Background

Mr Morton was a retired farmer who owned land in Tarneit, Victoria, known as ‘Dave’s Block’. The land had been used for farming continuously for many years before it was rezoned from rural to residential use in 2010, making farming increasingly unviable. Mr Morton and his family wanted to get the best value for their land, so they hired a developer to divide it up, prepare it, and sell it as a residential estate.

They signed contracts with the developer, who was given broad control over financing, dividing the land, earthworks, marketing, and selling the land. The developer was responsible for all the costs and activities and was paid a fee based on a percentage of sales. Critically, Mr. Morton insisted that his land not be used as security for any development finance.

The land was subdivided into residential and commercial lots, and settlements occurred between 2019 and 2021. The Commissioner issued amended assessments, treating the sale proceeds as assessable income, on the basis that Mr Morton was either carrying on a property development business or had ventured the land into a profit-making scheme.

Mr Morton disagreed, arguing that the sales represented a one-off gain from selling something he owned, not regular income from business.

Legal issues

The Commissioner argued that the proceeds were assessable income on two alternative grounds under the Income Tax Assessment Act 1997:

• Mr Morton carried on a business of residential development, deeming the land trading stock
• the proceeds arose from a profit-making scheme under section 15-15.

Mr Morton argued that he had done no more than realise a long-held capital asset, by enterprising means.

The decision

The Full Court unanimously dismissed the Commissioner’s appeal, affirming the primary judge’s conclusion that Mr Morton was merely realising a capital asset.

The Court placed weight on the following factors:

No original profit-making purpose

Mr Morton acquired the land from his father in 1980 to farm, not to develop or sell. The decision to subdivide was driven by external forces — rezoning, rising rates and land tax, and the declining viability of farming.

Limited and passive involvement

Mr Morton played little active role in the development. He did not oversee the project, contribute to planning applications, organise finance, or manage construction. He did not even read the monthly reports the developer provided under the agreement.

Developer bore the commercial risk

The developer was solely responsible for all development costs and financing. Mr Morton’s land was not used as security — a condition he had insisted on from the outset. The Court found this to be a highly significant factor distinguishing realisation from business activity.

Developer acted independently, not as Mr Morton’s agent in a general sense

While the development agreement contained agency-type and power of attorney provisions, the Court found these were facilitative only and limited to enabling the developer to fulfil Mr Morton’s legal obligations, such as executing contracts of sale. They did not convert the developer’s activities into activities carried on by Mr Morton himself.

Scale alone is not determinative

The Court affirmed the well-established principle that the magnitude and the sophistication of a realisation alone does not convert it into a business or profit-making scheme.

Importantly, the Court looked beyond the legal form of the development agreement to its commercial substance — particularly who bore risk, who controlled the project, and whose business the development truly was.

Practical implications

The Morton case is a useful reference point for landowners and advisors navigating the capital/revenue boundary where subdivision is involved. It highlights that outcomes in subdivision cases remain highly fact-dependent. In particular, advisors should focus on:

• who bears financial risk, including funding and security arrangements
• the degree of the landowner’s control and involvement
• the commercial substance of the development agreement
• the landowner’s purpose at acquisition and at the time of subdivision.

The decision sits comfortably alongside earlier cases distinguishing mere realisation from development activity. It reinforces that even modern, large-scale subdivisions can remain capital on the right facts, for example where the landowner lacks development expertise, does not assume financial exposure, and does not exercise significant control over the project. The structure and substance of development agreements should be closely scrutinised.

How SW can help

The Morton decision confirms that tax treatment of land subdivision depends heavily on the specific facts and the terms of the development arrangements. Early and careful structuring of these arrangements is essential.

SW can assist by reviewing development agreements, assessing the risk and control profile of proposed arrangements, and advising on the appropriate tax treatment before transactions are committed to. Please contact your SW advisor to discuss further.

Contributors

Rahul Sanghani

Ned Galloway

Nicolas Hodge

The post Full Federal Court confirms capital treatment for subdivided farmland appeared first on SW Accountants & Advisors.

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.

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.

Developers can unlock stalled or underutilised residential projects by engaging with the government-led Development Facilitation Program (DFP), which offer expedited planning pathways or waive or vary mandatory planning scheme requirements relating to building height, setbacks when affordable housing is incorporated into proposals. These initiatives present a strategic opportunity to align commercial outcomes with housing policy objectives across jurisdictions. 

Our property expert Sejla Kadric is joined by three industry experts on the topic:  

1. Michael Henderson – Michael joined Contour in 2018 and was appointed a Director in 2024. Michael has been working as a town planner in both the private and public sectors since 2009; holding senior positions within both sectors. Michael brings enthusiasm and leadership qualities, together with his detailed understanding of Victoria’s planning system and its intricacies, to a wide cross-section of development projects. His expertise includes advice during site acquisition and project design, management of applications and negotiating successful approval outcomes with planning authorities. 

2. Kate Breen – Kate leads Affordable Development Outcomes, specialising in the development of affordable housing research, policy and precinct and site-specific planning frameworks and delivery strategies. With a strong focus on developing evidence-based and commercially viable strategies that work for all parties, Kate has developed successful approaches supporting major planning scheme amendments and permit approvals, including appearing as an expert witness at Panel. She has also worked extensively with the community housing sector on bids for government land and funding. 

3. Lucy Simms – Lucy is the Chief Commercial Officer at Women’s Property Initiatives (WPI), where she leads partnerships with developers, government, and philanthropy to deliver affordable housing for vulnerable women. With over a decade of experience in development management, Lucy brings a commercial lens to community housing transactions and an understanding of developer needs, alongside the importance of creating social cohesion within projects. 

Our expert speakers will share their insights and guide you through the process from all angles: 

• Michael will set the scene by talking through the various opportunities that the DFP offers, how to engage with the DFP and potential outcomes of incorporating affordable housing into residential developments.  

• Kate will outline what social and affordable housing is, the key elements needed to plan and deliver it, the requirements for securing planning approval, and examples of effective affordable housing strategies. 

• Lucy will round out the conversation by bringing a community housing perspective, demonstrating how collaboration with developers can drive speed and social impact, and outlining WPI’s approach to integrating affordable housing within private developments. 

Walk away with clear, actionable knowledge on how to successfully integrate affordable housing into your developments while maximising both community benefit and project outcomes.  

Date

Wednesday, 25 February 2026

Industry speaker

• Michael Henderson | Contour Consultants
• Kate Breen | Affordable Development Outcomes
• Lucy Simms | Women’s Property Initiatives

SW speaker

Sejla Kadric
Director, SW

The post Unlocking Development Potential Through Affordable Housing seminar appeared first on SW Accountants & Advisors.

With 2026 land tax assessments just around the corner, these changes bring key obligations and deadlines that warrant close attention. 

Absentee owner surcharge – notification by 15 January 

The absentee owner surcharge (AOS) is an additional land tax imposed on properties owned by absentee individuals or entities (essentially foreign owners of Victorian land). As of 2026, the AOS is a 4% surcharge on the taxable land value, levied on top of regular land tax. It applies broadly to both residential and commercial land holdings.  

15 January 2026 was the cut-off for absentee owners to notify the SRO of their status, if they were an absentee as of 31 December 2025. Every year, foreign owners must declare their absentee status by 15 January so that the SRO can apply the surcharge in the upcoming land tax assessment. If an owner fails to notify but is later identified as foreign, the SRO will back-charge the surcharge and may impose penalties for the late notification. 

It’s worth noting that exemptions from AOS are very limited. Generally, only developers undertaking substantial development projects (which provide economic benefits to Victoria) might obtain a temporary exemption from the surcharge. Passive foreign investors or landlords are unlikely to be eligible for the exemption. Therefore, affected owners should ensure they have notified the SRO on time and factor the surcharge into their investment returns. 

If you’re an absentee owner and did not yet notify for 2026, contact the SRO immediately. Although the 15 January deadline has passed, making a late notification voluntarily may help reduce penalties. 

Short stay levy – first annual returns due 30 January 2026  

The short stay levy applies to short stays in Victoria from 1 January 2025, on bookings that are less than 28 consecutive days (not including the checkout day). The levy of 7.5% of the total booking fee is to be collected and paid by either: 

The first annual short stay levy return is due on 30 January 2026, with owners, booking platforms, and tenants being required to register before lodging their first return if they have a liability. It should be noted that booking platforms do not need to register individual properties. 

Booking platforms and property owners or tenants who accepted short-stay bookings during 2025 must register for the short stay levy and submit their first annual return by 30 January 2026, provided their total booking income did not exceed $75,000. 

Providers whose short-stay accommodation bookings generated more than $75,000 in 2025 are required to lodge quarterly returns, with the next instalment due by 30 April 2026. 

Failure to register and comply with payment obligations may result in the SRO initiating recovery action for any outstanding levy amounts, along with applicable penalties. 

Vacant residential land tax – notification by 15 February & expanded scope  

VRLT is a state tax designed to discourage empty properties and increase housing supply. Since 2018 it has applied an annual tax (1% of a property’s value, increasing to 3% for long-term vacancies) on residential homes in Melbourne that were vacant for more than 6 months in the preceding year. From 1 January 2025, residential houses in regional Victoria are also subject to VRLT.   

Owners of such properties must notify the SRO each year and then pay VRLT on their land tax bill if liable. Owners of vacant residential land in 2025 are required to notify the SRO by 15 February 2026 of the property’s vacancy status. This notification is mandatory even if you believe an exemption applies (e.g. for newly built homes, holiday homes, or other exempt categories). The SRO uses these notifications to issue VRLT assessment notices for the 2026 tax year. Failure to notify the SRO by 15 February may result in penalties being applied. Owners who have already notified that they are exempt (such as under a holiday home exemption) do not need to notify the SRO again, provided their circumstances have not changed.

Perhaps the biggest change is the expansion in the scope of VRLT. From 1 January 2026, VRLT will apply to land in Metropolitan Melbourne that is capable of residential development but has remained undeveloped for at least 5 years. This will apply to land that is vacant and land with a residence that is partly built but has not been occupied. In other words, long-term ‘land banking’ will now likely attract VRLT. 

The Commissioner of State Revenue (Commissioner) has a discretion to extend this 5-year period. Broadly, the Commissioner will consider residential land as ‘not vacant’ for a tax year if construction of a residence has not commenced after five years and the owner: 

In considering whether to exercise discretion, the Commissioner may take into account factors such as site access limitations, findings related to cultural heritage, environmental or ecological constraints, extreme weather events, delays in utility connections, and ongoing planning appeals. More information on the factors considered can be found in the Government Gazette. 

Heightened SRO compliance focus in FY2026 

The SRO has significantly ramped up its compliance efforts for the 2025–26 financial year, following a year in which more than 90% of its 13,300+ investigations uncovered non-compliance, resulting in $888 million in assessed liabilities. This year, the SRO is targeting high-risk areas across land tax, vacant residential land tax, and absentee owner declarations, with a particular focus on incorrect exemption claims, undeclared absentee ownership, and failure to notify vacant or undeveloped land. 

Property owners and investors should expect increased scrutiny, especially where land is incorrectly receiving principal place of residence or primary production exemptions, or where VRLT and absentee owner surcharge notifications have not been lodged. The SRO is also closely monitoring properties claiming the holiday home exemption and land held in a trust or by foreign owners. With advanced data-matching tools, the SRO is well-positioned to detect and penalise non-compliance. Early engagement, accurate reporting, and professional advice are essential to avoid reassessments and penalties. 

How SW can help 

Navigating Victoria’s 2026 land tax environment can be complex, with new levies, expanded obligations, and heightened SRO scrutiny. SW can assist you in navigating these obligations by assessing landholdings to determine potential liabilities under the rules, ensuring all relevant notifications are submitted on time, and implementing strategies to minimise exposure to penalties and reassessments. 

Contributor

Blake Trad

The post Navigating Victoria’s 2026 land tax environment appeared first on SW Accountants & Advisors.

The Alert raises the ATO’s concerns about certain property development management agreements. These typical arrangements are used by taxpayers to segregate the development risks from the land-owning entity. TA 2026/1 is another instance of the ATO seeking to apply Part IVA which is a significant development that will have a broad impact across many property developers.

Characteristics of arrangements under review

Those property development arrangements under review, typically involve:

The ATO has concerns that the arrangements are contrived to artificially separate land ownership and development activities to gain a tax timing advantage, being:

• upfront deductions in Dev Co that would not be available to the landowner
• the repeated deferral of income recognition.

The ATO has a specific concern that the repeated utilisation of development losses can result in the economic group perpetually deferring paying tax on group profits and enabling wealth extraction.

The ATO has indicated that Part IVA anti-avoidance provisions may apply to these types of arrangements.

ATO actions

The ATO has confirmed that they will:

• publish a Practical Compliance Guideline outlining a risk framework
• engage with taxpayers that are undertaking these types of arrangements.

How SW can help

TA 2026/1 is another example of the ATO seeking to apply Part IVA to a once typical arrangement. This is a common structure used by taxpayers to segregate the development risks from the land-owning entity. Whilst we have been aware of rumblings in this area from the ATO, this is a significant development that will have a broad impact across many property developers.

SW will provide more detail once the draft Practical Compliance Guideline is released and will discuss TA 2026/1 with any impacted clients.

Our experts can assist with advising how TA 2026/1 affects your existing arrangements. We can also engage with the ATO to deal with potential disputes.

Reach out to your SW advisor for support from our team.

The post Developing trouble: ATO Alert on related party development management agreements appeared first on SW Accountants & Advisors.

Queensland introduced the Additional Foreign Acquirer Duty (AFAD) in 2016 and the Foreign Land Tax Surcharge (FLTS) in 2019 to curb speculative foreign acquisitions. While these measures were designed to protect local buyers, they inadvertently captured Australian developers using international funding, creating a prohibitive tax environment that delayed projects and discouraged investment.

Since 2016, twelve new or increased property taxes have been introduced, impacting Queensland’s competitiveness. The latest reforms aim to address these issues by reducing compliance barriers, clarifying eligibility criteria, and introducing faster approval processes, signalling a shift towards a more investment-friendly framework.

Key changes announced

Dwelling threshold reduced

One of the most significant changes is the reduction of the dwelling threshold for relief eligibility from 50 dwellings to 20 dwellings. Previously, only large-scale residential projects could access AFAD and FLTS relief, leaving mid-sized developments exposed to additional costs.

By lowering the threshold, the government has opened the door for smaller projects, such as townhouse complexes and boutique apartment developments, to qualify for relief. This change is expected to stimulate housing supply and encourage more diverse development across Queensland.

Pre-approval process

The introduction of a pre-approval process marks a major improvement in how relief is administered. Under the old system, developers could only apply for relief after acquiring land, creating uncertainty and financial risk. The new process allows developers to secure approval before acquisition, giving them confidence to proceed with transactions and improving access to finance. This proactive approach reduces risk and supports better project planning.

Published service standards

To complement the pre-approval process, the Queensland Revenue Office (QRO) has introduced published service standards for processing applications. Frequent applicants and renewals will be processed within 30 working days, while new applicants will receive decisions within 60 working days. These timelines provide transparency and predictability, addressing long-standing concerns about delays and improving investor confidence.

Broader recognition of group entities

The reforms also broaden eligibility by recognising the activity of the relevant corporate group of which the entity is a group entity in determining if the entity has made a significant contribution or is a significant contributor. Many projects involve joint ventures or complex corporate arrangements, and under the new rules, these structures will be considered when determining if the exemption criteria is satisfied.

Five year averaged significant contributor test

For landholders seeking relief from the FLTS, a new five-year averaged significant contributor test has been introduced. This test ensures that entities demonstrating sustained economic contribution to Queensland can access relief, rewarding long-term investment rather than short-term activity. It encourages stability and ongoing engagement with the state’s economy.

Under this administrative arrangement, a significant contribution means that an entity (or relevant corporate group) has:

• Current commercial activities, or committed future commercial activities over a 12-month period from the liability date, at the requisite contribution level or
• Commercial activities approved by the Commissioner.

In this context, requisite contribution level means employing 75 or more full-time equivalent employees in Queensland (excluding labour hire or contractors) or incurring expenditure in Queensland of more than $20 million annually (comprising Queensland payroll tax and land tax liabilities, Queensland goods and services and wages paid to Queensland residents).

In relation to commercial activities approved by the Commissioner, the Commissioner will have regard to:

• the commercial activity in the context of population size, demographics, and industry maturity in the area
• the nature of the area and/or industry
• the contribution the activity makes to the area and/or industry (for example, whether the entity is a major employer in the area or whether the industry would exist without the presence of the entity) and
• any other relevant factors.

Clearer criteria and transitional arrangements

Finally, the reforms provide clearer eligibility criteria and transitional arrangements for entities already receiving relief. This removes ambiguity and ensures continuity for ongoing projects, reducing compliance risk and supporting developers during the transition to the new framework.

Rulings

To implement these reforms, the QRO has issued the following updated rulings:

• Public Ruling GEN012.1 Administrative arrangement—exemption from AFAD and land tax foreign surcharge for residential land developers
• Public Ruling LTA000.6.1 Administrative arrangement—exemption from land tax foreign surcharge for landholders undertaking commercial activities that make a significant contribution
• Public Ruling DA000.15.5 Additional foreign acquirer duty—ex gratia for significant development for liabilities arising before 15 December 2025
• Public Ruling LTA000.4.4 Guidelines for ex gratia relief from the land tax foreign surcharge for liabilities arising before 30 June 2026

How SW can help

Navigating these new rules can be complex, especially with multiple rulings and transitional arrangements.

We assist developers and investors by:

• Providing tailored advice on eligibility under the new AFAD and FLTS relief framework.
• Preparing and lodging pre-approval applications with QRO to secure relief before acquisition.
• Structuring projects and ownership arrangements to maximise compliance and minimise tax exposure.

Contributors

Robert Parker – Consulting Director, Tax

Blake Trad – Consultant, Tax

The post QLD Foreign Tax Reforms: Merry Xmas for Queensland Developers appeared first on SW Accountants & Advisors.

The ruling, titled Income tax: rental property income and deductions for individuals who are not in business (‘the ruling’), along with two practical guidance guides, replaces the longstanding IT 2167. It targets non-business rental properties, especially holiday homes, short-term rentals, and mixed-use properties.  

Key points from the draft: 

We provide further commentary on this matter below. 

Assessable rental income 

Any amounts derived from rent, lease premiums, licence fees or other similar charges are assessable income for a rental property. This includes amounts received through an agent, a sharing or online platform such as Airbnb, or directly from a tenant. 

Any of the above amounts received will form part of the property owner’s assessable income, even if the income is not received at commercial arm’s length rates.  

Certain amounts received under family arrangements, such as the payment of board to a parent, may not be treated as assessable income. 

Deductions and apportionment of expenses 

Property owners can claim deductions for losses or outgoings to the extent that they are incurred in gaining or producing assessable income from the property, provided they are not capital, of a private or domestic nature, or prevented from being deductible under another legislation. 

As such, property owners may only claim deductions to the effect that it relates to their assessable rental income. For mixed-use properties, where the property owner is also using it for personal or family purposes, then deductions must be appropriately apportioned to account for this private use. 

PCG 2025/D6 provides guidance and factors when apportioning costs, including: 

Certain costs such as advertising, property agent fees, and cleaning fees are fully deductible and do not require apportionment. 

Holiday homes – increased stringency 

The most notable change in the draft ruling is the ATO’s increased stringency on holiday homes.  

A ‘holiday home’ refers to a property that is used, or held for use, for a person’s holidays or recreation, or for the holidays or recreation of their family members and friends, either for no rent or at a reduced rate. 

Where a person’s rental property is a holiday home, the ATO may regard the property as a ‘leisure facility’ for the purposes of s26-50 of the ITAA 1997 and deny certain deductions such as land tax or council rates. This is to prevent taxpayers from obtaining a tax subsidy for expenditure on their own recreation.  

However, the ruling provides an exception to this where the holiday home is used, or held for use, mainly to produce assessable income in the form of rents, lease premiums, licence fees or similar charges.  

PCG 2025/D7 provides a risk framework and factors to consider when determining if the property is used, or held for use, mainly to produce assessable income, including: 

Transitional relief 

The ATO has allowed a transitional period, during which they will not allocate compliance resources to review whether properties fall under s26-50 before 1 July 2026, provided the relevant expenses arise from arrangements entered into before 12 November 2025.

How SW can help 

Property owners should be aware that the ATO will have increased scrutiny on rental deductions.  

SW can help assess your property’s position under the draft ruling, review your usage patterns, ensure deductions are correctly apportioned, and provide practical guidance on what evidence and apportionment methods you’ll need going forward.  

Our team can provide tailored guidance and help you understand how these changes may affect your properties and tax obligations, ensuring you stay well-prepared and informed. 

Contributor

Dylan Kelly

The post Rental properties and holiday homes: ATO’s new draft ruling appeared first on SW Accountants & Advisors.

The Victorian Government has released Treasurer’s guidelines outlining limited circumstances where the Commissioner may exercise discretion to exempt landowners from VRLT if construction has not commenced due to acceptable reasons. 

What is VRLT and how has it evolved? 

Vacant Residential Land Tax is an annual tax which was introduced by the Victorian Government from 1 January 2018 to address the lack of housing supply by encouraging landowners to make their vacant residential properties available for purchase or rent.   

From 1 January 2018 to 31 December 2024, VRLT only applied to vacant residential land in Melbourne’s inner and middle suburbs. The residential land was vacant where the land was not used or occupied for more than 6 months in the year. VRLT was calculated as an annual tax of 1% of the capital improved value (CIV) of the land.  

Effective 1 January 2025, the State Taxation Acts and Other Acts Amendment Bill 2023 introduced: 

There are also a number of exemptions from VRLT available to taxpayers. Where the property is exempt from land tax, it is also exempt from VRLT. Several specific exemptions are also available, namely for holiday homes, work accommodations and new residential land.  

Upcoming changes effective 1 January 2026 

From 1 January 2026, the Victorian Government has further expanded the scope of VRLT, now applying to unimproved land in metropolitan Melbourne if it is: 

The 5-year undeveloped period applies retrospectively, so land owned since 31 December 2020 or earlier may be liable to VRLT.  

Landowners may apply to the Commissioner to exercise his discretion to extend the 5-year period where construction has not commenced for acceptable reasons. The Guidelines released by the Treasurer outline the acceptable reasons.  

Recent guidelines – construction delays 

On 17 November 2025, the Victorian Government released guidelines outlining the acceptable circumstances where construction of a residence on the land has not yet commenced. 

Residential land on which construction of a residence has not commenced after five years is considered not vacant at the Commissioner’s discretion, if a landowner: 

The guidelines set out circumstances where land is not considered vacant, including: 

The Guidelines state that the following factors would not generally support a favourable decision by the Commissioner: 

This is unhelpful for many developers, as these challenges present barriers to progressing the development of the land. 

How SW can help 

If you own land which comes under the scope of VRLT, you must notify the State Revenue Office (SRO) by 15 February 2026. 

Our experts at SW can assist with reviewing your circumstances, advising on VRLT implications, supporting VRLT reviews, and managing applications for exemptions and the Commissioner’s discretion. For support, please reach out to your SW advisor. Our team is ready to help you navigate these changes with confidence. 

Contributor

Dylan Kelly

The post Unimproved land subject to Vacant Residential Land Tax from 1 January 2026 appeared first on SW Accountants & Advisors.