29 September 2025 to 3 October 2025
Weekly Bulletin Contents
TAX
Monday 29 September 2025
Taxpayer fails to show assessments excessive
A taxpayer who had been issued with amended assessments that increased her taxable income over a 4 year period from some $84,000 to some $1.6m and which led to an increase in her taxation liability of more than $1.4m (including penalties) has failed to discharge the onus that the assessments were excessive. Among other things, the taxpayer argued that any unexplained deposits in her accounts had been made by her husband who was engaged in a range of business activities and who also directed the family finances and controlled her access to her accounts. In dismissing her application, the ARTA noted various matters including that a company involved in the matter was owned by her. It also said that her failure to keep the basic records or appreciate that money drawn from relevant accounts and used for personal purposes might be taxable showed a gross indifference to the “operation of a taxation law”. (Ahmad and FCT (Taxation) [2025] ARTA 1907, 26 September 2025)
Taxpayer fails to have matter reinstated
A taxpayer who failed to meet Tribunal directions within a reasonable time and who had his proceedings dismissed under s 100 of the Administrative Tribunal Act 2024 has now been unsuccessful in his application for reinstatement of the matter under s 102 of the matter. In dismissing the matter the Tribunal said, among other things, that the history of the matter and the taxpayer’s submissions at the reinstatement hearing gave it “absolutely no confidence” that any reheard matter would be progressed appropriately. (NYKS and FCT (Practice and procedure) [2025] ARTA 1874, 24 September 2025)
Directions: Commonwealth entities notionally liable to pay certain taxes
The A New Tax System (GST, Luxury Car Tax and Wine Tax) Directions 2025 has been made. It continues to give effect to the Parliament’s long standing intention that Commonwealth entities are to be notionally liable to pay certain taxes. The Directions maintain existing arrangements to support the notional application of certain taxes to the Commonwealth and untaxable Commonwealth entities. This ensures that the Commonwealth and untaxable Commonwealth entities do not receive a comparative advantage compared to other entities that have a legal liability under the GST, LCT and WET Acts.
Tuesday 30 September 2025
Taxpayer liable for SGC
The ART has confirmed that a taxpayer was liable for superannuation guarantee charge in respect of payments made to his former spouse when she was employed as his personal assistant. The taxpayer sought to claimed that salary or wages were not paid to his former spouse during the relevant period or any amount paid was below the relevant threshold. However, the ART found, among other things, that the taxpayer’s witness evidence was inadequate in that it only raised the question of whether the salary and wages were actually paid, as opposed to showing that they were not paid on the balance of probabilities. (PCQT and FCT (Taxation) [2025] ARTA 1873, 19 September 2025)
Board of Taxation: Red Tape Reduction Review
The Board of Taxation has advised that it will undertake a review on how compliance and regulation on business taxpayers could possibly be reduced through changes in business tax law and administration. The review will focus on areas where there are opportunities for red tape reduction that are substantial, material, measurable and directly support productivity. The Board will provide more information on how to be involved in consultations soon.
GST-free supply of small packs of analgesics
The GST-free Supply (Drugs and Medicinal Preparations) Determination 2025 has been made. It continues the grant of GST-free status to small packs of analgesics (25 tablets or less). The 2025 Determination is substantially the same as the previous 2015 instrument (which is due to sunset). The new instrument applies from 1 October 2025.
Wednesday 1 October 2025
Commissioner’s High Court appeal in Bendel case listed for hearing
Now that the parties involved in the Bendel case have lodged their written submissions and responses, the appeal has been listed for a one-day hearing in Canberra on 14 October. Members will recall the dispute centers on the question of whether a loan for the purposes of s109D(3) ITAA 1936 includes a situation where a trustee has resolved to distribute an amount to a beneficiary, but the beneficiary consents or acquiesces to the amount being retained by the trustee and used for the purposes of the trust.
The taxpayer has so far been successful, with both the AAT and the Full Federal Court answering the question in the negative. For something to be a loan, there needs to be a requirement to repay an amount. The High Court’s decision will be of great interest to members and their small business clients in terms of what it means for the operation of Division 7A.
There should be a decision by early 2026, well ahead of the time for making trust resolutions for 2025-26.
Final Budget Outcome surprises on the upside (again)
The Final Budget Outcome numbers for 2024-25 were released by the Treasurer and the Finance Minister earlier this week, showing an $18 billion bottom line improvement over the $28 billion deficit forecast in the Pre-election Economic and Fiscal Outlook back in March. It’s remarkable how the fiscal news always seems to improve the closer we get to the final outcome.
A final deficit of $10 billion might seem like a big amount, but it represents just over one per cent of the government’s total outlays of $762 billion. And it does reflect a much better fiscal position than that facing many other countries.
The $18 billion improvement comprises a $4.6 billion spending shortfall (mainly timing changes relating to various State programs) and increased tax receipts of $13.1 billion (from PAYG collections and company tax). Our over-reliance on personal and company income tax remains a worrying feature of Australia’s tax system. A couple of $5 a week personal tax cuts are unlikely to make much of a dent in bracket creep, which keeps pushing up PAYG collections.
Thursday 2 October 2025
Another unsuccessful attempt to challenge default assessments
The Administrative Review Tribunal has shut down a taxpayer’s attempt to overturn default assessments raised by the Commissioner.
The Applicant, Mr Olow, ran a child care business in western Sydney from 2013 to 2016 through a corporate entity that was wholly controlled by him. When the Commissioner audited the 2015 and 2016 income years he uncovered discrepancies totaling more than $1 million in the form of unexplained cash withdrawals from the company plus what appeared to be private expenses for the benefit of Mr Olow that were paid for by the company, including school fees, food, clothing items, private travel and traffic fines. Amended assessments and penalties increased his tax debt by $780,000.
While admitting to the Tribunal that his “financial records are inadequate, as to a large extent are his recollections” the Applicant sought to confine his arguments to his assertion that most of the cash withdrawals were made to pay wages to family members. Those wages were disclosed as assessable income by the family members and were subject to PAYG withholding that has been remitted to the ATO. Assessing those amounts to Mr Olow would therefore result in double taxation, it was argued.
Relying on well-established case law, the Tribunal ruled that it is impermissible to pick apart a default assessment in this way. Mr Olow needed to establish what his taxable income should have been for the years in question, which was something he admitted he couldn’t do. The objection decisions upholding the default assessments were accordingly confirmed.
Olow v Commissioner of Taxation [2025] ARTA 1924 (30 September 2025)
Barth appeals against denial of input tax credits
The taxpayer in The Trustee for the Barth Family Trust v C of T [2025] ARTA 1558 (28 August 2025) has appealed to the Federal Court against the ART’s decision that it was not entitled to input tax credits for its creditable acquisitions where its GST returns were lodged more than four years after their due date.
Among the taxpayer’s arguments before the Tribunal was a claim that the Commissioner had allowed further time for lodgement in communicating with Mrs Barth within the four-year statutory period, meaning that the GST returns were not in fact late. The Tribunal did not accept that argument as it was inconsistent with what the ATO had actually said in an email and an SMS message sent to Mrs Barth.
Friday 3 October 2025
Have your say: BASAAG membership open to BAS agents
The ATO is accepting expressions of interest for registered BAS agents to join the BAS Agent Advisory group (BASAAG). Applicants should have at least 5 years’ experience as a registered BAS agent to become a member of the BAS Agent Advisory Group (BASAAG).
To submit an EOI:
- complete the BASAAG membership EOI application form
- submit with your curriculum vitae or LinkedIn profile to [email protected] with the subject line ‘EOI – BASAAG membership’.
Nominations close 21 October 2025 and the ATO expects to notify applicants in November 2025.
Institute of Financial Professionals Australia (IFPA) comment
The BASAAG focuses on maintaining relationships with key areas of the community and business and provides an opportunity for strategic discussion to develop and improve the effective running of Australia’s tax, superannuation and registry systems.
ATO publishes Corporate Tax Transparency report for 2023–24
The ATO has published its annual Corporate tax transparency (CTT) report. It shows 4,110 entities lodged returns with total income above $100 million in 2023–24.
Across the population, total income rose to $3,278.8b (+4.5%), taxable income dipped to $365.5b (–3.8%), and tax payable fell to $95.7b (–2.3%).
Ownership shares were 44.2% Australian private, 41.7% foreign-owned and 14.2% Australian public. In resources, petroleum resource rent tax (PRRT) fell 20.6% to $1.48b amid lower oil prices and production.
GIC and SIC rates – 1 October to 31 December 2025
The ATO has released the general interest charge (GIC) and shortfall interest charge (SIC) rates for October to December 2025, effective from 1 October 2025 to 31 December 2025, as announced on 23 September 2025.
| Annual | Daily (compounding) |
GIC | 10.61% | 0.02906849% |
SIC | 6.61% | 0.01810959% |
SUPER & FINANCIAL SERVICES
ATO finalises NALI updates – what advisers need to know
The ATO has completed revisions to LCR 2021/2 and TR 2010/1 to reflect the 2024 changes to non-arm’s length income (NALI) provisions under s295-550 ITAA 1997.
Key points include:
LCR 2021/2
- Applies from the 2018–19 year
- For SMSFs with NALI, taxable income is split into:
- A ‘low tax component’ (taxed at 15%), and
- A ‘non-arm’s length component’ (NALC) (taxed at 45%).
- A SMSF’s NALC is capped at the lesser of:
- The sum of:
- Any NALI amount (other than from a general expense shortfall) less any deductions attributable to that income, and
- Any NALI as a result of a general expense shortfall (calculated using the two times approach), and
- The fund’s taxable income for the year less any assessable contributions and any deductions attributable to those contributions.
- The sum of:
- In simple terms, if a fund’s NALI is greater than its taxable income, then the fund’s taxable income will be taxed at 45% as the lesser of the two apply. Note, the NALC cap applies to both general and specific expenses.
- A reminder on general vs specific expenses:
- A general expense shortfall is quantified as two times the difference between the actual amount paid and an arm’s length amount. That is, instead of all fund income being taxed as NALI at 45%, tax applies only to twice the shortfall amount. For example, if the shortfall amount was $2,000, then the fund’s NALI will be $4,000 (ie, $2,000 x 2).
- Specific expenses (eg, costs linked to acquiring a particular asset) are treated more harshly. All income from that asset (including capital gains when sold) will be fully taxed at 45%.
- Large APRA-regulated funds are outside the NALE rules, but other NALI provisions still apply.
TR 2010/1
- Clarifies how the amended NALI rules interact with contribution rules.
- In-specie contributions must be recorded at market value in the fund’s accounts and member records.
- When an asset is purchased under a sale contract for less than its market value, the discount is treated as NALE rather than a contribution. This is because the fund acquires only the asset itself – the ‘shortfall’ is not a separate asset and therefore cannot be counted as a contribution. Since the purchase is at undervalue, the NALE rules apply which means all income derived from the asset (ie, rent, capital gains on disposal, etc) is taxed as NALI at 45%.
GIC and SIC rates – 1 October to 31 October 2025
The ATO has released the general interest charge (GIC) and shortfall interest charge (SIC) rates for October to December 2025, effective from 1 October 2025 to 31 December 2025, as announced on 23 September 2025.
| Annual | Daily (compounding) |
GIC | 10.61% | 0.02906849% |
SIC | 6.61% | 0.01810959% |
Legacy pension amnesty
The Department of Social Services has released two new determinations about legacy income streams: the Social Security (Asset-test Exempt Income Stream Guidelines) Determination 2025 and the Social Security (Asset-test Exempt Income Streams – Legacy Product) Determination 2025.
When the five-year commutation window started on 7 December 2024, it accidentally knocked some existing legacy income streams out of asset-test exemption. The legislation did not allow commutations for these products in that way, so the asset-test exemption no longer applied.
The new determinations let the Secretary confirm that legacy lifetime income streams which were 50% or 100% exempt immediately before 7 December 2024 will keep their asset-test exemption, provided they meet all the other rules.
ASIC’s review of super reports and audits
ASIC has reviewed how APRA-regulated super funds, known as registrable superannuation entities (RSEs), have reported and audited their finances for 2024–25. This was the first year these funds had to lodge audited financial reports under Chapter 2M of the Corporations Act. The review covered 60 fund reports and five audit files, with a close look at how investments were valued and how expenses were shown.
ASIC findings on superannuation funds
Valuation issues:
- Some funds relied on external managers’ prices for unlisted investments without sufficient year-end verification.
- Inconsistent valuation method explanations, hindering report comparability and member understanding.
Expense reporting:
- Sponsorships and advertising often not disclosed separately.
- Funds urged to prioritise member-relevant expenses, not just dollar amounts, for clearer cost transparency.
ASIC audit observations
Audit quality:
- Mixed audit quality; materiality often set too high.
- Insufficient evidence collected for hard-to-price assets.
- Weak testing of external managers’ methods and data.
- ASIC provided feedback to firms and will continue monitoring audits.
ASIC will maintain oversight in 2025–26, collaborate with APRA to enhance audit practices, and may enforce actions for significant breaches.