CPA Australia Tax News

This edition was current at the time of publication.

AI and tax: 5 issues to watch

Artificial intelligence is no longer a future-facing concern for tax practitioners - it is already reshaping how businesses operate. I was reflecting on my time as a tax practitioner in the Big 4 and the emerging issues that current frameworks were simply not designed to handle. 

Here are five that deserve closer attention.

1. Permanent establishment  
AI systems can generate significant economic value in a jurisdiction without any physical presence. This challenges the traditional permanent establishment (PE) test. Where an AI model is trained offshore but deployed domestically to serve local customers, which jurisdiction has the right to tax the resulting profits? The OECD’s Pillar One work attempts to address nexus for highly digitalised businesses, but most mid-market AI deployments fall well below those thresholds.  

2. Transfer pricing 
Transfer pricing rules require profits to follow functions, assets, and risks. AI complicates each of those limbs. The training data, the algorithm, the infrastructure, and the human oversight may all sit in different entities or jurisdictions. Determining an arm’s length price for intra-group AI services or IP licences is highly subjective. The ATO is already signalling increased scrutiny of digital and intangible arrangements.  

3. Workforce displacement  
As AI automates tasks previously performed by employees, the payroll tax base narrows. A business that replaces ten staff with an AI platform reduces its payroll tax liability materially, even though its productivity and profitability may be unchanged or improved. This shift highlights the growing urgency of comprehensive tax reform to ensure the sustainability of the revenue base.

4. TPB obligations 
The Tax Practitioners Board (TPB) has been explicit in recent draft guidance Exposure Draft TPB(I) D62/2026: registered tax practitioners remain personally responsible for advice delivered or substantially assisted by AI tools, regardless of the technology used to prepare it. This raises practical questions about supervision and review. If a practitioner uses a generative AI tool to draft advice or prepare a return, what review process is sufficient to satisfy the “reasonable care” standard? 

5. GST  
The GST treatment of offshore AI services consumed by Australian businesses is not always straightforward. Many AI platforms are supplied by non-resident entities, and while the reverse-charge and non-resident supplier rules address some scenarios, the correct treatment depends on whether the recipient is registered, whether the supply is a taxable import of services, and how the platform is contractually structured. 

Second, where employers provide AI tools to employees for personal use - or where AI-generated outputs blur the line between business and personal benefit - FBT exposure may arise. As AI becomes embedded in everyday professional and personal life, the boundary between work tool and fringe benefit will be tested.

Jenny Wong
Tax Lead
CPA Australia 

 

Statutory review of Australia’s thin capitalisation reforms

The Board of Taxation has been tasked by the the government to independently review the recent changes to Australia’s thin capitalisation rules.

The Board will assess whether the amendments are operating in a manner consistent with the policy intent, which was to strengthen Australia’s thin capitalisation regime to address risks arising from the use of excessive debt deductions, informed by the OECD’s best practice guidance. 

Send your comments by 6 May to [email protected]

 

MTAS Tax Time 2026 (TT26) changes 

The ATO TPSG meeting has advised the following MTAS trust tax return form changes will be deployed in TT26: 
• Label changes to the Trust tax return to improve data quality:
– Non-PP managed investment scheme amount B1 
– Franked distribution related to investments amount U2 
– Other assessable foreign source income from a financial investment amount H1 
Note: The three labels do not need to be reported separately on the Trust income schedule of a beneficiary.

• Expanded ATO data validations for electronic lodgments to strengthen data integrity:
– Valid date of death required for No Beneficiary Assessment Codes 15 and 16 
– Assessment code must align with the date of birth 
– Individual beneficiary first name, last name, and date of birth must all be completed 
– Date of birth must not be entered for a non-individual beneficiary 

• Expansion of ATO pre-fill for individual to include trust lodgment data: 
– Beneficiaries presently entitled to a share of trust income (assessment codes 12 or 30) 
– Available in tax agent software (through existing individual pre-fill services) and in myTax. 

 

Victoria

SRO draft rulings about aggregate provisions

SRO Victoria has issued two draft land transfer (stamp) duty public rulings that relate to the aggregation provisions in the Duties Act 2000.

Aggregation of dutiable transactions (DA-026v3): This ruling explains how and when multiple dutiable transactions, such as transfers of land, may be aggregated and treated as a single transaction for duty assessment.

Exception from aggregation for domestic builders (DA-071): This ruling explains when registered domestic builders who purchase multiple parcels of vacant land can qualify for an exception from aggregation. Once finalised, the ruling will apply to contracts of sale signed on or after 1 June 2026.

Send you comments by 13 April to: [email protected]

 

 

ATO website updates

• Compare your business 
• Identity fraud threats  
• Company tax rates
• Global domestic minimum tax return

 

 

SUPERANNUATION AND FINANCIAL PLANNING

ASIC launches IDR data dashboard

Australians now have unprecedented access to consumer complaints data following the launch of ASIC's new Internal Dispute Resolution (IDR) data dashboard. 

The dashboard enables users to compare the complaints reported by individual financial firms for the first time.

 

 

 

PROFESSIONAL DEVELOPMENT

FBT core rules  

Join this webinar to understand some of the core concepts and principles of FBT. Delivered by TaxBanter Trainers. Register now.

Building wealth in the super environment 

This webinar will discuss the rules around contributions and how to maximise super contribution opportunities. Register now.

 

 

 

LEGISLATION  

Draft Div 296 regulations released for comment  

Treasury has released draft regulations that support the Treasury Laws Amendment (Building a Stronger and Fairer Super System) Act 2026, providing detailed implementation rules for the new Div 296 tax regime. 

The regulations establish comprehensive frameworks to: 

• explain how super funds will attribute fund earnings to individuals
• set out how to calculate earnings for defined benefit interests
• specify the super interests that are excluded from the policy
• explain how the tax applies in a person's final year and
• set the adjustment factors for capital gains tax for large super funds.

Send you comments by 31 March to: [email protected]

 

 

 

Jurisdictions added for qualified GloBE taxes 

Treasury has registered the Taxation (Multinational -- Global and Domestic Minimum Tax) (Qualified GloBE Taxes) Amendment (Measures No. 1) Determination 2026 (the Determination). The Determination align with the OECD's central record by adding certain jurisdictions that have a Qualified IIR, Qualified DMTT and QDMTT Safe Harbour Status to sections 5, 6 and 7 of the Taxation (Multinational -- Global and Domestic Minimum Tax) (Qualified GloBE Taxes) Determination 2025. 

Date of effect: 21 March 2026.

 

 

 

 

RULINGS AND GUIDANCE

ATO Payday Super guidance – Draft LCR 2026/D1-D4

Four draft law companion rulings were released to provide detailed guidance on the following key aspects of the Payday Super changes commencing on 1 July 2026:

• Draft LCR 2026/D1 focuses on the existing concept of ordinary time earnings, which remains unchanged under Payday Super
• Draft LCR 2026/D2 details eligible contributions that employers can make to reduce or avoid the SGC
• Draft LCR 2026/D3 focuses on how the SGC is calculated and assessed 
• Draft LCR 2026/D4 details application and transitional rules.

 

Decision Impact Statement - FCT v PepsiCo 

The ATO has issued a Decision Impact Statement (DIS) outlining the ATO's view of the implications of the High Court's decision in FCT v PepsiCo Inc & Anor [2025] HCA 30. 

In that case, a majority of the High Court found that the taxpayers (PepsiCo Inc and Stokely-Van Camp Inc (SVC)) were not liable to royalty withholding tax (RWT) nor to diverted profits tax (DPT). 

 

 

CASES 

Tax agent's registration cancellation set aside 

A tax agent was considered to be a fit and proper person despite breaches of the Code of Professional Conduct, and therefore a decision to cancel his registration was set aside and replaced with a written caution. 

The ART took into account a range of factors, including: much of the non-compliance occurred or had its genesis in the period before Owen Stanley Free Free became a registered tax agent; he and his family had experienced significant health and personal difficulties; he had taken concrete steps to bring his affairs into order, with lodgements and those for associated entities now up to date; his remaining personal tax liability was modest (approximately $7,700) and subject to a payment plan; and there was no evidence of unsatisfactory conduct in relation to his clients. (Free and TPB [2026] ARTA 319, ART, Olding SM, 10 February 2026.)

 

 

Appeals updates 

The Tax Practitioners Board has lodged a notice of appeal to the Federal Court from the ART decision in Free and TPB [2026] ARTA 319 (see above). 

 

 

 

 

 

 

 

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