Schedule 6 of the Treasury Laws Amendment (Tax Reform No. 3) Bill 2026 proposes one-off relief to disregard certain June 2026 quarter employer contributions when calculating an individual’s concessional contributions for 2026–27.

Why it matters

The 2026–27 concessional contributions cap is $32,500. Without relief, the timing overlap could push employees over the cap, particularly higher-income earners, employees who salary sacrifice, and those with multiple employers. Excess contributions are added to taxable income and taxed at marginal rates, with a 15% tax offset, and may affect other income-tested outcomes.

The Bill is not yet law and is currently before the House of Representatives. If passed, Schedule 6 would commence on the next 1 January, 1 April, 1 July, or 1 October following Royal Assent.

What employers need to know

Some employees may have reduced their salary sacrifice contributions to avoid exceeding the cap during the transition. If the relief becomes law, they may wish to revisit their arrangements and consider increasing contributions, taking into account their individual cap position.

How SW can help

SW’s Employment Taxes team can help employers identify employees who may be affected by the proposed relief and assess the impact on existing or recently adjusted salary sacrifice arrangements.

We can also help review contribution strategies and consider the practical steps available if the relief becomes law. Get in touch with our team to discuss what the changes could mean for your workforce.

Contributor

Thomas Grimsey-Carr | Consultant, Tax

The post Proposed one-off relief to avoid exceeding the concessional contributions cap under Payday Super appeared first on SW Accountants & Advisors.

In 2025, combined scam losses reported across key Australian channels reached $2.18bn, an increase of 7.8%, despite the number of reports falling. Investment scams accounted for $837.7m, while payment redirection scams resulted in losses of $166.8m.

These figures highlight the financial consequences of fraud and the increasing sophistication of the methods being used. A fraudulent payment can be authorised and transferred within seconds, stolen identities can be used to open accounts remotely, and criminals can impersonate customers, executives, or professional advisors with remarkable accuracy.

For financial institutions, fraud exposure extends across customer onboarding, payments, lending, cybersecurity, AML/CTF, third-party relationships, and internal operations. Understanding where these risks intersect is increasingly important for Boards and senior management.

How fraud is exploiting gaps in financial institutions

A fraud incident can involve several processes and control points before a loss is identified.

A stolen identity may satisfy digital onboarding requirements, and the resulting account may remain inactive before receiving scam proceeds, which are then rapidly transferred to other accounts or overseas. Similarly, a fraudulent payment instruction may pass through customer service, authentication, and transaction processing without any individual control identifying the full circumstances.

These situations demonstrate why fraud prevention depends on the quality of information shared between teams, the effectiveness of controls throughout the customer relationship, and the speed at which suspicious activity can be escalated.

Several areas warrant particular attention.

Scams, account takeover & payment redirection

Investment scams, phishing, remote-access fraud, and compromised digital banking credentials continue to expose customers and institutions to substantial losses.

Payment redirection fraud is particularly concerning. Criminals may impersonate a supplier, customer, or professional advisor and request changes to banking details, often using legitimate-looking correspondence or compromised email accounts.

Verification procedures can fail when staff confirm a change through the same email address or communication channel used by the fraudster.

Institutions also need to identify circumstances where customers have authorised payments themselves after being deceived, as traditional controls designed around unauthorised transactions may fail to detect these situations.

Fraudulent onboarding & money mule accounts

Stolen identities, synthetic identities, and recruited account holders are used to establish accounts that receive and disperse fraudulent funds.

New accounts receiving payments from unrelated parties, followed by rapid transfers or withdrawals, may indicate money mule activity. Company structures and intermediaries can further complicate identification of the individuals controlling an account.

The connection between onboarding information and ongoing transaction monitoring is particularly important. Information that appears unremarkable during account opening may become significant when considered alongside subsequent account activity.

AI-enabled impersonation & document fraud

Artificial intelligence is making identity and document fraud increasingly convincing.

AI-generated identification documents, cloned voices, deepfake videos, and highly personalised communications can be used to impersonate customers, employees, and executives.

These techniques create vulnerabilities in digital onboarding, contact-centre authentication, and payment verification, particularly where processes rely on static personal information, document appearance, or voice recognition without additional safeguards.

Financial institutions should be testing how their existing controls respond to these techniques, including whether staff can recognise and appropriately escalate suspected impersonation.

Mortgage, lending & application fraud

Fraudulent loan applications can involve overstated income, fabricated financial records, identity misuse, manipulated property information, and collusion between borrowers, brokers, or other parties.

These risks can be difficult to detect when individual documents appear credible, or information is independently verified through compromised or related parties.

Controls should consider the broader application process, including the conduct of intermediaries, inconsistencies between supporting documents, and patterns across related applications.

Insider fraud & collusion

Employees and contractors may have access to customer information, payment systems, approval authorities, and knowledge of internal control processes.

Unauthorised overrides, misuse of privileged access, and collusion with external parties can enable fraud to continue undetected.

Changes in personnel, offshore processing arrangements, and inadequate reviews of system access can increase exposure, particularly where employees retain permissions beyond those required for their roles.

Third-party & outsourced operations

Financial institutions increasingly rely on payment providers, fintech platforms, brokers, technology providers, shared service centres, and outsourced operations.

These arrangements create additional points of exposure where responsibilities for fraud prevention, monitoring, incident reporting, and investigation may be shared between organisations.

Institutions need assurance that third-party controls are operating effectively and that suspicious activity can be identified and escalated without unnecessary delay.

Overseas banks operating in Australia

Foreign bank branches and subsidiaries face additional challenges arising from cross-border transactions, reliance on global systems, and offshore decision-making.

In April 2026, AUSTRAC reported that 50 foreign bank branches had moved $2.5 trillion into and out of Australia over the preceding year. Its supervisory work identified low levels of suspicious matter reporting among foreign branches and money mule risks within foreign bank subsidiaries.

These findings are particularly relevant given the nature and volume of transactions undertaken by foreign-owned banks.

Cross-border payments can move suspected fraud proceeds beyond Australian recovery channels quickly. Trade finance and correspondent banking also create exposure to false invoicing, fraudulent trade documents, complex ownership structures, and sanctions evasion.

Some overseas banks rely on group-wide transaction monitoring, customer due diligence systems, and offshore investigation teams. While these arrangements can provide consistency across jurisdictions, the controls must also account for Australian payment behaviour, scam typologies, suspicious matter reporting obligations, and local regulatory expectations.

Australian management should be able to demonstrate how these risks are identified, monitored, and escalated, including where decisions or investigations are undertaken offshore.

Clear accountability is particularly important when an incident requires immediate intervention across multiple institutions or jurisdictions.

Warning signs that warrant closer attention

Certain patterns of activity can provide early indications of fraud exposure or weaknesses in existing controls.

For Boards and executives, areas worth examining include:

• fraud, AML/CTF, cybersecurity, customer complaints, and operations teams identifying related issues without sharing intelligence
• unusual account activity that includes recently opened accounts receiving funds from unrelated parties and rapidly transferring them through domestic or international payment channels
• customer contact details, beneficiary information, or staff access permissions being changed shortly before high-value payments or unusual account activity
• payment recalls, scam complaints, or law enforcement enquiries involving common accounts, devices, addresses, or intermediaries
• identity or payment verification requirements being overridden without independent approval or adequate supporting evidence
• reporting levels that appear inconsistent with the institution’s transaction volumes, customer profiles, or cross-border activity
• management being unable to explain how offshore monitoring systems identify locally relevant fraud patterns
• external providers identifying suspicious transactions or behaviour before internal monitoring systems.

Individually, these indicators may have legitimate explanations. Repeated or connected activity, however, can expose weaknesses in an institution’s fraud prevention and detection arrangements.

What should Boards & executives be asking?

Fraud risk reporting should provide a clear understanding of the institution’s exposure, the effectiveness of existing controls, and the ability to respond when suspicious activity is identified.

There are several questions worth putting to management.

1. Where can funds move through our institution faster than suspicious activity can be identified, stopped, or recovered?
2. Can we connect customer onboarding, device information, payments, complaints, cyber incidents, and AML/CTF intelligence to identify related accounts and broader fraud networks?
3. How have our identity verification and payment controls been tested against AI-generated documents, voice cloning, and other impersonation techniques?
4. Are we monitoring risks associated with receiving accounts and payment beneficiaries, as well as the customers initiating transactions?
5. How frequently are authentication, onboarding, and payment verification exceptions occurring, and what does this tell us about control effectiveness?
6. For overseas banks, which controls are operated locally, which depend on group systems, and how are gaps between them identified and managed?
7. When was the last institution-wide fraud risk assessment undertaken, and have response procedures been tested through realistic scenarios?
8. Can we preserve evidence, make timely decisions, and coordinate investigations and fund recovery across other banks and jurisdictions?

The quality of management reporting is important. Boards should have visibility of emerging fraud patterns, significant control exceptions, recurring incidents, and the actions being taken to address identified weaknesses.

Preparing for the Scams Prevention Framework

Australia’s Scams Prevention Framework introduces obligations for regulated entities to prevent, detect, disrupt, report, and respond to scams.

AFCA membership became mandatory for entities providing regulated services from 1 September 2026, with most framework obligations scheduled to commence on 31 March 2027.

For affected financial institutions, preparation should include reviewing fraud and scam controls across customer onboarding, transaction monitoring, payment verification, incident response, and complaints handling.

Particular attention should be given to how information moves between teams, how suspicious activity is escalated, and whether the institution can demonstrate that its controls are operating effectively.

The upcoming obligations also provide an opportunity to examine how fraud and scam risks are considered within broader governance, operational risk, and financial crime frameworks.

Reviewing fraud exposure & control effectiveness

Fraud methods will continue to evolve as criminals exploit changes in technology, payment systems, and customer behaviour.

Regular fraud risk assessments, targeted transaction analysis, and independent testing can help financial institutions identify vulnerabilities that may be difficult to recognise through routine monitoring.

Reviews should consider how fraud could occur across the institution, the controls intended to prevent or detect it, and whether those controls remain effective against current methods.

There is also value in examining previous incidents, complaints, investigation findings, and control exceptions to identify patterns that may indicate broader weaknesses.

For institutions with offshore operations or third-party dependencies, the review should extend to the systems and processes relied upon outside the Australian business.

How SW can help

SW’s Fraud & Forensics team works with financial institutions to assess fraud exposure, strengthen controls, and investigate suspected fraud.

Our services include:

• fraud risk assessments across financial institutions and individual business units
• fraud control framework reviews, gap analysis, and benchmarking
• targeted data analytics across customers, payments, suppliers, employees, and third parties
• reviews of account onboarding, money mule detection, payment verification, and exception controls
• independent investigations, transaction tracing, and recovery support
• cross-border fraud governance reviews, including local and group control arrangements
• fraud response planning, simulation exercises, and investigation readiness
• executive, Board, and employee fraud awareness training.

Talk to us

Anthony Hodgkinson, Partner – Fraud & Forensics, has more than 30 years’ experience in fraud, corruption risk management, and forensic investigations.

For assistance assessing your institution’s fraud exposure, reviewing existing controls, or investigating suspected fraud, contact Anthony or your SW advisor.

The post Fraud risks facing Australian financial institutions appeared first on SW Accountants & Advisors.

The team covered topics such as:

• Understanding the proposed 30% minimum tax and who will and won’t be affected
• The new definition of a fixed trust and whether it represents welcome reform or creates new uncertainty
• Practical tips and common pitfalls when electing beneficiaries as ‘fixed’ beneficiaries
• Exploring what is and isn’t permitted under the new rules and whether restructuring is possible

Webinar

Expert speakers

Abi Chellapen
Director
SW

Blake Rodgers 
Director
SW

Vanessa Priest
Director
SW

Ned Galloway
Associate Director
SW

The post Minimum Tax Trust Changes webinar appeared first on SW Accountants & Advisors.

The proposed measures, the bulk of which would come into effect from 1 July 2028, would:

• impose a 30% minimum tax on the net income of most discretionary trusts
• deny credits for that minimum tax to corporate beneficiaries
• introduce from 1 July 2027, a broad three-year roll-over relief regime to facilitate restructures from discretionary trusts to individuals, companies, and fixed trusts
• introduce an optional excluded election trust (EET) regime allowing certain existing discretionary trusts to avoid the minimum tax by effectively pre-nominating beneficiaries and fixed distribution percentages
• replace the existing income tax definition of fixed trust with a significantly broader principles-based definition, with fixed trusts also being excluded from the minimum tax regime
• introduce a number of exclusions for testamentary trusts, primary production income, charities, deductible gift recipients (DGRs), and certain other trust structures.

These measures represent one of the most significant reforms to discretionary trust taxation in decades and have the potential to materially alter the attractiveness and commercial viability of existing trust structures. The measures are broadly consistent with the exposure draft (ED) which SW had previously provided submissions on here.

Unfortunately, the draft legislation introduced does not appear to have made any material changes recommended as part of the feedback provided by SW or other stakeholders.

How does the tax operate?

From income years commencing on or after 1 July 2028, trustees of affected trusts, referred to in the legislation as minimum tax trusts, will be liable to pay tax at a minimum rate of 30% on ‘minimum tax income’. Several categories of income are excluded from minimum tax income, including:

• primary production income
• certain income relating to vulnerable minors
• income allocated to registered charities, tax exempt entities, and DGRs
• distributions to foreign beneficiaries subject to withholding-tax and conduit foreign income rules
• eligible testamentary trust income.

Corporate beneficiaries remain adversely affected

One of the most controversial features of the proposal has been retained, namely, that a corporate beneficiary of a minimum tax trust:

• remains assessable on trust income under ordinary rules
• does not receive any offset for the minimum tax paid by the trustee.

For minimum tax income, this would generally mean that such income distributed by a minimum tax trust to a company will bear tax at 60%.

New definition of fixed trust

The Bill repeals the existing fixed trust definition and replaces it with a broader principles-based test. Under the new regime, a trust may qualify as a fixed trust where either:

• beneficiaries have fixed entitlements
• there are no material discretionary elements capable of significantly affecting beneficiaries’ rights to trust income or capital.

Importantly, the following ordinary discretionary powers, commonly found in most trust deeds, will not necessarily prevent a trust from being treated as fixed:

• amendment powers
• issue and redemption powers
• administrative powers
• certain governance provisions.

Managed investment trusts

The ED legislation provides the Minister with the power, by legislative instrument, to determine that trust estates of a certain kind are not minimum tax trusts, including if the Minister is satisfied that each trust estate of that kind has widely held membership or is used for collective investment by pooling the contributions of members. We hope that this mechanism will be used to confirm that managed investment trusts (MIT) are fixed trusts, although this remains to be seen.

Testamentary trust concessions

Discretionary testamentary trusts established for genuine testamentary purposes are excluded from the proposed 30% minimum tax, as are deceased estates. This means eligible testamentary trust income continues to be taxed under the existing trust rules, including the ordinary adult tax rates available to minors on excepted trust income.

Transitional roll-over relief

Consistent with the exposure draft, a concession is provided to enable a restructure of trusts into a new vehicle. This dedicated roll-over regime is proposed to be available from 1 July 2027 to 30 June 2030.

The measure is intended to facilitate transfers of assets from discretionary trusts into:

• companies
• fixed trusts
• other eligible fixed structures.

Key conditions

The regime contains a number of requirements including:

• the requirement that all assets of the trust be transferred to the new vehicle, subject to certain limited exceptions, remains a major point of criticism, as the existence of dutiable property in a trust may significantly deter access to roll-over relief
• continuity requirements (broadly ensuring consistency of underlying ownership) must be satisfied
• residency requirements
• a requirement that no material discretionary elements exist within the resulting (transferee) structure for a prescribed period
• elections and notifications must be provided to the Commissioner.

Excluded election trusts (EETs) — alternative to restructuring

A second transitional measure is the introduction of an EET regime. Rather than restructuring, an eligible discretionary trust existing on 1 July 2028 may elect to become an EET. An EET will not be treated as a minimum tax trust subject to the 30% tax impost while the election remains effective.

An EET election can only be made for trusts that are in existence on 1 July 2028 and requires trustees to nominate:

• each beneficiary
• fixed percentages of income and non-income earnings.

The nomination generally cannot be later changed except in limited circumstances such as:

• death of a nominated beneficiary
• relationship breakdown.

Revocation consequences

If an EET fails to comply with the beneficiaries and proportions nominated in the EET election:

• the election is automatically revoked
• for the year income to which the revocation occurs, the beneficiaries are treated as not being presently entitled to the income of the trust, which means that the trustee would be assessed under section 99A at the top marginal rate plus Medicare levy
• in subsequent years, the trust would become subject to the minimum tax regime thereafter.

A trustee also has a once-only opportunity to voluntarily revoke an EET election.

SW comments

The proposed legislation represents a major change to the taxation of family groups and private investment structures. For many existing discretionary trusts, particularly those utilising company beneficiary arrangements, the following measures, in combination, may significantly increase effective tax costs:

• a trustee-level 30% minimum tax
• denial of offsets to corporate beneficiaries.

While the Government has provided both roll-over relief and the EET regime as transition mechanisms, each option contains technical requirements and potential commercial implications that should be carefully considered well before the proposed 1 July 2028 commencement date.

SW can model the impact of the minimum tax on your current structure, assess whether existing arrangements remain fit for purpose, and evaluate the three practical paths — rollover, EET election, or accepting the minimum tax — including the interaction with State duty.

Please contact your SW advisors to discuss how these proposed changes may affect you or your clients.

Contributors

Ned Galloway | Associate Director, Tax

The post Trust in the detail, part three: The minimum tax on trusts Bill appeared first on SW Accountants & Advisors.

Our experts Matt Birrell, Blake Rodgers, Chris Dexter, and Tim Stillwell shared practical insights into discretionary trust changes, the latest Division 7A developments, and proposed capital gains tax (CGT) and negative gearing reforms.

Webinar

Expert speakers

Matt Birrell
Director
SW

Blake Rodgers 
Director
SW

Chris Dexter
Director
SW

Tim Stillwell
Director
SW

The post SW / ANZ webinar – Keep Calm and Listen to Your Accountant appeared first on SW Accountants & Advisors.

The report highlights a continued focus on ensuring taxpayers are correctly reporting GST and maintaining effective tax governance frameworks, while also introducing a structured three-tier model used by the ATO to identify behaviours and transactions that may present GST risk, namely real property transactions and accommodation arrangements.

Key findings from the Top 1,000 GST Assurance Program

The ATO reported that between 1 July 2019 and 30 June 2026 it completed 1,034 GST reviews covering 860 taxpayers. As of 30 June 2026, 46% of taxpayers within the Top 1,000 population had achieved a high assurance rating, 49% achieved medium assurance, and 5% remained at low assurance. The ATO noted an encouraging trend of taxpayers improving their assurance ratings over time, with governance remaining one of the most significant barriers to achieving high assurance.

The report also emphasises the importance of GST governance, data integrity, and transaction testing. The ATO observed that taxpayers with well-designed and documented GST control frameworks are significantly more likely to achieve higher assurance outcomes.

The ATO’s three-tier model

A notable feature of this year’s report is the alignment of GST assurance activities with the ATO’s Public and Multinational Business Three-Tier Model (3TM). The model is designed to identify the key behaviours, events, and focus areas that drive tax performance and compliance outcomes.

Tier 3 identifies the specific transaction type and industries that the ATO considers warrant closer attention. The ATO’s current GST focus areas include:

• treatment of significant or unusual transactions involving financial supplies (e.g. financial acquisition threshold)
• treatment applied by financial services, investment, and insurance industries (e.g. GST apportionment, reduced input tax credits, reverse charge)
• the GST classification of food and health products
• reporting of GST on low value imported goods and inbound intangible supplies by offshore entities
• treatment applied to real property transactions and accommodation.

Real estate emerges as key focus area

Of particular interest is the ATO’s identification of real property transactions and accommodation arrangements as a specific Tier 3 focus area, with 15% of issues that received a separate assurance rating for this risk area in the 2025–26 financial year obtaining a low or red flag assurance rating. These issues particularly relate to the application of the margin scheme, GST-free farmland provisions, claiming of input tax credits in relation to the supply of residential accommodation, and GST treatment of build-to-rent (BTR) developments.

While the report does not introduce new GST rules for real property, its inclusion in the ATO’s formal risk framework is a clear signal that property transactions remain a significant area of concern from a GST assurance perspective. The GST outcomes of property transactions can be a complex technical issue and involve significant value.

Property funds, developers, and real estate investment groups may face increased scrutiny of matters such as land acquisitions and disposals, leasing arrangements, development structures, going concern concessions, margin scheme eligibility, and input tax credit entitlements. Given the volume, value, and complexity of transactions undertaken across the sector, the ATO is likely to continue closely examining the GST treatment adopted by property funds for both day-to-day operations and significant transactions.

BTR draft guidance may assist property funds

Against this backdrop, the ATO’s ongoing work on GST guidance for modern BTR developments may provide welcome clarity for the property sector.

The ATO is currently developing an addendum to GSTR 2012/6 dealing with commercial residential premises. The draft update was issued following recognition that modern BTR developments often have characteristics that differ from traditional residential accommodation and can involve complex questions regarding whether premises should be characterised as residential premises or commercial residential premises for GST purposes.

For more information, see our previous alert on draft ruling GSTR 2012/6DC, available here.

For property funds investing in the growing BTR sector, the finalised ruling is expected to provide greater certainty when structuring developments and assessing GST outcomes.

How SW can help

The ATO’s latest GST assurance findings reinforce that strong GST governance and accurate transaction reporting remain critical to achieving a high assurance rating. The inclusion of real property transactions and accommodation arrangements as a specific GST focus area highlights the ATO’s continued scrutiny of the property sector, particularly property funds, developers, and real estate groups.

The ATO’s draft guidance on BTR accommodation is a welcome development, providing greater certainty in an area that has historically presented GST issues. Property funds should carefully assess and document the GST treatment of their property transactions, particularly significant acquisitions, disposals, and development arrangements, to ensure they are well positioned for future ATO reviews.

SW’s indirect tax specialists have extensive experience advising on the GST treatment of property transactions and accommodation arrangements. If you would like to review the GST treatment adopted for your property activities, please contact your SW advisor.

Contributor

Dylan Kelly | Senior Consultant, Tax

The post ATO sharpens GST focus on real property in Top 1,000 Assurance Program appeared first on SW Accountants & Advisors.

Background

Following Royal Assent of the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 on 26 June 2026, from 1 July 2027 the 50% capital gains tax (CGT) discount for individuals, trusts, and partnerships is replaced with cost base indexation, and a 30% minimum tax on capital gains applies.

Following the 2026-27 Budget, the Government undertook to consult on the treatment of early stage and start-up businesses, recognising that these businesses often hold assets that are difficult to value and can grow rapidly from a low-cost base. A consultation paper was released on 18 June 2026, and this exposure draft is the result.

The concession

A new 50% discount applies to a discount capital gain where:

• the CGT event happens on or after 1 July 2027 in relation to an IBCC asset
• the asset is not a disqualified asset at the time of the CGT event
• the taxpayer has not chosen cost base indexation instead
• the taxpayer is not a company, complying superannuation entity, or foreign resident.

Gains that attract the innovative business CGT concession (IBCC) discount are excluded from the minimum tax on capital gains and from the deemed sale and reacquisition rules operating across 30 June and 1 July 2027. If indexation is chosen instead, those rules apply in the ordinary way.

IBCC assets

An IBCC asset is a CGT asset that is, or can become, an equity interest in a company, such as shares, options (including warrants) to acquire shares, and convertible notes that are not debt interests. The explanatory materials note this will often capture SAFEs, depending on the legal character of the instrument.

The asset must also:

• be at risk – there must be no arrangement maintaining the value of the asset or its returns
• be issued directly by the company to the investor, excluding secondary market acquisitions
• be issued at a time when the company was an IBCC company
• be held for at least three years, unless the interests are acquired under a takeover or similar scheme covering all or substantially all interests.

Modified rules apply for beneficiaries of trusts and members of AMITs, employee share trusts, shares acquired on exercise, or conversion of a qualifying option or note, most replacement asset rollovers (excluding Division 122 and scrip for scrip), and assets passing on death or relationship breakdown.

Carried interests

The discount extends to CGT event K9 gains from carried interest entitlements of general partners in VCLPs, ESVCLPs, and AFOFs, and limited partners in VCMPs, to the extent the gain is reasonably attributable to an IBCC asset. The direct issue and three-year holding requirements are tested at the level of the relevant partnership.

IBCC companies

A company must satisfy the following conditions:

The Industry Secretary may specify safe harbour conditions for the innovative company test by legislative instrument. Satisfying a safe harbour does not make a company an early-stage innovation company for any other purpose.

Ineligible activities

The predominant activity test excludes activities comprising of:

• property development or land ownership
• banking
• provision of capital
• leasing
• factoring and securitisation
• insurance
• infrastructure construction or acquisition
• passive investment directed to interest, rents, dividends, royalties, or lease payments
• gambling, tobacco, and vaping technology outside the harm minimisation carve-outs.

Importantly, developing technology for use in relation to finance, insurance, or passive investment activities is not an ineligible activity.

Registration, reporting & disqualification

Registration is administered by the Industry Secretary (currently the Department of Industry, Science and Resources) rather than the ATO, and may be backdated where the company notifies the Secretary and affected interest holders.

Registered companies must lodge annual reports. Failure to do so results in automatic suspension, and cancellation if the report remains outstanding at the end of the income year in which it was due. Registration may also be cancelled for fraud, serious misrepresentation, or reliance on untrue, incorrect, or incomplete information, in some cases with the company treated as never having been registered.

An IBCC asset becomes a disqualified asset where the company ceases to meet the predominant activity test, its registration ceases to have effect, or the Secretary makes a disqualification determination. A company that has met the predominant activity test for at least 20 years is treated as not having ceased to meet it.

Section 170 of the Income Tax Assessment Act 1936 will not prevent amendment of assessments to give effect to suspension or cancellation of registration, effectively removing the period of review for these matters.

Rulings by the Industry Secretary

New Division 363 of Schedule 1 to the Taxation Administration Act 1953 empowers the Industry Secretary to issue public and private rulings on whether a company is an IBCC company and whether an asset is a disqualified asset.

A private ruling given to a company also applies to entities holding CGT assets issued by that company and to beneficiaries of trusts holding such assets. Rulings bind both the Secretary and the Commissioner, and the Commissioner is excluded from ruling on those provisions. Decisions are subject to internal review and then review by the Administrative Review Tribunal.

Transitional rules

Assets issued before 1 July 2027 can qualify where the company registers before the relevant CGT event and, broadly, the company:

• was incorporated for less than 15 years on 30 June 2027, and is not an affiliate of an older company
• is unlisted at registration, unless it was listed before 11 September 2026, being the date the exposure draft was released
• satisfies the Australian residence, staff, and asset tests at registration
• had aggregated turnover under $50m and met the innovative company and predominant activity tests in the later of the 2025-26 income year or the year of incorporation.

SW comment

The IBCC is a meaningful carve-out from the CGT reform package, but it is a narrow and heavily administered one. Three features warrant particular attention.

• First, the direct issue requirement confines the concession to primary capital contributions. Secondary market acquisitions are excluded, which will materially affect later stage investors and secondary funds.
• Second, the treatment of widely held trusts remains unresolved. The explanatory materials expressly state that the Government is still considering how the direct issue requirement should apply to managed investment trusts, AMITs, and other widely held trusts, having regard to proportionate compliance impacts. Fund managers should treat this as a live issue.
• Third, the ineligible activities list is broad. Banking, provision of capital, leasing, factoring, securitisation, and insurance are excluded, as is property development. The carve-back for technology developed for use in those activities is the critical distinction for fintech and proptech businesses, and its boundaries are untested.

The shift of gatekeeping to the Industry Secretary, combined with annual reporting, automatic suspension, and the removal of the period of review, places significant ongoing compliance weight on investee companies, with the consequences borne by their investors.

How SW can help

SW’s Tax Consulting team can assist with:

• assessing eligibility under the proposed IBCC regime
• reviewing existing investment and fund structures
• preparing submissions to Treasury during consultation
• advising founders, employees, venture capital investors, and fund managers
• modelling the interaction of the IBCC with the broader CGT reform package.

For further information, please contact your SW advisor.

The post New 50% CGT discount proposed for investments in innovative start-ups appeared first on SW Accountants & Advisors.

Introduction

On 3 September 2026 the Government released exposure draft legislation (ED) implementing the core components of the 30% minimum tax regime (MTR) for discretionary trusts, with consultation closing on 18 September 2026. The package confirms a 1 July 2028 start date and introduces two response pathways for affected trusts:

• transitional rollover relief
• a new excluded election trust (EET) election.

Following our 31 July 2026 submission on the Consultation Paper, SW has lodged a second submission responding to Treasury’s exposure drafts on ‘Minimum Tax Trusts’. We welcome several features of the draft relative to earlier announcements; in particular a broader fixed trust definition, the carve-out for distributions to charities, not-for-profits and tax exempt, the refund model for excess franking credits, and the availability of offsets through chains of trusts. However, a number of issues and anomalies remain that, in our view, require further consideration before the measures are settled.

What SW has submitted

The fixed trust definition should turn on the exercise of powers, not their existence

Almost every professionally drafted trust instrument contains powers to amend the deed, to issue or redeem units, to characterise receipts as income or capital, or to create classes of interests. Under the proposed changes, the mere existence of such a power appears capable of denying fixed trust status. The result is that a very large population of trusts that are, in economic substance, entirely fixed, including the vast majority of single class unit trusts, would be treated as discretionary by default.

We have submitted that unexercised powers, subject as they are to fiduciary constraint, should be disregarded unless and until exercised in a way that materially alters defined entitlements, consistent with safe harbour 6 in PCG 2016/16.

MITs, widely held trusts & employee share trusts need to be expressly excluded

The Explanatory Memorandum and the Treasurer’s media release states that MITs, widely held trusts, and employee share trusts will fall outside the MTR. In our view that outcome is not clear on the text of the law. Absent express inclusion in the fixed trust definition, these trusts will need to review and amend their constitutions, an avoidable cost, with real practical difficulty for schemes regulated under the Corporations Act 2001 where member resolutions are required, and with potential State duty exposure. At a minimum, there should be a statutorily binding safe harbour along the lines of PCG 2016/16 that does not depend on the exercise of the Commissioner’s discretion.

The EET regime is a useful concept but needs more flexibility

We support the logic of the EET regime, which allows a trust to be notionally fixed for tax purposes without surrendering the asset protection that a discretionary structure offers. To be workable, we have submitted that:

• the grounds for varying an election be expanded beyond death and relationship breakdown, to include bankruptcy, legal disability, or incapacity of a nominated beneficiary
• the definition of eligible company be tested on the same ‘exercise, not existence’ basis as the fixed trust definition
• availability be extended to trusts established on or after 1 July 2028, or at least to 30 June 2030 to align with the proposed rollover window
• distributions of corpus that are not capital gains should not be constrained by the election
• automatic revocation of the EET not be triggered by an accumulation of income assessed under section 99A, by the application of section 100A, or by distributions to registered charities and tax exempt.

We have also flagged the trustee risk highlighted by Owies v JJE Nominees Pty Ltd, and the residual uncertainty as to whether making an election could attract duty in some states, a point that will need confirmation from each revenue authority if the regime is to be relied upon.

Rollover relief should not be defeated by dutiable property

The requirement that all trust assets be transferred means that a trust holding dutiable property is effectively forced to choose between a duty cost and the minimum tax. As a trust cannot both elect the EET regime and access the rollover, income from any retained assets remains within the MTR in any event. We see no policy or integrity basis for the duty impost and have submitted that the carve-outs be expanded.

Testamentary trusts, primary production & corporate beneficiaries

We have renewed three points from our earlier submission.

• The testamentary trust exclusion should operate by reference to distributions actually made to individuals and exempt entities, rather than requiring existing wills to be rewritten.
• The primary production exclusion should extend to income derived from the use of land or assets by a related entity carrying on a primary production business — a very common rural ownership structure.
• The double taxation of distributions to corporate beneficiaries, which produces an effective rate of 60%, rising to 69% on payment to a top-rate shareholder, remains sufficiently harsh that we have again urged the Government to reconsider it.

Consultation process

While we welcome Treasury’s adoption of several points raised in the first round of consultation, a consultation period of 11 working days is too short for reforms of this scope and depth, particularly where the bulk of the changes do not commence until 1 July 2028. We have recommended that more time be allowed for future tranches.

What this means for you

The regime will have significant consequences for private business and family groups using trusts, particularly those with corporate beneficiaries. It may also affect commercially fixed unit trusts, managed funds, primary production structures, testamentary trusts, and groups weighing a restructure ahead of 1 July 2028.

How SW can help

SW can model the impact of the minimum tax on your current structure, assess whether existing arrangements remain fit for purpose, and evaluate the three practical paths — rollover, EET election, or accepting the minimum tax — including the interaction with State duty.

Please contact your SW advisors to discuss how these proposed changes may affect you or your clients.

Contributors

Ned Galloway | Associate Director, Tax

The post Trust in the detail, part two: SW responds to the minimum tax trust exposure draft appeared first on SW Accountants & Advisors.

While the ruling sets out the ATO’s interpretation of the law, the draft Practical Compliance Guideline is arguably the more important document for many taxpayers because it provides a roadmap for understanding how the ATO intends to allocate its compliance resources. In simple terms, taxpayers can self-assess their arrangements into a risk zone ranging from white (lowest compliance risk) to red (highest compliance risk).

For CFOs, financial controllers, and technology businesses, the key question is often not whether software payments exist, but whether the ATO might consider part of those payments to be royalties that should be subject to royalty withholding tax. The new framework is intended to provide greater certainty around that issue.

Why has the ATO released this guidance?

The framework follows the High Court’s decision in PepsiCo and reflects the ATO’s view that economic substance and examining the totality of the arrangement may be relevant in identifying an embedded royalty, even where no royalty is expressly stated in the contract.

The guidance currently applies to software intermediation and distribution arrangements, with further schedules expected for other industries and transaction types.

Understanding the risk zones

Particular focus on restructures

The draft guidance includes a clear ATO warning on restructures.

The ATO may review changes to contractual or operating structures that reduce or eliminate Australian royalty withholding tax, even where the arrangement otherwise falls within a lower-risk zone. Transfer pricing, MAAL, DPT, and Part IVA may also be relevant.

Multinational groups undertaking software licensing or distribution restructures should therefore consider royalty withholding tax alongside transfer pricing.

Amber Zone example

A foreign software provider licenses ERP software to AU Software Co, an Australian related-party distributor, for supply to Australian customers. The agreement with the software owner grants AU Software Co the exclusive right to market and distribute the ERP software to Australian customers. However, it does not grant AU Software Co the right to make copies of, or modify, the ERP software. AU Software Co enters into customer contracts and receives payments from those customers, while the offshore supplier owns the software and provides the underlying platform and support. AU Software Co does not recognise any part of its payment to the offshore supplier as a royalty for Australian tax purposes.

On the facts in Example 8, the ATO would treat the arrangement as falling within the amber zone. The key risk indicators are that the Australian distributor is selling software-related products or services to Australian customers, the software and associated intellectual property are held offshore, and no Australian royalty has been recognised or subjected to royalty withholding tax.

The example illustrates that, where the relevant software rights and economic value sit offshore but Australian customer-facing activities are carried on locally, the ATO may expect taxpayers to undertake and document a more detailed royalty risk assessment.

By contrast, the risk assessment changes to the red zone where AU Software Co is also granted rights to make copies of, or modify, the ERP software. A red zone outcome may also arise where the software owner is located in a specified jurisdiction, or, generally speaking, is otherwise shielded from tax on the relevant income.

How SW can help

Businesses with cross-border software, SaaS, platform or technology distribution arrangements should review their existing arrangements against the framework. Even where no royalty has historically been recognised, the ATO expects taxpayers to be able to explain and support that position.

SW can assist in the following assessment:

• assessing where your arrangement is likely to sit within the ATO’s risk framework
• whether the undissected payments contain a royalty component
• whether sufficient documentation exists to support your position
• identifying whether practical steps are available to mitigate the relevant royalty withholding tax risk.

The release of TR 2026/2 and PCG 2026/D4 signals that software royalty arrangements will remain an area of significant ATO focus. Early assessment of risk positions and supporting documentation may help reduce the likelihood of future disputes and compliance costs.

The post What the ATO’s finalised software royalties ruling & draft guidance means for businesses appeared first on SW Accountants & Advisors.

Year 2 is different.

For groups with a 31 December 2025 year end, the first substantive Pillar Two returns will generally be due by 31 March 2027, being 15 months after year end. Accordingly, MNE groups should already be considering their year 2 compliance strategy and data requirements.

The ‘no charging mechanism’ position no longer applies

One of the unique features of the first year of Pillar Two compliance was that many jurisdictions were not yet subject to any qualifying charging mechanism, being the Income Inclusion Rule (IIR), Domestic Minimum Tax (DMT) or Undertaxed Profits Rule (UTPR).

As a result, for the year ended 31 December 2024, some jurisdictions could effectively be excluded from substantive Pillar Two consideration because no jurisdiction had a charging mechanism to impose top-up tax in relation to those jurisdictions.

For the fiscal year ended 31 December 2025, this position changes significantly.

From fiscal years beginning on or after 1 January 2025, Australia’s UTPR commences. At the same time, many jurisdictions that did not previously apply an IIR or DMT have now introduced one or both charging mechanisms.

Consequently, jurisdictions that attracted limited Pillar Two attention during year 1 may now require a more detailed assessment. Finance teams should avoid assuming that conclusions reached during the 2024 compliance cycle remain valid for 2025.

More jurisdictions will require safe harbour analysis

For many groups, the 2024 exercise focused only on (a limited number of) jurisdictions where a charging mechanism existed and therefore where a potential top-up tax exposure could arise.

For 2025, safe harbour analysis may need to be performed for jurisdictions that did not require assessment in the prior year because no charging mechanism applied.

Where a jurisdiction satisfies one of the Transitional CbCR Safe Harbour tests, no full Pillar Two calculation will generally be required for that jurisdiction.

However, where none of the available safe harbour tests are satisfied, the MNE group may be required to undertake full GloBE calculations for that jurisdiction.

Accordingly, even where the underlying business has not changed materially, the number of jurisdictions requiring analysis may increase significantly from year 1 to year 2.

The transitional CbCR safe harbour ‘once-out, always-out’ rule becomes more relevant

As groups move into their second year of compliance, greater attention should be given to the operation of the TCSH rules.

Broadly, where a jurisdiction ceases to qualify for the TCSH for one year, that jurisdiction is unable to subsequently re-enter the safe harbour regime in a later year.

This ‘once-out, always-out’ concept means that safe harbour assessments should be undertaken carefully and supported with appropriate documentation.

The year 2 assessment therefore should not simply be viewed as a rollover of the year 1 position.

Jurisdictions not assessed in 2024 should not automatically lose access to TCSH

A practical issue likely to arise for many MNE groups concerns jurisdictions that were not required to be analysed in 2024 because no charging mechanism applied.

In our view, the fact that a jurisdiction was not required to consider the TCSH in 2024 should not, by itself, prevent that jurisdiction from relying on the TCSH when a charging mechanism first becomes applicable in 2025.

This situation should be distinguished from a jurisdiction that was assessed in 2024 and failed the TCSH requirements.

In other words, the fact that the TCSH was not relevant to a particular jurisdiction in year 1 should not necessarily preclude that jurisdiction from accessing the TCSH in year 2 when a charging mechanism becomes applicable.

Given the potential compliance savings that can arise from the TCSH, this distinction may be important for many MNE groups.

Group restructures may create additional Pillar Two compliance obligations

MNE groups that undertake restructures during the year should carefully consider the Pillar Two implications, even where the restructure appears relatively straightforward.

In particular, changes involving the identity of the Ultimate Parent Entity (UPE), the insertion of a new holding company, mergers, demergers, acquisitions, disposals, or changes to ownership chains can give rise to additional Pillar Two compliance requirements. In some cases, a single accounting period may involve multiple reporting obligations, separate filing positions, or different safe harbour assessments before and after the restructure.

Importantly, transactions that may appear routine from a legal or commercial perspective can have consequences for Pillar Two group composition, filing obligations, and the application of safe harbours. Accordingly, MNE groups should consider reviewing any restructuring activity undertaken during the year to determine whether it affects their Pillar Two compliance position, reporting obligations or filing approach. Early identification of these issues can help avoid unexpected compliance obligations and reduce the risk of errors when lodgement deadlines approach.

Governance & readiness remain critical

While many MNE groups may continue to benefit from the TCSH for the year ended 31 December 2025, this relief is temporary. Accordingly, organisations should use the transitional period to prepare for the point at which full GloBE calculations are required.

In our experience, groups that use the transitional years to enhance data collection processes, identify information gaps, and establish governance frameworks will be significantly better positioned when safe harbours cease to be available.

Management should therefore consider:

• whether the group currently captures all data that may be required to perform full GloBE calculations in future years
• whether roles and responsibilities between tax, finance, and accounting teams remain appropriate
• whether assumptions adopted during year 1 remain valid
• whether local advisors are required in newly implementing jurisdictions
• whether documentation supporting safe harbour positions is being maintained
• whether reporting to senior management and audit committees remains fit for purpose.

Revenue authorities around the world are increasingly focused on Pillar Two implementation, and MNE groups should expect greater scrutiny as the first substantive returns begin to be lodged. MNE groups that invest in preparing for full calculations during the transition period are likely to experience a more efficient and lower-risk compliance process when the TCSH is no longer available.

Don’t forget the tax provision process

For many MNE groups, Pillar Two was initially viewed as a future compliance exercise.

As year 2 approaches, Pillar Two considerations are becoming increasingly relevant to the annual tax reporting cycle. Finance teams should consider whether any Pillar Two developments may affect tax accounting positions, disclosures, governance processes, and audit discussions.

Early engagement between tax teams, finance teams, and auditors will generally result in a more efficient compliance process.

Looking ahead

The year ended 31 December 2024 was largely about understanding the new rules and determining whether transitional relief was available.

The year ended 31 December 2025 represents the next phase of the regime.
The commencement of Australia’s UTPR, the broader rollout of IIR and DMT regimes globally, and the need to assess additional jurisdictions under the Transitional CbCR Safe Harbour rules mean that many MNE groups will find year 2 materially different from year 1.

For MNE groups with a 31 December 2025 year end, the Pillar Two lodgement deadline is 31 March 2027. While this may appear some time away, experience suggests that MNE groups that commence planning early are better positioned to manage data collection, governance requirements, and filing obligations efficiently.

How SW can help

SW’s Pillar Two specialists can assist with:

• transitional CbCR Safe Harbour assessments
• review of year 1 positions and implications for year 2
• jurisdictional charging mechanism analysis
• governance frameworks and documentation for Pillar Two
• preparation and review of GloBE calculations
• lodgement obligations for Australian Pillar Two.

If you would like to discuss the implications of year 2 Pillar Two compliance for your group, please contact your usual SW advisor.

Contributors

Antony Cheung | Associate Director, Tax

The post Pillar Two in year 2 & what’s different from year 1 appeared first on SW Accountants & Advisors.