reported tax losses may instead be placed in a taxable position, with interest and penalties applying.

Implications for property developers and landowners

For property developers and landowners in development projects, the Draft PCG serves as a clear warning. The ATO’s compliance radar is trained on any arrangement where profits from property development are earned collectively but taxed selectively. The key takeaways include:

Self-assess your risk profile

Taxpayers involved in property developments should immediately benchmark their arrangements against the PCG’s green and red zone criteria.

High risk of audit and Part IVA application for red zone cases

Those identified as high risk should prepare themselves for the possibility of ATO review and potential dispute.

Existing projects are not exempt

The Draft PCG will apply to both new and existing arrangements once finalised, so property groups currently using related-party development structures must not assume they are outside the scope.

Legitimate commercial arrangements remain acceptable

The ATO is careful to clarify that not all related-party development arrangements are problematic. Standard commercial practices, such as a one-off project where a landowner partners with a developer and appropriately shares project income, or where deferred payment terms are agreed but income is still accounted for each year, are generally considered not a compliance concern.

How SW can help

We are actively assisting clients in the property and construction sector to navigate the ATO’s increased focus on property development arrangements. Our team can review existing and proposed structures against the PCG’s green and red zone criteria, identify key tax and compliance risks, and provide practical recommendations to strengthen positions and align income recognition with ATO expectations.

Please contact your SW advisor to discuss how these developments may impact your arrangements and how we can support you.

Contributors

Stephen Peries

Ned Galloway

Antony Cheung

The post PDAs in public: When your property development arrangement gets the ATO’s attention appeared first on SW Accountants & Advisors.

Effective from 1 April 2026, these measures are designed to provide immediate financial relief and improved cash flow flexibility for eligible businesses impacted by increased fuel expenses. Alongside a temporary reduction in fuel excise and adjustments to fuel tax credit rates, the ATO has launched a dedicated Fuel Response Plan to help affected taxpayers manage their tax obligations during this period of heightened cost pressure.

ATO options for impacted taxpayers

The ATO is offering streamlined access to a new temporary Fuel Response Plan in response to the impact of higher fuel prices on businesses.

Who may be eligible

Your business may qualify if you are an ABN holder and meet the following criteria:

• operating costs have increased directly due to higher fuel costs, or indirectly due to higher transport, logistics, or other supply chain costs
• you have incurred a new tax debt or are finding it difficult to meet existing payment arrangements
• you can demonstrate a reduced capacity to pay specifically as a result of increased fuel costs (separate to a general downturn in business or ordinary cash flow issues)
• all tax lodgements are up to date or will be brought up to date within three months.

Key features of the plan

The Fuel Response Plan includes a number of flexible support measures designed to assist with cash flow management, including:

• no upfront payment required
• up to 36 months to repay
• possible remission of General Interest Charges (GIC), subject to satisfying conditions
• equal monthly instalments to assist with cashflow management.

How SW can help

Navigating ATO support measures and determining eligibility can be complex, particularly where multiple financial pressures are involved. Our team can work with you to assess whether your business qualifies for the Fuel Response Plan, taking into account your specific circumstances and cash flow position.

We can also assist in preparing and lodging the applications with the ATO, including remissions of GIC, liaising on your behalf to streamline the process and improve the likelihood of a successful outcome. In addition, we can help you review your broader tax position, manage existing payment arrangements, assisting with cashflow forecasts and implement strategies to reduce business overhead costs, support cash flow and ongoing compliance during this period.

If your business is experiencing pressure from rising fuel costs, we encourage you to contact one of our experts to discuss how we can support you.

Contributors

Dee Newman

Nuwani Jayaweera

The post How the ATO’s Fuel Response Plan can support your business in 2026 appeared first on SW Accountants & Advisors.

The case emphasises that outcomes depend on how benefits are structured and documented, directly influencing remuneration design, governance practices, and a business’s overall tax risk. The court delivered its decision on 27 March 2026 in SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36, allowing SEPL’s appeal. The ruling is also relevant for trustees, directors, and advisers providing non‑cash benefits to working family members.

Key questions on FBT

SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation is one of the most instructive FBT cases in recent years, tracing a path from the Administrative Appeals Tribunal (AAT), through to a single judge of the Federal Court, and finally to the Full Federal Court.

The litigation pivots on two deceptively simple questions:

• When are working owners of a family trust business ‘employees’ for FBT purposes?
• When is the provision of luxury motor vehicles a ‘fringe benefit’ rather than a benefit conferred by reason of ownership or beneficial entitlement?

The answers, it turns out, are far from straightforward.

The background: A large family business

SEPL Pty Ltd was the corporate trustee of the SFT Trust, a commercially substantial family business. The trust was established in 1987 and following the father’s death in 2009 and the mother’s retirement as director in 2014, control passed to three brothers who became the sole directors and shareholders of SEPL.

The brothers worked long hours in executive roles. Despite this, they received no salary. Instead, they benefited in two ways:

• profits were distributed to each brother’s family trust
• each brother had exclusive personal use of luxury motor vehicles owned by SEPL.

Over 40 such vehicles were held during the relevant FBT years (2016–2020).

Vehicle expenses were debited to their mother’s beneficiary loan account and subsequently cleared through grossed-up trust distributions to cover her resulting income tax liability. There were no board resolutions authorising the vehicles as distributions to the brothers individually, and no amounts were recorded as distributions to their personal beneficiary accounts.

The Commissioner issued amended FBT assessments on the basis that the brothers were employees and the vehicles constituted fringe benefits. SEPL objected, and on disallowance, applied to the AAT for review.

The AAT confirms the brothers were owners, not employees

The AAT set aside the Commissioner’s assessments. Applying what it described as a holistic analysis — informed in part by common law employment principles — the Tribunal concluded the brothers were not employees of SEPL for FBT purposes.

The Tribunal emphasised the absence of written employment contracts, formal remuneration, and board resolutions establishing employment. It also noted that the brothers operated at the apex of the business rather than within a conventional hierarchy. These factors pointed away from a contract of service and towards proprietorial control.

On the second issue — whether the vehicles were provided ‘in respect of’ any employment — the Tribunal also found in favour of SEPL. Drawing on the Full Federal Court’s reasoning in J & G Knowles and Associates Pty Ltd v Commissioner of Taxation [2000] FCA 196, the Tribunal held that the test requires a sufficient or material connection between the benefit and the employment, not merely a causal link. It concluded that the brothers accessed the vehicles as beneficiaries and proprietors of the family trust, reflecting their status as ultimate controllers of the business, rather than as remuneration for services rendered.

Federal Court affirms the FBT assessments

The Commissioner appealed, and Justice O’Sullivan allowed the appeal, setting aside the AAT’s decision and affirming the FBT assessments.

On the employment question, the primary judge held that the Tribunal had erred by importing common law concepts of employment into a statutory framework that provided its own complete definitions. The fringe benefits tax assessment act (FBTAA) was to be read on its own terms. The key provision was section 137, which the Court treated as a deeming mechanism: if a non-cash benefit, had it been paid in cash, would have constituted ‘salary or wages’, then the recipient is to be treated as an employee. Applying this test, the Court found the condition satisfied, noting that a cash payment of equivalent value would have engaged the withholding obligations, and therefore held that the brothers were employees.

On the ‘in respect of’ question, the Court rejected the Tribunal’s focus on the brothers’ subjective belief that they were entitled to the vehicles as beneficiaries. The correct inquiry was objective: was there a sufficient or material connection between the benefit and the employment? Given the brothers’ executive roles, their operational immersion in the business, and the absence of any resolution treating the vehicles as trust distributions, the Court found the connection clear. The appeal was allowed, and the assessments were reinstated.

Full Federal Court restores the AAT outcome

SEPL appealed. A Full Court allowed the appeal and restored the AAT’s outcome.

On the first issue, the Full Court identified four errors in the primary judge’s approach.

• First, the primary judge had focused on the definition of ‘employment’ in section 136(1) rather than the operative concept of ‘employee’. The Full Court explained that ‘employment’ is descriptive of what a person has once they are an employee — it does not expand or lead the inquiry into whether a person qualifies as one.

• Second, section 137 was misconstrued. The Full Court emphasised that section 137 is a confined hypothetical exercise, not a free-standing deeming mechanism. Before section 137 can operate to treat a benefit as ‘salary or wages’, the third condition in section 137(1)(c)(i) must be met: the hypothetical cash payment must constitute salary or wages paid to the person, which, via the definition of ‘salary or wages’ and the reference to section 12-35 of Schedule 1 to the TAA, requires that the cash would have been paid to the person ‘as an employee’. This inquiry necessarily invokes the ordinary, common law, meaning of ‘employee’. The Tribunal was therefore correct to consider common law principles in this context.

• Third, the primary judge treated section 137 as automatically converting every non-cash benefit received by a person performing work into salary or wages. That was an error. The provision does not deem an employment relationship into existence, it merely operates on the concept of salary or wages where all three statutory conditions are independently satisfied.

• Fourth, the primary judge had also relied on section 12-40 of Schedule 1 (relating to payments to company directors), even though the Commissioner had expressly disavowed reliance on that provision before the Tribunal and the primary judge, and it was not part of the questions of law that enlivened the Court’s section 44 jurisdiction. That reliance was not permissible.

Applying the proper statutory framework, the Full Court held that it was open to the Tribunal to conclude that any hypothetical cash payment would have been made to the brothers in their capacities as proprietors and beneficiaries, not as employees, and that the condition in section 137(1)(c)(i) was therefore not satisfied. The Tribunal’s conclusion that the brothers were not employees was not only available but also well-supported by the facts.

On the second issue, the Full Court confirmed the Tribunal’s approach. The ‘in respect of’ test requires a sufficient or material connection between the benefit and the employment; causation alone is insufficient. In this case, the brothers’ access to the vehicles was tied to their proprietorial and beneficial capacities: the mechanism of debiting vehicle costs to the matriarch’s beneficiary account and clearing those debits through grossed-up trust distributions was fundamentally inconsistent with a remuneration arrangement. The Full Court rejected the primary judge’s approach of treating operational involvement in the business as determinative without separately considering the materiality of the employment connection against the competing proprietorial explanation.

The Full Court confirmed that a benefit may be causally referable to multiple sources. The presence of an employment relationship does not compel a finding that the benefit is provided ‘in respect of’ that employment if a sufficiently material explanation lies elsewhere, in this case, in the brothers’ ownership and beneficiary status.

Key takeaways

Common law still matters under the FBTAA. To apply section 137, you must ask whether a hypothetical cash payment would have been made to the person as an employee. That question calls for the ordinary common law meaning of the term. The statute does not fully define it away.

Section 137 has a limited and targeted role and is not a mechanism that converts all non-cash benefits into remuneration. Each of the three conditions in section 137(1) must be independently satisfied, including, critically, that the hypothetical cash equivalent would have been paid to the person as an employee rather than as a proprietor or beneficiary.

The ‘in respect of employment’ test requires substantive connection, not mere proximity. Benefits that arise from ownership, family relationship, or beneficial entitlement may properly sit outside the FBT regime, even where the recipient also performs executive functions in the business.

Documentation matters enormously in family business contexts. The absence of resolutions recording vehicle access as a trust distribution — while ultimately supporting SEPL’s case — created the ambiguity that drove three rounds of litigation. Clear and consistent documentation of the basis on which benefits are provided will always reduce exposure.

Where business is conducted through a company rather than a trust, Division 7A may also be relevant. If a private company provides a non-cash benefit to a shareholder-director, it is necessary to consider whether that benefit constitutes a deemed dividend under section 109CA of the ITAA 1936, noting that Division 7A operates to the exclusion of FBT in relation to loans and forgiven amounts (section 109ZB, ITAA 1936).

How SW can help

The SEPL decision provides welcome clarity on the limits of FBT in family trust structures, but it also highlights how finely balanced these issues can be. Outcomes will continue to turn on facts, characterisation, and documentation. Engaging our experts early will help you navigate complex FBT rules with confidence, protect family business arrangements, minimise FBT exposure, and reduce the risk of prolonged disputes.

Please contact your SW advisor for tailored support from our team.

Contributors

Rahul Sanghani

Natalie Wang

The post SEPL case update: Ownership vs employment implications for fringe benefits tax appeared first on SW Accountants & Advisors.

In Tao v Commissioner of State Revenue [2025] VSC 831, the Court held that becoming the sole director and shareholder of a corporate trustee constituted control of the trust itself, exposing the acquirer to landholder duty.

As the first Victorian Supreme Court decision to interpret section 82, the case highlights the provision’s broad reach and serves as a warning that even administrative changes can carry significant tax consequences.

Background of the VCAT decision

The WCT Unit Trust owned a Victorian development property valued at over $1m, making it a landholder under the Duties Act. Its corporate trustee was 66 William Road Pty Ltd. The trust units were held as follows:

• 50 units by Maclaw No. 547 Pty Ltd, as trustee for the Mountain Highway Unit Trust.
• 25 units by Fredco Incorporated Limited, as trustee for Nomsec No. 1 Limited.
• 25 units by Amber Investments Pty Ltd, in which Mr Tao was a majority shareholder.

In 2014, Mr Tao bought four shares in the trustee company 66 William Road Pty Ltd, becoming its sole shareholder. By March of that year, he had also appointed himself as the company’s sole director and secretary. More than five years later, the Commissioner issued a notice assessing duty of roughly $199,650, plus penalties and interest.

The Commissioner’s assessment treated Mr Tao’s assumption of control of the trustee as a ‘relevant acquisition’ of the WCT Unit Trust under section 82 of the Duties Act. The assessment was based solely on his control of the trustee company, even though neither Mr Tao nor Amber Investments Pty Ltd had acquired any additional units in the WCT Unit Trust.

Legal issues

Landholder duty is imposed when a person makes a ‘relevant acquisition’ of an interest in a landholding entity, such as a company or unit trust owning Victorian land worth $1m or more. Typically, this covers acquisitions of significant shareholdings or unit holdings. Section 82, however, is a broad provision that extends to changes in control that do not involve the direct acquisition of an interest.

In essence, section 82(1) provides that if a person ‘acquires control’ of a private landholder by means other than a direct acquisition of an interest, they are deemed to have made a relevant acquisition of 100% of the landholder, or a lesser percentage as determined by the Commissioner.

Section 82(2) defines ‘acquiring control’ as obtaining the capacity to determine or influence the outcome of the landholder’s financial and operating decisions. It makes clear that practical influence, beyond strict legal rights, and the parties’ conduct and behaviour must be considered in assessing control. This broad definition means a person can control a landholding entity without owning it, provided they effectively determine or influence key decisions.

The Supreme Court decision

Mr Tao challenged the Victorian Civil and Administrative Tribunal (VCAT) decision in the Supreme Court of Victoria, seeking leave to appeal.

One ground of appeal was that VCAT failed to treat section 82 as a two-stage test: first, determining whether control has been acquired; and second, if so, exercising the Commissioner’s discretion to deem the acquisition to be less than a 100%. The Court rejected this argument, finding that the VCAT had, in fact, identified Mr Tao’s acquisition of practical control of the WCT Unit Trust through his appointment as sole director and shareholder of the trustee company, and then considered whether to reduce the default 100% deemed acquisition.

VCAT reduced the deemed acquisition to 85% to reflect Mr Tao’s existing indirect interest held by Amber Investments Pty Ltd.

Mr Tao also argued that section 82 should be construed narrowly as an anti-avoidance provision, and that VCAT had misunderstood the purpose of the discretion in paragraph (b). Mr Tao contended that the discretion was intended to reflect the degree to which an effective beneficial interest had been acquired. The Court disagreed, confirming that section 82 is a distinct head of duty, not merely an anti-avoidance mechanism, and that it allows the Commissioner to deem a person to have acquired up to 100% of a landholder simply by acquiring control.

It was held that the discretion under section 82(1)(b) is directed at adjusting the default 100% acquisition where a taxpayer already holds an economic interest, as was the case with Mr Tao. VCAT’s decision to reduce the deemed acquisition to 85% was therefore a lawful and appropriate exercise of that discretion.

Mr Tao further contended that VCAT had ignored numerous factual matters, including the absence of any change in beneficial ownership and the rights of other unit holders. The Court held that these considerations were either raised for the first time on appeal or were irrelevant to the control test and that section 82 focuses on practical control rather than beneficial ownership. Therefore, arguments based on the distinction between legal and equitable interests, or the absence of share transfers, did not undermine the finding that Mr Tao had acquired control.

The Court found that VCAT had considered all factual matters put before it and had properly applied the discretion to reduce the deemed acquisition. As a result, the Court concluded there was no error of law and refused leave to appeal.

Key takeaways

• Taking control of a corporate trustee or landholding company, for example by becoming its sole director, can trigger landholder duty even if no trust units or shares change hands. Any restructure that concentrates decision-making power should be reviewed for duty implications.

• The Court observed that the ability to ‘influence’ may be something less than 50% control. The State Revenue Office website states that:

[Section 82] “can also apply to a person who is appointed to the board of directors of a landholder (or the corporate trustee of a landholder). Provided the shareholders or unit holders have not made arrangements that allow the director to benefit, or exercise rights which confer benefits similar to holding an interest in the landholder, the Commissioner will take the view that the director has not acquired control (and made a relevant acquisition of an interest of 100%) as a result of such an appointment.”

• In the Supreme Court, the Commissioner argued that this statement was intended to apply only to multi-director companies, including trustee companies, and not to companies with a sole director. However, given the Supreme Courts observation that ‘influence’ may arise with less than 50% control, the appointment of a director to a multi-director company could also, in some circumstances, trigger section 82.

• Section 82 is broad. The duty is not confined to anti-avoidance scenarios but operates as a standalone head of duty even where there is no relevant acquisition in the landholder. Consequently, acquisitions that are exempt under section 89D, such as the appointment of receivers, liquidators, executors or administrators, may nevertheless be liable for duty as an acquisition of control.

• The Commissioner’s discretion is limited. It is primarily directed at preventing double taxation of an existing economic interest, rather than operating as a general waiver of liability.

How SW can help

Navigating the nuances of landholder duty and trust structures can be complex. SW’s state taxes team is closely monitoring these developments. If you are contemplating changes to a trust’s structure or a corporate trustee, or if you suspect past changes may have inadvertently triggered a duty exposure, our team can help review your situation and manage any landholder duty risks.

Contributor

Robert Parker

Blake Trad

The post Supreme Court confirms landholder duty on appointment of director appeared first on SW Accountants & Advisors.

The long-awaited Division 296 tax has now passed both houses of Parliament and received Royal assent, becoming law under the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026.

While media coverage has focused on the so-called ‘$3m super tax’, the rules are more nuanced in practice. Division 296 affects certain high-balance super accounts, and the way the tax is calculated depends on several factors. This alert explains who is impacted, how the tax operates, and the key practical issues that are emerging.

Who is affected by Division 296

Division 296 applies to individuals whose total superannuation balance (TSB) exceeds $3m.

There are two thresholds:

$3m to $10m

• An additional 15 percent tax applies to the proportion of super earnings attributable to balances above $3m.

Over $10m

• A further 10 percent tax applies, resulting in a total additional tax of 25 percent on the relevant portion of earnings.

Both thresholds will be indexed to CPI, using incremental increases of $150,000 for the $3m threshold and $500,000 for the $10m threshold.

If your total super balance is below $3m, Division 296 will not apply. Division 296 will only apply if your TSB exceeds the relevant threshold.

What is actually being taxed

Division 296 does not tax:

• your total super balance
• your contributions
• withdrawals from super.

Instead, it applies to superannuation earnings, based on the proportion of your balance that exceeds the relevant threshold.

Super funds will continue to pay their usual tax on earnings, generally 15 percent. Division 296 operates at the individual level and effectively increases the tax rate on super earnings attributable to very large balances.

In broad terms, this means:

• earnings on balances above $3m may be taxed at up to 30 percent in total
• earnings on balances above $10m may be taxed at up to 40 percent in total.

An example of how Division 296 applies

Facts

• Total superannuation balance at 30 June 2027: $5m
• Superannuation earnings for the year: $400,000
• Member is in accumulation phase
• Balance exceeds $3m but is below $10m

Step 1: Determine the proportion of the balance above $3m

• Amount above $3m: $2m (TSB $5m – $3m threshold)
• Proportion above threshold: $2m ÷ $5m = 40 percent

Step 2: Apply this proportion to super earnings

• Earnings subject to Division 296: $400,000 × 40 percent = $160,000

Step 3: Apply the additional Division 296 tax

• Division 296 tax rate: 15 percent (between $3m and $10m only)
• Division 296 tax payable: $160,000 × 15 percent = $24,000

Total tax outcome

• The super fund continues to pay its normal tax on earnings
• The individual receives a separate Division 296 assessment of $24,000
• The individual can pay this personally or elect to release funds from super

This example illustrates that Division 296 does not apply to all earnings, only the portion attributable to the balance above $3m.

How earnings are calculated

Following industry feedback, the final legislation does not tax unrealised capital gains.

Instead, earnings are calculated using a realised earnings approach. Super funds will report realised, attributable earnings for affected members to the Australian Taxation Office (ATO) using approved methodologies.

Key points:

• Unrealised gains are excluded.
• Contributions are adjusted for.
• Special rules apply to pension phase income and defined benefit interests.

This change significantly reduces volatility risk compared to the original proposal.

How the balance threshold is tested

From the 2026–27 financial year onwards, an individual’s TSB will be measured at:

• the start of the financial year
• the end of the financial year.

The higher of these two balances will be used to determine whether Division 296 applies.

A transitional rule applies in the first year, where only the closing balance at 30 June 2027 is tested. This may create limited planning opportunities for individuals who have already met a condition of release.

Paying the Division 296 tax

The ATO issues the assessment to the individual affected.

Within 84 days, the individual can either:

• pay the tax from personal funds
• elect to release money from super, similar to the process under Division 293.

Key practical issues to be aware of

We are already seeing a number of recurring themes for impacted clients:

• Asset valuations matter more than ever, particularly for self-managed superannuation funds (SMSFs) holding property or unlisted investments.
• Capital gains tax (CGT) election will be available for SMSF’s assets at 30 June 2026 for Division 296 purposes only. The election is optional, must be applied to all CGT assets held directly by the fund, is irrevocable, and must be made by the due date of the fund’s 2026-27 tax return.
• Liquidity planning is critical, especially where super assets are illiquid.
• Spouse balance disparities can increase exposure over time.
• Defined benefit members will be subject to modified rules, with tax typically payable on retirement rather than annually.

What you should do now

If your total super balance is approaching or already exceeds $3m, consider:

• reviewing current and projected super balances
• ensuring valuation processes are robust
• modelling future earnings and potential Division 296 exposure
• revisiting contribution, pension, and estate planning strategies.

How SW can help

Navigating the new Division 296 tax can be complex, particularly for individuals with high super balances or SMSFs holding diverse assets. At SW, we have extensive experience in superannuation strategy, tax planning, and compliance, and we can help you understand your potential exposure, model future earnings, and develop practical strategies to manage the impact of this legislation. Our team can assist with valuation processes, liquidity planning, CGT elections, and contribution or pension planning to ensure your super arrangements remain efficient and aligned with your long-term goals. By working with SW, you gain tailored advice and actionable solutions to stay ahead of Division 296 requirements and make informed decisions for your superannuation and estate planning.

This publication is issued by SW Accountants & Advisors Pty Limited ABN 78 625 921 390 (SW) exclusively for the general information of clients and staff of SW and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name SW within Australia. The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. SW, and related entity, or any of its offices, employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in the publication.

Contributor

Dominic Lam

The post Division 296 tax has passed parliament and what it means for large super balances appeared first on SW Accountants & Advisors.

We summarise the main changes below and explain what they may mean for you.

Contribution caps from 1 July 2026

Concessional (before-tax) contributions

The annual concessional contributions cap will increase to $32,500. This cap includes employer Super Guarantee contributions, salary sacrifice contributions, and personal contributions for which a tax deduction is claimed.

If your total super balance was less than $500,000 at 30 June 2026, you may also be able to access unused concessional cap amounts from the previous five financial years under the carry-forward rules.

Non concessional (after-tax) contributions

The standard annual non-concessional contributions cap will increase to $130,000. Eligibility to make non-concessional contributions continues to depend on your total super balance at 30 June of the previous financial year.

Bring-forward rule thresholds

If you are under age 75, the bring-forward rule may allow you to contribute up to three years’ worth of non-concessional contributions in a single year. From 1 July 2026, the maximum amount you can contribute under the bring-forward rule, and the length of the bring-forward period, will depend on your total super balance at 30 June 2026.

The thresholds will be as below:

It is important to note that if you have already triggered a bring-forward period in an earlier financial year, you will remain subject to the previously applicable caps until that bring-forward period ends.

Transfer balance cap and flow-on impacts

From 1 July 2026, the general transfer balance cap will increase from $2.0m to $2.1m. This cap limits the amount that can be transferred into the tax-free retirement phase.

The increase in the transfer balance cap will also flow through to a number of other thresholds, including total super balance limits that determine eligibility for non-concessional contributions and bring-forward arrangements.

If you have already commenced a retirement phase income stream, any increase to your personal transfer balance cap will be proportionate and will depend on how much of your cap you have previously used.

What you should be thinking about now

With these increases approaching, it may be timely to:

• review your contribution strategy for the 2026-27 financial year
• consider whether delaying non-concessional contributions until after 1 July 2026 could allow larger amounts to be contributed
• check whether triggering a bring-forward arrangement before 30 June 2026 could limit your flexibility once the higher caps apply
• review your total super balance ahead of 30 June 2026 to understand future contribution eligibility.

As always, contribution strategies need to be considered in the context of your broader financial position, cash flow, and tax circumstances.

How SW can help

At SW, we can work with you to assess your current superannuation position and develop a tailored contribution strategy aligned with your broader financial goals. We can assist in reviewing your eligibility for concessional and non-concessional contributions, advising on the optimal timing of contributions, including bring-forward strategies, and assessing your total super balance and transfer balance cap position. We also ensure your approach is tax-effective and aligned with your cash flow and investment objectives.

If you would like to discuss how these changes may apply to you, please get in touch with your adviser.

Contributor

Dominic Lam

The post Superannuation contribution caps to increase from 1 July 2026 appeared first on SW Accountants & Advisors.

The Federal Government has announced significant reforms to the regulation of Private Ancillary Funds (PAFs) and Public Ancillary Funds (PuAFs) as part of its broader objective to increase philanthropic giving in Australia.

These changes flow from recommendations by the Productivity Commission and recent Treasury consultations and are expected to have a significant impact on how ancillary funds operate and plan their distributions. This also builds on the broader regulatory focus outlined in our previous article, which discusses similar issues around the interpretation of benefits and compliance expectations for ancillary funds.

Renaming of ancillary funds to ‘Giving Funds’

Private and Public Ancillary Funds will be renamed ‘Giving Funds’.

The government has indicated that this change is intended to more clearly reflect the core purpose of these structures, which is to distribute funds to eligible charities rather than to accumulate capital over time.

Minimum annual distribution rates

The government has announced it will align the minimum annual distribution rates for Private and Public Ancillary Funds to 6%.

At present:

• Private Ancillary Funds are required to distribute 5% of net assets each year.
• Public Ancillary Funds are required to distribute 4% of net assets each year.

Distribution smoothing

To offset the impact of higher annual distribution requirements, the government has announced that Giving Funds will be allowed to smooth distributions over a three-year period.

This means funds will be able to average their minimum distribution obligation across multiple years, rather than meeting the minimum on an annual basis. The measure is intended to:

• support more strategic grant making
• reduce the risk of forced asset sales in years of weaker investment performance.

Timing of change and transitional rules

The new rate will apply from the first financial year following amendments to the Giving Fund guidelines, and existing Giving Funds will not need to meet the new distribution rate for two years.

How SW can help

For trustees of Giving Funds, the changes create both compliance obligations and strategic opportunities. SW can help with:

• modelling the cash flow and investment impact of a 6 percent distribution rate across different market return scenarios
• reviewing trust deeds and governing documents to ensure they permit higher distributions and three-year averaging
• designing grant strategies that use averaging effectively while still meeting annual compliance requirements
• aligning distribution timing with investment performance and liquidity needs
• support large capital distributions
• documenting trustee decisions to support ACNC and ATO expectations.

Contributor

Heather Dyke

The post Government announces changes to Private and Public Ancillary Funds (Giving Funds) appeared first on SW Accountants & Advisors.

The Treasury Laws Amendment (Payday Superannuation) Regulations 2026 support the Treasury Laws Amendment (Payday Superannuation) Act 2025, and although many provisions simply restate existing exclusions, these two amendments are especially relevant for employers.

SW’s specialist employment tax team breaks down below what these changes mean. Employers must assess the impact of the new qualifying earnings framework, identify transition period compliance risks, and design payday-based models ahead of the 1 July 2026 start date.

What the regulations confirm

The regulations confirm that the types of employees and payments that do not attract super will continue to be excluded under the new qualifying earnings framework. In practice, the regulations largely restate and consolidate existing exclusions rather than making any material changes to superannuation guarantee obligations.

For employers, the key takeaway is that the in/out rules are not where the real compliance impact sits. The bigger operational impacts come from tighter contribution deadlines and the consequences of late payments under the redesigned charge regime.

Administrative uplift encourages early payment and prompt voluntary disclosure

The most significant change for employers in the regulations is the new scalable administrative uplift, which forms part of the redesigned Superannuation Guarantee Charge (SGC). The uplift starts at 60% of the relevant shortfall and notional earnings (interest) components for a qualifying earnings day, but it can be reduced through specific mechanisms that are designed to reward early action.

Why it matters

The structure is intentional and is designed to reward employers who identify issues early, disclose voluntarily, and make prompt payments, while making late detection and delayed action more costly.

How the uplift can be reduced

Employers have several ways to reduce the uplift outcome, as outlined below.

Early payment before Australian Taxation Office (ATO) action

When a shortfall is corrected and paid in full before the ATO begins any assessment activity, the rules allow the uplift to be limited to the notional SG interest component rather than the full shortfall.

Early voluntary disclosure

The uplift rate is reduced on a sliding scale depending on how quickly a voluntary disclosure statement is lodged.

Good compliance history

If the Commissioner has not initiated an assessment or estimate process in the previous 24 months, the default uplift percentage can be reduced.

Administrative uplift at a glance

Practical implication

Under Payday Super, the cost of being late is no longer a simple fixed add-on. It is structured to encourage early remediation and voluntary disclosure, making it far more important for employers to have processes that detect superannuation issues quickly enough to preserve these reductions.

The Commissioner’s discretion is limited to exceptional circumstances

The regulations specify the exceptional circumstances in which the Commissioner can extend contribution deadlines, such as natural disasters or widespread technology outages affecting contribution platforms.

The key message for employers is that the Commissioner does not have broad discretion to waive timing failures in ordinary business scenarios. Outside genuinely exceptional events, employers are expected to have systems, processes, and governance in place to meet the received-by-the-fund timing requirements under Payday Super.

What employers should do now

With commencement from 1 July 2026, employers should prioritise the following:

• Map end-to-end timing from the pay event through the clearing house to fund receipt, including cut-offs and bounce-back scenarios.
• Build an early detection SG process with exceptions reporting, rapid triage, and a defined remediation pathway.
• Plan for voluntary disclosure readiness by establishing governance and documentation to support timely disclosure when required.
• Stress-test onboarding data quality to ensure contributions can be processed smoothly within the tightened operating environment.

How SW can help

SW’s specialist employment tax team supports employers in translating the Payday Super reforms into practical, compliant payroll and superannuation processes. We help employers assess the impact of the new qualifying earnings framework, identify transition period compliance risks, and design payday-based models ahead of the 1 July 2026 start date. Where issues arise, we also support early remediation and voluntary disclosures under the revised SGC framework.

Contributor

Thomas Grimsey-Carr

The post Payday Super Regulations released: What employers need to know and why early action matters appeared first on SW Accountants & Advisors.

The decision by the full Federal Court makes clear that informal arrangements and internal accounting entries are not enough to support deductions for related-party transactions. This case has particular significance to taxpayers who enter related party transactions with specific relevance to family groups that may currently lack the requisite written documentation. This case also has potential ramifications for corporate groups that are not consolidated for income tax purposes and cross border related party transactions.

The background

Two companies in the S.N.A Group entered into agreements with two asset-owning trusts for the use of rent rolls, trademarks, and associated assets in 2005. The agreements covered the period from 2005 until 2015, at which point they lapsed and were not renewed. Despite this, the operating companies continued to use the assets and continued to make payments after the agreements had lapsed, claiming the payments as deductible service fees.

The primary judge found in favor of the taxpayer, concluding that the taxpayers were subject to a presently existing liability and that the fees were therefore deductible under section 8-1. The primary judge held that, although there was no longer a written contract, the terms could be inferred from the parties’ conduct. The primary judge was particularly sympathetic to the commercial practice of small businesses, where related-party transactions are not always documented.

However, the Full Federal Court held that, there was no objective evidence after 2015 of communications between the parties, their bookkeeper, or their external tax accountant indicating that the companies were subject to a liability for the use of the assets. Nor were any tax invoices issued by the trusts. Furthermore, the method for calculating the payments for the use of the assets, which was based on the unitholders of the trusts receiving a specified percentage return, was inconsistent with the fees ultimately paid.

The making of payments and recording those payments in the books of related parties is not sufficient to infer a request for the provision of services or assets. Taxpayers must be able to objectively support a liability when charging fees for services and the use of assets by related entities. They should ensure that agreements between related parties are properly documented and kept up to date so as to cover the relevant period for which deductions are claimed.

Practical implications

Taxpayers who do not have written agreements, or who are unable to objectively demonstrate the existence of a contract are at risk of having deductions denied for transactions with related entities.

Contemporaneous documentation for related-party transactions should be prepared and regularly reviewed so that it covers the relevant period of any deductions and clearly details the method of calculation. Where documentation is not available, taxpayers should identify and retain other evidence to support the existence of a contract, including emails, minutes, invoices, or workpapers.

How SW can help

The decision in Commissioner of Taxation v S.N.A Group Pty Ltd [2026] FCAFC 10 makes clear that informal arrangements and internal accounting entries are not enough to support deductions for related-party transactions. Groups with inter-entity dealings should take this opportunity to review whether their agreements are properly documented and supported by objective evidence.

SW can assist by reviewing your existing related-party arrangements, assessing the robustness of your charging methodology, identifying gaps in contemporaneous documentation, and helping you update or formalise agreements to ensure they withstand scrutiny. Taking proactive steps now can significantly reduce the risk of deductions being denied in the future.

Contributors

Stephen Peries

Richard Osborn

The post Full Federal Court denies deductions for transactions between related parties appeared first on SW Accountants & Advisors.