The tax world is ever-changing, and this year was no exception. It’s timely to reflect on the major developments that have shaped the tax and superannuation landscape in 2025, as well as what’s ahead in 2026. This article aims to highlight the key developments this year and look ahead to the coming year.
What happened this year?
Student loans
A one-off 20% reduction was made to Higher Education Loan Program debts and certain other student loans that were incurred on or before 1 June 2025. The ATO has been rolling out the reduction, which is expected to be applied before the end of this calendar year.
Instant asset write-off
The temporary increase in the small business instant asset write-off (IAWO) to $20,000 is now law. The enabling legislation was passed by parliament on 27 November 2025 and was enacted on 4 December 2025.
This means small businesses with an aggregated turnover of less than $10 million can immediately deduct the cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose by 30 June 2026.
No deduction for ATO interest charges
The GIC and shortfall interest charge (SIC) ceased to be deductible from 1 July 2025. An ATO fact sheet explains the law change. The denial of the deduction is based on when the GIC or SIC assessment is incurred.
Changes to foreign resident capital gains withholding rules
Legislative changes were made to the foreign resident capital gains withholding rules from 1 January 2025 to:
- increase the withholding rate to 15% (from 12.5%); and
- remove the $750,000 threshold below which withholding previously did not apply for transactions involving taxable Australian real property and certain indirect Australian real property interests.
Increase in superannuation guarantee rate
The superannuation guarantee rate (SG) increased again on 1 July 2025 by 0.5% to 12%. No further increases are currently legislated.
Payday Super
The most significant reforms to superannuation in more than 30 years may finally be law, but now the work to implement Payday Super (PDS) begins.
The primary concerns with the new requirement for employers to pay their employees’ superannuation at the same time as salary and wages, instead of quarterly, are:
- the short runway to 1 July 2026 and the readiness of the systems and employers;
- the risk that employers may not be able to ensure contributions they make are processed and accepted by their employees’ superannuation funds within the PDS timeframes;
- the ATO’s transitional approach in PCG 2025/D5, which will provide little protection or certainty to employers.
Being in the PCG’s green zone doesn’t mean the employer won’t be liable for the SG charge—it means the ATO won’t allocate compliance resources to investigate employers who are in the green zone. Also, the ATO cannot disregard the law. It must assess the SG charge if it obtains information that an employer has a shortfall, even if the employer is in the green zone.
Employers should approach the payment of employee superannuation under PDS with a different mindset. Making an early voluntary disclosure and promptly paying a late contribution is the best way to minimise interest and penalties under PDS. An earnings component will still apply to the shortfall, but by taking these proactive steps, the employer may avoid further penalties.
While we wait for further legislative details and the necessary software releases from the digital service providers, businesses can start to review their software, systems and processes to identify what is needed to be PDS-ready.
Luxury car tax changes
The definition of a fuel-efficient car was amended from 1 July 2025 by reducing the maximum fuel consumption for a car to be considered fuel-efficient for LCT purposes. It has reduced from 7 litres per 100 kilometres to 3.5 litres per 100 kilometres.
Personal services businesses and Part IVA
The ATO recently released PCG 2025/5. The PCG provides guidance on when the ATO is more likely to apply its compliance resources to consider the potential application of the general anti-avoidance rule in Part IVA of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) to the alienation of personal services income (PSI). The PCG applies to income splitting arrangements where the PSI of an individual is derived through a personal services entity (PSE) that is conducting a personal services business (PSB), even where the PSI rules don’t apply to attribute the income to the individual.
Some taxpayers have wrongly assumed that Part IVA cannot apply to their arrangements where they pass the PSI tests and are conducting a PSB. This has been an area of confusion for as long as the rules have been around, but there has always been the potential for Part IVA to apply in these circumstances.
The PCG does not indicate the likelihood of Part IVA applying to an arrangement; only the likelihood of the arrangement bringing Part IVA into question and the ATO reviewing that arrangement.
The PCG advises that taxpayers should not be concerned that the ATO will apply compliance resources to pursue Part IVA where they have made a genuine attempt to move into a low-risk arrangement by 30 June 2027.
The ATO has long held the view that Part IVA can apply to income-splitting arrangements where the PSI rules are satisfied, so the release of this latest guidance is unsurprising. Taxpayers should review their arrangements and ensure they do not alienate their PSI, even where a PSB is being conducted.
Family trust elections
There has been widespread misunderstanding of the rules around family trust elections (FTE) and family trust distribution tax (FTDT) for decades. FTDT arises when distributions are made outside the family group of the individual specified in an FTE. This area is now a focus for the ATO.
The issues are compounded by:
- the unlimited amendment period that applies to FTDT;
- the inability of the Commissioner to ignore the application of FTDT or extend the time to revoke or vary elections;
- the broad meaning of ‘distribution’ for this purpose; and
- records that are lost or unable to be located.
The ATO recently provided an update on the ATO’s approach to FTDT. Until 31 December 2026, the ATO may consider it fair and reasonable to remit GIC (as much as 80%) where an electing entity has taken reasonable steps to mitigate the effects of a distribution being made outside the family group.
New rental property and holiday home guidance
Recently released draft guidance from the ATO explains when amounts received for letting a property on the short-term rental market or to long-term tenants are assessable, and when deductions can be claimed. It also sets out methodologies to apportion expenses when there is personal use of the property.
Significantly, the draft guidance sets out for the first time when deductions will be denied for holiday homes on the basis that they are a leisure facility where the property is not used or held ‘mainly’ to produce rent.
Any rental arrangements in place before 12 November 2025 have until 1 July 2026 to ‘get their house in order’. This means the ATO will not devote compliance resources to consider the application of section 26-50 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) to such arrangements for expenses incurred before 1 July 2026.
If producing rent is prioritised over personal use, holiday home owners have nothing to worry about. However, those who have claimed excessive deductions should be concerned, as the ATO will be taking a much firmer approach.
Cybersecurity
Cybersecurity remains a major risk for Australian individuals and businesses, and for the tax system. The Australian Taxation Office (ATO) encourages all individuals and registered tax practitioners to access ATO online services using a strong myID.
New features have been recently introduced into the ATO app, including:
- real-time messages to notify users when key changes are made to their ATO account; and
- new functionality for users to lock and unlock their ATO account where they are concerned to prevent unauthorised access or fraudulent refunds.
Firmer ATO action
Late last year, the ATO signalled that it would take firmer action against businesses that did not engage with the ATO regarding unpaid taxes or superannuation. This has seen the issuance of director penalty notices and garnishees in 2025 accelerate. Practitioners reported seeing a notable shift in the ATO’s approach to debt collection, requests for remission of the general interest charge (GIC), and debts on hold.
New TASA obligations
New obligations under the Tax Agent Services Act 2009 (Cth) (TASA) and the Tax Agent Services (Code of Professional Conduct) Determination 2024 (Code Determination) began to apply to registered tax and BAS agents. The new rules apply to large firms from 1 January 2025 and smaller firms from 1 July 2025.
A new notification obligation requires registered agents to notify the ATO that a false or misleading statement made by an agent for a client has not been corrected when all the conditions have been satisfied. Importantly, reporting a client to the ATO is required only where the agent believes the client’s actions have caused substantial harm to the interests of others.
Tax Ombudsman
Concerns around the ATO’s administration of the tax system have brought about the Tax Ombudsman’s:
What to look out for in 2026?
Unpaid present entitlements: Bendel appeal
Those with corporate beneficiaries that have an unpaid present entitlement (UPE) to a share of income from an associated trust are closely watching the outcome of the Commissioner’s appeal to the High Court from the Full Federal Court’s (FCAFC) decision in Commissioner of Taxation v Bendel [2025] FCAFC 15 (Bendel). In Bendel, the FCAFC dismissed the Commissioner’s appeal, finding that the UPE was not a loan under subsection 109D(3) of the ITAA 1936.
The ATO’s Interim DIS, issued on 19 March 2025, states that the ATO will continue to administer the law in accordance with its published views relating to private company entitlements to trust income, as set out in TD 2022/11. The ATO does not intend to revise its current views until the appeal process is finalised.
High Court hearings have been held on 14 October 2025 and 3 December 2025. A decision is not expected until 2026.
Update on Division 296
The Government proposed to introduce a new tax from 1 July 2025, which would tax at 15% those earnings attributable to the part of an individual’s total superannuation balance that exceeds $3 million (adjusted for withdrawals and contributions).
Objections to the inclusion of unrealised gains in the ‘taxable superannuation earnings’ of an individual, and the lack of indexation of the $3 million threshold, were widespread. On 13 October 2025, the Government announced it would make sensible changes that take two years of feedback into account while still maintaining the main objectives of the policy.
The changes will:
- apply a total concessional tax rate of 30% to earnings on balances between $3 million and $10 million;
- apply a total concessional tax rate of 40% to earnings on balances over $10 million;
- index both the $3 million and $10 million thresholds to maintain relativity with the transfer balance cap; and
- defer the start date by 12 months to 1 July 2026.
We await the release of exposure draft legislation that proposes to introduce new Division 296 into the ITAA 1997, and the introduction of enabling legislation before 30 June 2026 to give effect to this measure.
AML/CTF
The new anti-money laundering and counter-terrorism financing (AML/CTF) obligations are set to apply to accountants from 1 July 2026.
