19 January 2026 to 23 January 2026

TAX

Monday 19 January 2026

Our submission on Division 296 tax draft legislation

On 16 January 2026, the Institute of Financial Professionals Australia (IFPA) lodged its submission on the Better Targeted Superannuation Concessions (ie, Division 296 tax) exposure draft legislation.

In its submission, IFPA argues the proposal in its current form still has flaws that will produce inequitable and unworkable outcomes if legislated.

Key concerns raised in the submission include:

Only closing total superannuation balance (TSB) should be used for Division 296 purposes. The “higher of two balances” approach produces unfair outcomes by taxing notional balances rather than actual circumstance and must be adjusted to account for losses, insurance proceeds, excess contributions and other events outside a member’s control.
Death-related outcomes are unworkable and inequitable. The inclusion of members in the year they die can impose tax after assets have been distributed and shift liabilities to estates and beneficiaries. A clear exemption where a member dies during an income year is required.
The cost base reset is fundamentally flawed. The all-or-nothing election, lack of portability, exclusion of indirect assets and failure to properly exclude pre-30 June 2026 gains undermine the policy intent and risk taxing historical gains, particularly for larger balances.
Administrative settings will undermine implementation. Variable SMSF tax return due dates may impact cost base election timing, along with misaligned payment and release authority timeframes, and unresolved earnings attribution issues all create unnecessary compliance risk and uncertainty, requiring legislative amendment and clear guidance.

Further details regarding these issues and our recommended amendments can be found in our submission here.

ATO: DPOs being used to strengthen “payment performance”

The ATO has advised that it is actively using departure prohibition orders (DPOs) as part of a broader shift towards strengthening payment performance and debt collection. Since July 2025, the ATO says it has issued 21 DPOs, more than the total number issued in the financial year ended 30 June 2025. Taxpayers who have accumulated significant tax debts that they have the means to pay, and who take deliberate steps to avoid paying, can expect to have overseas travel plans disrupted by the ATO.

CGT: Market value of interest not less than agreed sale price

The Full Federal court has unanimously dismissed the taxpayer’s appeal from the decision in Kilgour v FCT [2024] FCA 687 in which the Federal court ruled that market value substitution rule for capital proceeds (per s116-30 of the ITAA 1997) did not apply to her 20% interest in a gambling company that was sold to a third party for $31m. As a result, the taxpayer was found not to have satisfied the $6m MNAV test for the purposes of accessing the CGT small business concessions in respect of the gain she made on the sale of her interest. Broadly, the taxpayer argued that the market value of her 20% minority interest was less than 20% of the overall agreed sale price of $31m because, if her interest had been sold separately, it would have been sold at a lesser value (as opposed to the greater value paid by the purchaser for the benefit of acquiring 100% of the interests in the company). However, the Full Court ruled that the Federal Court at first instance had not erred in rejecting this argument. The Full Court also ruled that the taxpayer should be refused leave to raise a new argument – namely, that the market value of the entire holding should be assessed at $24m – such that the taxpayer’s 20% holding should be valued at $4.8m. (Kilgour v FCT [2025] FCAFC 183, 12 December 2025)

Tax agent de-registration reduced from 2 years to 18 months

The ART has confirmed the decision of the Tax Practitioners Board to terminate the registrations of a tax agent and his company for various breaches of the Code of Professional Conduct. This included a lack of care in relation to the lodgment of tax returns of 2 clients and making false and misleading statements in relation to some of his own tax affairs in respect of a family trust. However, the ART reduced the period of deregistration from 2 years to 18 months due to mitigating personal circumstances. (Jeff Lunn and Gregoriades Sofocleous & Associates Pty Ltd v Tax Practitioners Board [2025] ARTA 2654, 9 December 2025)

PS LA 2026/1 SMSFs: education directions for contraventions

The ATO has released PS LA 2026/1 Self-managed superannuation funds – education directions for contraventions of the Superannuation Industry (Supervision) Act 1993. It sets out what an ATO officer needs to consider when deciding whether to give a trustee, or a director of a corporate trustee of a SMSF, an education direction under s 160 of the Superannuation Industry (Supervision) Act 1993 (SISA) – which provides a range of compliance options to deal with conduct which has resulted in contraventions of the SISA or the Superannuation Industry (Supervision) Regulations 1994. One such option is to give an education direction. Doing so is appropriate in cases where the person’s lack of knowledge or understanding of their obligations contributed to the contraventions.

GST: Partial success – amount of input tax credits to be reconsidered

The ART has ruled that a taxpayer carried on a dog breeding “enterprise” for GST purposes and therefore was entitled to claim relevant input tax credits. However, the issue of the amount of input tax credits that could be claimed was remitted to the ATO for further consideration given its finding that the taxpayer’s reconstructed records (following a flood) were insufficient to substantiate his claims and that input tax credits could not be claimed for food and other consumables that were insufficiently evidenced as having any connection with any enterprise carried on by the taxpayer. In addition, the ART agreed with the Commissioner’s decision to reduce input tax credits claimed for the acquisition of an investment property. Furthermore, the ART found that the taxpayer had not met his burden of proof to demonstrate that the penalty for recklessness was inappropriately imposed. Finally, the ART again warned self-represented taxpayers about using AI to find supporting material as in this case it found irrelevant cases and cases that did not exist! (Smith and FCT (Taxation) [2026] ARTA 25, 12 January 2026)

Draft amendments re closely‑held trusts report beneficiary TFNs

The Government has released draft amendments to streamlines how closely‑held trusts report beneficiary tax file numbers (TFNs). The draft amendments removes reporting on a separate form. Instead, trustees must report TFNs of presently‑entitled beneficiaries on the trust’s income tax return. These changes will enhance the trust reporting system’s prefill capabilities, and supports the ATOs current system changes. Comments due 1 Feb 2026.

Tuesday 20 january 2026

No stay of 4 year de-registration of tax-agents

The ART has refused the application of a tax agent and his company for a stay of the decision to terminate their registration for 4 years pending the determination of application for special leave to appeal to the High Court. The Tax Practitioners Board had investigated the tax agent and his company (and subsequently terminated their registration) following findings by the Supreme Court of Victoria that they had: breached their fiduciary duties to their former clients; wrongfully used confidential information; and engaged in dishonest and fraudulent conduct. The ART found that having weighed all the relevant factors that it was not satisfied that there were compelling reasons why it should exercise its discretion in favour of the applicants. In particular, it found that the adverse consequences for the TPB and the public interest weighed strongly against the grant of a stay. (Mulcahy & Co Accounting Services Pty Ltd and Tax Practitioners Board [2026] ARTA 2, 2 January 2026)

Taxpayer fails to discharge onus of proving assessments excessive

The AAT has ruled that a taxpayer failed to discharge the onus of proving that assessments issued to him for 5 income years were excessive. The assessments were made in respect of unexplained bank deposits of some $4m which the ATO assessed as undisclosed rental income, employment income and distributions from various companies and trusts associated with the taxpayer. The taxpayer claimed that the deposits were loans from family and friends and that he had repaid some of them. However, the ART found that there was insufficient independent evidence that deposits were loans (or that they had been repaid) – and that his own evidence was not sufficiently reliable. It also noted that some of the loan amounts had been made through the various companies and trusts. Moreover, the ART found that he made no attempt to demonstrate what his actual taxable income was for the relevant years. The ART also found that penalties had been validly imposed for recklessness and that engaging tax agent was insufficient to demonstrate “reasonable care”. (Zhou and FCT [2026] ARTA 16, 7 January 2026)

Valuation of superannuation plans for family law purposes

The Family Law (Superannuation) Legislation Amendment (2026 Measures No. 1) Instrument 2026 has been made. Its purpose is to update family law valuation methodologies for interests in certain superannuation plans, to ensure those methodologies produce accurate and reasonable values. These updates are to add, change or remove methodologies for certain superannuation plans. The Instrument also repeals a particular information determination, which is a separate instrument that provides for the information that a trustee must provide about a superannuation interest.

PSLA updated re insolvency and restructuring

The ATO has updated Law Administration Practice Statement PS LA 2011/6 Insolvency – collection, recovery and enforcement issues for entities under external administration for a range of matters including technical accuracy and currency, and for matters to be considered when dealing with restructuring plans for a small business.

Wednesday 21 january 2026

Taxpayer Alert TA 2026/1: Contrived property development arrangements

The ATO has issued Taxpayer Alert TA 2026/1: Contrived property development arrangements between related parties that defer recognition of income and exploit tax losses. It informs taxpayers and their advisers of the ATO’s concerns about certain related-party property development arrangements involving long-term construction contracts (i.e., property development agreements spanning more than one income year) that artificially defer recognition of income. The ATO said it will also soon issue draft practical compliance guideline.

ATO: GST credits and fuel tax credits expire if not claimed within 4-years

The ATO has issued a reminder that Miscellaneous Taxation Ruling MT 2024/1 Miscellaneous tax: time limits for claiming an input tax or fuel tax credit details how GST credits and fuel tax credits will expire if not claimed within the 4-year credit time limit. This is generally 4 years from the due date of the original BAS in which you could have claimed them. However, the ATO said that lodging an amendment request or voluntary disclosure doesn’t preserve your credit entitlements. The ATO said it needs to process your amendment and include it in your assessment within the 4-year credit time limit, otherwise the credits expire.

Updated Practice statements re Australian Business Register

The ATO has updated Law Administration Practice Statement PS LA 2016/4: Maintaining the Australian Business Register and Law Administration Practice Statement PS LA 2016/5: The disclosure of information and documents collected by the Registrar of the Australian Business Register. Among other things, the updates include details of additional information to be entered on the Register.

VIC: Vacant residential land tax notifications due soon

The Victorian State Revenue Office has advised that land holders must notify it by 15 February 2026 if they own certain residential land in Victoria that was vacant in 2025. If a notification has been made in the past, landowners will only need to make a new one if their circumstances have changed.

Thursday 22 january 2026

No trust over property – transfer generates tax consequences

The taxpayers (an individual, Mr R, and his company, TCR) have been partially successful in review of objection decisions made by the Commissioner concerning transactions involving the purchase, subdivision, development of land culminating in the transfer of a developed residential property to Mr R for $4.12m. The central dispute concerned whether TCR held the property on trust for Mr R from the time of its acquisition in 2013 and that of the correct tax and GST consequences of the transfer. The ART held that no trust existed in favour of Mr R over the property and that TCR was both legal and beneficial owner until the formal transfer to Mr R. It also found Mr R had not established that the property was his main residence, and that in any event the exemption was only available if the home was owned by an individual, not a trust. However, the ART preferred the taxpayers’ valuation evidence ($2.25 m) over the ATO’s reliance on the actual transfer price ($4.12m), with the effect that no deemed dividend arose under Div 7A on the transfer of the property by TCR to him and that GST payable by TCR was calculated on this lower value. (Robinson and FCT (Taxation and business) [2026] ARTA 50,16 January 2026)

Firearms surrender payments not assessable: Gun reform Bill

The Combatting Antisemitism, Hate and Extremism (Firearms and Customs Laws) Bill 2026 has been passed by Parliament and awaits Royal Assent. For tax purposes, it contains amendments that provide compensation payments received under the new firearms surrender arrangements under the Bill will not be assessable income. It also contains customs-related amendments to, among other things, prohibit the importation and exportation of prohibited extremist material.

ATO reminder: Super guarantee payments due 28 January

The ATO has issued a reminder to employers that if they have eligible workers, they need to make sure they pay their SG contributions in full, on time, and to the right fund by 28 January to avoid penalties and interest. For this payment to be considered paid on time it needs to reach the super fund by the quarterly due date. The ATO also said that if you currently use the Small Business Super Clearing House (SBSCH), it will close permanently on 1 July 2026. Don’t wait until the last minute – transition to an alternative service.

Friday 23 january 2026

ATO: Changes to interest and FTL penalty remission requests

The ATO has advised that from Thursday 22 January 2026 you’ll need to submit requests for remissions of general interest charge (GIC), shortfall interest charge (SIC) and FTL penalty using the relevant remission application form. In this regard, the ATO has also released information on How to request a remission of interest and failure to lodge penalties. It contains information on the following matters: Considerations for remission; Request a remission; Online services; and, Outcome of your request.

Vic State Revenue: January 2026 bushfires

The Victorian State Revenue has advised that if you are a Victorian taxpayer impacted by the January bushfires who has questions or concerns about their state tax obligations, please contact them on 13 21 61 to discuss your circumstances.

SUPER & FINANCIAL SERVICES

Division 296 design issues continue to emerge

Draft legislation for the proposed Division 296 tax exposes several technical and administrative issues raising questions about how the measure will operate in practice for affected members, funds and estates.

Balance measurement may produce unintended outcomes

One key issue is the proposal to determine Division 296 exposure using the higher of a member’s opening or closing total superannuation balance (TSB). This approach departs from earlier designs that relied solely on the closing balance. In some circumstances, members whose balances fall during the year due to market losses, insurance claims or other events outside their control could still be assessed by reference to a higher opening balance that no longer reflects their financial position. This may result in tax being calculated on notional rather than actual wealth.

Death-related outcomes remain unclear

The treatment of members who die during an income year also presents practical challenges. Under the current draft, deceased members may still be assessed for Division 296 in later years, even where superannuation benefits have already been paid out and estates fully administered. This creates the risk of tax liabilities arising after assets have been distributed, potentially shifting the burden to executors or beneficiaries who did not receive the superannuation benefits. The interaction with death benefit pensions may also result in Division 296 effectively applying twice on the same underlying balance.

Cost base reset raises equity and complexity concerns

The proposed cost base reset mechanism, intended to limit the taxation of pre-commencement gains, is structured as an all-or-nothing election applying at the fund level. Members cannot selectively reset individual assets that may benefit from the reset and retain the original cost base of other assets with a capital loss.

Applying the cost base reset on a fund level rather than at an asset level means members are locked in to their fund and will lose the CGT relief if assets are transferred to a new fund.

Administration and timing issues for members and funds

The draft legislation also has administration issues, such as:

mismatched timeframes between Division 296 payment dates and the ability to release amounts from super to pay the tax
unresolved issues around the attribution of earnings between members
uncertainty in how exempt current pension income and capital losses will be treated for Division 296 purposes.

As consultation continues, these issues highlight the need for more working on the design of the proposed tax.