Tax News and Updates October 2025

1.

Federal Court appeal lodged in Barth Family Trust GST input tax credit case

Tax agents should be aware that the taxpayer in Trustee for Barth Family Trust v FC of T [2025] ARTA 1558 has appealed the recent Administrative Review Tribunal (ART) decision to the Federal Court.

The ART found that the taxpayer was not entitled to input tax credits claimed in activity statements lodged more than four years after their respective due dates.  The decision turned on the operation of section 93-5 of the A New Tax System (Goods and Services Tax) Act 1999, which provides that entitlement to input tax credits ceases four years after the due date for lodgment of the relevant BAS.

The taxpayer had argued that the Commissioner had, either expressly or implicitly, allowed further time for lodgment, or that the time limit did not apply in the context of an objection or review.  However, the ART rejected those submissions, confirming a strict interpretation of the four-year limitation period.

The Federal Court appeal is expected to focus on whether exceptions to the time limit in section 93-5 may arise in cases involving objections or review, or where the Commissioner's conduct could be taken as extending the lodgment period.

Tax agents should continue to advise clients to lodge BASs on time to preserve entitlements to input tax credits and monitor the progress of this appeal for any implications regarding the interpretation of section 93-5.

The Trustee for the Barth Family Trust and Commissioner of Taxation (Taxation) [2025] ARTA 1558 (28 August 2025)

2.

Final ATO guidance on effective life of depreciating assets released

The ATO has published its final guidance on the effective life of depreciating assets for income tax purposes, with updates to the legislative instrument now in force.

The new instrument, Income Tax (Effective Life of Depreciating Assets) Determination 2025, was finalised following consultation in June and replaces the 2015 version, which sunsets on 1 October 2025.  The determination sets out the periods over which various types of assets are expected to be used to produce income, forming the basis for calculating annual depreciation deductions.

In conjunction with this update, Tax Ruling TR 2022/1, which explained the methodology used to determine effective life, will be withdrawn at the end of October 2025.  The reasoning and background previously included in the ruling are now incorporated into the ATO’s web guidance as non-binding explanatory material.

Tax agents should ensure they are using the updated 2025 determination when advising clients on depreciation claims and asset planning going forward.

Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025 - Federal Register of Legislation

3.

ATO outlines 2025–26 focus areas for privately owned and wealthy groups

The ATO has released its compliance priorities for privately owned and wealthy groups for the 2025–26 income year.  These areas of focus reflect insights gathered from case work, risk analysis and data intelligence and signal increased scrutiny across several key tax and governance issues.

Core tax and compliance risks

The ATO will continue to monitor governance failures and poor internal controls leading to common issues such as incorrect or incomplete lodgment, omitted income, overclaimed deductions and GST credits, and inappropriate access to small business and R&D concessions.  Proper documentation, timely lodgment and appropriate use of professional advice remain critical.

Capital gains tax (CGT)

There is increased attention on CGT concessions, with a focus on incorrect claims and restructures designed to access benefits that would not otherwise be available.  The ATO has also flagged concerns with trusts inappropriately disregarding capital gains for foreign beneficiaries under Division 855.

Trust arrangements

High-risk trust distributions, circular arrangements, and misapplication of section 100A remain under active review.  The ATO is also concerned about misuse of franking credits and family trust distributions outside the family group, potentially triggering family trust distribution tax.

Use of business assets and Division 7A

The ATO is targeting arrangements where private company funds or assets are used for personal or intra-group purposes without proper tax treatment.  Ongoing compliance concerns under Division 7A include unreported loans, inadequate agreements, and misuse of repayments or guarantees.

Succession planning

Increased activity around business exits, wealth transfers and restructures has prompted closer examination of tax consequences.  The ATO is watching for inappropriate access to CGT concessions, Division 7A issues and misuse of trust structures.

Industry-specific risks

The ATO has identified high-risk behaviour in several sectors:

• Professional firms: Non-compliance with PCG 2021/4, lodgment failures, and aggressive tax positions promoted by advisers.
• Property and construction: Misclassification of property sales, incorrect use of the margin scheme or going concern exemptions, and intra-group dealings to shift income.
• Retail: GST errors from poor systems or controls, particularly during growth or business changes.
• Private equity: Focus on tax risks throughout the investment lifecycle.
• Retirement villages: Scrutiny of GST and income tax treatments, including related-party dealings and valuation issues.

Emerging areas

The ATO is also focusing on:

• Crypto assets: Ensuring accurate reporting of income, gains and expenses by both investors and businesses.
• Cross-border activity: Increased attention on related-party financing, CFC compliance, and intangible migration.
• Use of tax-exempt structures: Reviewing the inappropriate use of SMSFs and not-for-profit vehicles to access concessions or avoid tax.
• GST refund fraud: Ongoing compliance action against contrived arrangements within private groups designed to generate improper refunds.

Tax agents should review these areas with clients and ensure robust governance and accurate reporting across all entities within a private group.  The ATO’s approach remains data-driven and will involve early intervention and targeted engagement where risks are identified.

Areas of focus 2025–26 | Australian Taxation Office

4.

TPB commences legal action against unregistered tax preparer

The Tax Practitioners Board (TPB) has initiated proceedings in the Federal Court against Yan Qun Ke, alleging she provided tax agent services for a fee while unregistered, in breach of the Tax Agent Services Act 2009 (TASA).

The TPB filed its application on 29 July 2025 following an investigation into claims that Ms Ke, whose registration lapsed in November 2017, continued to prepare and lodge tax returns for the 2021 to 2024 income years for multiple clients.  The Board is seeking civil penalties and an injunction to prevent her from continuing to offer tax agent services unlawfully.

The TPB emphasised the risks posed by unregistered preparers, who are not subject to the same standards, obligations or oversight as registered tax practitioners.  Unlike registered agents, unregistered individuals are not required to demonstrate their qualifications or experience, hold professional indemnity insurance, or comply with the Code of Professional Conduct.

TPB Chair Peter de Cure AM stated that protecting consumers from unregistered providers remains a key compliance priority.  He urged the public to always check the TPB register to confirm that a practitioner is registered before engaging their services.

Advisors should remain vigilant about unregistered activity in the sector, as it undermines the integrity and professionalism of the tax system.

TPB takes legal action against unregistered tax preparer | Tax Practitioners Board

5.

ATO finalises guidance on amended NALI rules for small super funds

The ATO has released final updates to Law Companion Ruling LCR 2021/2 and Taxation Ruling TR 2010/1 to clarify the scope and operation of the amended non-arm’s length income (NALI) rules in section 295-550 of the Income Tax Assessment Act 1997.  These changes reflect the 2024 legislative amendments introduced by Schedule 7 to the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024.

LCR 2021/2 – Application of NALI to general expenses

The updated LCR 2021/2 confirms how the NALI provisions apply when a small complying superannuation fund (including SMSFs and small APRA funds) incurs non-arm’s length expenditure, or fails to incur an amount, in connection with earning income.

Key aspects of the finalised ruling include:

The “twice the difference” formula now applies to general expense breaches.  This means the NALI amount is twice the shortfall between the actual expense and what would have been incurred on arm’s length terms.

A cap applies to the non-arm’s length component (NALC) for an income year.  It is the lesser of:

• total NALI (net of relevant deductions), or
• taxable income (less assessable contributions) plus deductions attributable to those contributions.

Large APRA-regulated funds are excluded from the non-arm’s length expenditure rules, though remain subject to other NALI rules.

General expenses are defined as those not directly linked to a specific asset.

The previous compliance approach in Appendix 1 has been withdrawn, as the new law provides a statutory mechanism for managing the impact of general expense breaches.

The amended rules apply retrospectively from the 2018–19 income year, superseding earlier 2019 amendments.

TR 2010/1 – Contributions and value-shifting clarified

The revised TR 2010/1 sets out how the NALI provisions interact with superannuation contribution rules.  Key updates include:

• In-specie contributions must be recorded at market value in fund accounts and member balances.
• Where an asset is acquired for less than market value under a contract, the shortfall is treated as non-arm’s length expenditure, not a contribution.

Value-shifting arrangements are addressed:

• Where arm’s length conditions exist, the value shift may be treated as a contribution; and
• Where not at arm’s length, the NALI rules may apply instead.

The proposed compliance approach in draft ruling TR 2010/1DC has been removed.

These rulings provide practical clarity for advisers and trustees managing SMSFs and small APRA funds, particularly where related-party arrangements or undercharged expenses are involved.  Advisors should ensure clients are aware of the retrospective application of the amended rules and review fund arrangements accordingly.

Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 – Parliament of Australia

6.

ATO transitioning from SIGBOX to Kiteworks for file sharing

From 1 October 2025, the ATO will begin using Kiteworks as its new secure file sharing platform, replacing SIGBOX.

For current requests, continue using SIGBOX as arranged.  However, any files stored in SIGBOX will not be migrated, so users should download and retain any needed documents before the transition.

For new requests, the ATO will coordinate access to Kiteworks and provide supporting user guides.  Your ATO contact can assist with the setup.

Tax agents should be aware of the change and prepare clients accordingly.

ATO transitioning from SIGBOX to Kiteworks for file sharing