At the Institute of Financial Professionals Australia (IFPA), we are committed to keeping members informed as the tax framework continues to evolve. Our focus is on cutting through the noise to highlight the changes that matter most for you and your clients.
Below is a concise summary of the key tax developments from 2025. While not exhaustive, it captures the most significant issues and reforms shaping the current tax landscape, providing a practical snapshot of what advisers and practitioners need to know.
High Court to rule on whether UPEs owing to corporate beneficiaries are loans for Division 7A purposes
In February 2025 the Full Federal Court in the Bendel case unanimously upheld an earlier AAT decision that for something to be a loan, there needs to be a requirement to repay an amount. The Commissioner has since taken the matter to the High Court, which held a hearing in October. A decision is expected in the first half of 2026. In the meantime, the ATO has said it will continue to apply its existing guidance material and has warned that it may apply section 100A where taxpayers seek to rely on the Full Court’s decision.
Residency issues continue to cause uncertainty
The courts and tribunals have handed down a number of tax residency decisions recently – Quy, Kirtlan, Abotomey, Evans. These cases rest on weighing up a number of subjective factors and it can be difficult for practitioners (or the Commissioner) to get the “right” answer every time. A more prescriptive regime, based on a person’s physical presence in Australia might give practitioners and their clients greater certainty. There is a Board of Taxation report on this topic that has been gathering dust for some years now.
Revised ATO approach to short term property and holiday rentals
The ATO has issued revised guidance material on the apportionment of expenses attributable to rental properties. By treating holiday rentals as leisure facilities, the Commissioner seems likely to expect owners to do more to maximise rental income than he did under his previous guidelines – see TR 2025/D1, PCG 2025/D6 and PCG 2025/D7.
Small scale land subdivision – ATO guidance
The ATO has released some guidance material that includes a number of examples that illustrate its views about the tax consequences (income tax and GST) of the sale of land, including small scale subdivisions.
The contractor/employee divide continues to throw up challenges
Getting the distinction wrong can be quite expensive in terms of super guarantee charges and PAYG obligations, particularly where the relationship is not reduced to writing. In the Hatfield Plumbing case a plumber was found by the Federal Court not to be an employee, thereby overturning an earlier AAT decision to the contrary.
IAWO extended to 30 June 2026
The government seems determined to drip feed the $20,000 Instant Asset Write-Off (IAWO) into the tax system on a year-by-year basis, perhaps seeing the annual extension as a positive announcable for small business. Calls to make it a permanent feature of the capital allowance rules and to increase the thresholds have gone unheeded, although we at least have certainty about the 30 June 2026 date.
Expanded TASA Code of Professional Conduct now live
Not letting a crisis go to waste, the government has leveraged off the PwC scandal to significantly bolster the TASA Code of Professional Conduct. The revised Code, which we and others have argued does nothing the existing Code didn’t already capture, is highly prescriptive and has been in place for smaller practices (fewer than 100 employees) since 1 July 2025.
The TPB has recently announced that there has been a modest level of reporting, including some self-reporting, although that may change under the Board’s enhanced compliance program.
Non-deductible GIC and SIC
GIC and SIC are no longer deductible as from 1 July 2025. This puts GIC and SIC on the same footing as other non-deductible interest – to be avoided wherever possible.
Productivity Roundtable
September’s Productivity Roundtable ended up being at least as much about tax reform as it was about productivity. It was attended by the usual suspects, who for the most part put forward their well-worn ideas for tax reform, plus a few new ones. The government has announced that going forward it will look at the tax system through the lens of intergenerational fairness, which will mean different things to different people. Expect a few tweaks here and there in the May 2026 Budget, which the government will label as tax reform.
End of income splitting and retention for PSEs conducting a PSB?
The ATO has finalised its draft guidance on the potential application of Part IVA to income splitting and profit retention in a private services business (PSB) environment as PCG 2025/5. The final PCG gives examples of low risk and high risk scenarios, with the strong message being that Part IVA could be deployed where taxpayers engage in income splitting or profit retention. Consistent with our submission, the finalised PCG will not have retrospective application, provided taxpayers get their house in order by 30 June 2027.
AML and CTF Tranche 2 measures take effect on 1 July 2026
The anti-money laundering (AML) and counter-terrorism financing (CTF) regulations will be broadened to take in designated services provided by accountants (among other professions) as from 1 July 2026. Affected entities will need to enroll with AUSTRAC and implement an AML/CTF program, conduct client due diligence and report suspicious transactions.
Hall’s case – occupancy costs and traveling between places of work
The Commissioner has appealed against a Tribunal decision allowing the taxpayer, a sports presenter and producer employed by the ABC in Melbourne, a proportionate deduction for his rental costs as well as a cents per kilometre deduction for his travel between home and the ABC studios in Melbourne.
These types of claims have not received much judicial attention, especially not in a COVID environment, and the outcome of the appeal may have broader ramifications.
Shaw’s case – long distance truck driver and meal expenses
The Commissioner has also appealed against an ART decision where the Tribunal accepted the Applicant had incurred meal expenditure up to the Commissioner’s published reasonable amounts, thereby circumventing the Commissioner’s somewhat absurd argument that you have to have written evidence to prove that you don’t have to have written evidence of meals expenditure.
