CPA Australia Tax News

This edition was current at the time of publication.

 

Board of Taxation’s thin cap review

The Board of Taxation has officially launched its review into the Albanese Government’s thin capitalisation reforms. CPA Australia views this review as a welcome step to address the significant gaps and uncertainties that have emerged since the legislation received royal assent in April 2024. Our members consistently report that these changes, combined with other integrity measures, have dramatically increased complexity, compliance costs, and commercial disruption for Australian businesses.

A primary concern is the retrospective nature of the new rules. Because the provisions generally applied to debt deductions from 1 July 2023 without grandfathering or transitional relief, many taxpayers were forced to apply significant resources to restructure longstanding commercial arrangements.  The Debt Deduction Creation Rules (DDCR) applies to all debt deductions in respect of new and historical arrangements from the start of income years commencing on or after 1 July 2024. The Board’s investigation into the practical impost on businesses is a necessary acknowledgment of these challenges.

The review is set to scrutinise several critical technical areas where the current law may be falling short of its intent. Specifically, the Board will consider whether the $2 million de minimis exemption threshold should operate as a net debt deduction concept, as the current gross threshold has remained unchanged for over a decade. The review will also  assess if the default tax EBITDA calculation appropriately reflects an entity’s economic activity, addressing concerns that the current adjustments may lead to arbitrary or unfair outcomes for certain investment structures.

Furthermore, the review provides an opportunity to evaluate the Third Party Debt Test (TPDT) and the DDCR). Members feedback suggests the TPDT is exceptionally difficult to satisfy in practice due to restrictive conditions. It is vital that these integrity rules do not inadvertently penalise genuine commercial transactions or discourage the global capital investment Australia needs to remain competitive.

As the Board prepares its final report over the next 12 months, CPA Australia remains committed to advocating for a tax system that is fair, competitive, and administratively sustainable. We hope this review leads to the technical drafting changes and clear administrative guidance required to provide taxpayers and practitioners with the certainty they need
 

Jenny Wong
Tax Lead
CPA Australia 

Anti-Money Laundering/Counter-Terrorism Financing starter kits

AUSTRAC has released the AML/CTF program starter kits to support newly regulated entities prepare for the AML/CTF laws, applicable from 1 July 2026.  
The kits set out practical, step-by-step actions businesses can take to build a program suited to the business profile.

Starter kits for the newly regulated industries:

• Accountant guidance and program starter kit
• Real Estate guidance and program starter kit
• Conveyancer guidance and program starter kit
• Dealers in precious metals, stones and products guidance and program starter kit
• Legal profession guidance and program starter kit  

AML/CTF transitional rules update

The Department of Home Affairs and AUSTRAC are working to finalise transitional rules to support a smooth implementation of the AML/CTF reforms. The transitional rules will allow periods of time for reporting entities to adjust their business and processes to meet certain obligations, while still managing their ML/TF risk. An exposure draft of the transitional rules will be published. Industry will have an opportunity to provide feedback at this stage. Further details regarding the update to the AML/CTF transitional rules can be found here.

Review of thin capitalisation reforms: Board of Taxation

The government asked that the Board of Taxation undertake an independent review of the changes to Australia's thin capitalisation rules introduced in April 2024. 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. The review will commence on 1 February 2026. The final written report will be provided to the government within 12 months of the review starting.

Send your comments to: [email protected]

ATO website updates

• Reporting significant global entity status for large private groups 
• What attracts ATO’s attention 
• Transactions and taxes 
• Private company benefits (including Division 7A) \;
• Business structure 
• Key dates for employers to remember in 2026

 

Superannuation and Financial Planning

Preparing your employer clients for Payday Super

From 1 July 2026, your employers must pay their employees’ super each payday instead of at least once every three months. The ATO has released new factsheets, checklists and videos at ato.gov.au/PaydayResources to help employers prepare for this change.

You can find more information here.  It’s important your clients get it right to avoid interest and penalties. Read more.

ATO releases Payday Super checklist for employers

The ATO has released a Payday Super checklist to assist employers in preparing for the implementation of Payday Super, which takes effect from 1 July 2026. The ATO's Small Business Superannuation Clearing House (SBSCH) will close on 1 July 2026. To address this, the ATO has released a separate checklist, How to transition from the SBSCH, specifically for employers currently using the SBSCH service.

Transfer balance cap increases to $2.1m for 2026-27

The release of the CPI index number for December 2025 has confirmed that the superannuation "general transfer balance cap" will increase by $100,000 to $2.1m for 2026-27 (up from $2.0m for 2025-26). The "total superannuation balance" threshold for making non-concessional contributions will also increase to $2.1m for 2026-27 (up from $2.0m for 2025-26). The "defined benefit income cap" will increase to $131,250 for 2026-27 (ie $2.1m divided by 16).

ATO super updates

Register now Payday Super webinar for super funds.

 

Professional Development

Accountants Daily UK Study Tour in London

This is a small, curated program for a select number of Australian accounting and advisory firm leaders who want to get close to how leading UK firms are responding to the biggest shifts in the profession – including digital tax and real-time reporting, AI and automation, talent pressures, pricing and profitability, and evolving operating models.

FTEs and IEEs 
February 12

This topic covers when a family trust election (FTE) or interposed entity election (IEE) can and should be made.
 
WEBINAR BUNDLE: Save 5% when you purchase all 11 webinars in the series. Promotion valid until 8 Feb 2026. Register now.

Borrowing in an SMSF
February 17

Learn how a LRBA arrangement works, who the lender(s) can be and how to keep things at arms-length when related parties are involved.
 
WEBINAR BUNDLE: Save 5% when you purchase all 11 webinars in the series. Promotion valid until 13 Feb 2026. Register now.

 

Legislation

Wine tax credit for New Zealand producers: instrument registered

Treasury has registered the A New Tax System (Wine Equalisation Tax) (New Zealand Producer Rebate Claim Lodgment) Determination 2026 (Instrument). The Instrument allows eligible New Zealand wine producers that export wine to Australia to claim a producer rebate, in the form of a wine tax credit, at any time within four years after the wine tax credit arises.

Date of effect: 31 January 2026

 

Rulings and guidance

CGT main residence exemption: right to occupy dwelling under deceased's will

Draft Determination TD 2026/D1, with retrospective effect, sets out the ATO's preliminary views on when an individual has a right to occupy a dwelling under a deceased's will. 

The main residence exemption is available to a trustee or beneficiary of a deceased estate if the relevant requirements in s 118-195(1) ITAA 1997 are met, including if an individual with a "right to occupy the dwelling under the deceased's will" (item 2(b) of column 3 of the table in s 118-195(1)).

The right to occupy must be expressly granted under the terms of the will to an individual specifically named in the will or granted in a family provision order. If the right is granted under a separate agreement, a testamentary trust or pursuant to a broad discretion, item 2(b) is not satisfied.

Send comments by 16 February to: [email protected]

Payday Super: ATO compliance approach in 2026-27

Practical Compliance Guideline PCG 2026/1 explains how the ATO will allocate compliance resources to investigate superannuation guarantee shortfalls during the first year of Payday Super, which commences on 1 July 2026. PCG 2026/1 comprises three risk zones - low, medium and high. An employer will be in the low-risk zone where all the following are satisfied:

• the employer tried to ensure all individual base SG shortfalls in relation to its employees were nil for the Qualified Earnings (QE) day, by making on-time contributions equal to or exceeding the individual SG amount
• the relevant fund did not receive some or all of the eligible contributions on time,  these eligible contributions are received by the relevant funds and allocable for the benefit of the employees as soon as reasonably practicable, resulting in the employer having individual final SG shortfalls of nil for all employees for the QE day at that time.

Date of effect: applicable to QE days occurring from 1 July 2026 to 30 June 2027.

 

Cases

Penalties based on recklessness upheld by the ART

Two taxpayers have lost challenges to shortfall penalties based on recklessness.

In the first case, the ATO audited the taxpayer and determined that she had omitted assessable income totalling just over $180,000 from her 2015, 2016 and 2017 income returns. 

The Administrative Review Tribunal (ART) affirmed the penalties, concluding that this was not a case of inadvertent carelessness or isolated oversight, but rather "wilful disengagement". (Tilli and FCT [2026] ARTA 80, ART, Smith GM, 23 January 2026.)

In the second case, the taxpayer allowed an old acquaintance - who had promoted on social media, a so-called loophole to reimburse 100 per cent of a person's tax back - to lodge amended income tax returns. 

The ART upheld shortfall penalties based on recklessness as, in its view, the taxpayer's conduct constituted "gross carelessness as to whether his amended tax returns were correct". (Crawford and FCT [2026] ARTA 90, ART, Lazanas DP, 28 January 2026.)

 

 

 

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