Treasurer Jim Chalmers has announced welcome adjustments to the Government’s proposed Division 296 measure, which seeks to tax earnings on superannuation balances above $3 million.

The revisions to Labor’s ‘Better Target Super Concessions’ policy follow extensive consultation and industry feedback calling for a fairer, more practical design.

Some of the key components of today’s announced changes include:

1. Delayed start date
   The commencement date has been deferred for one year to 1 July 2026 (focusing on a taxpayer’s Total Super Balance at 30 June 2027), allowing time for consultation and legislative drafting.
2. Two-tier thresholds introduced for higher superannuation balances
   A progressive tax model is now proposed to apply:
   Balances up to the $3 million threshold are to be taxed at 15% on earnings
   Balances between $3 million and $10 million threshold are to be taxed at 30% on earnings
   Balances above $10 million are to be taxed at 40% on earnings
3. Indexation will apply to the new $3 million and $10 million thresholds
   Both thresholds (i.e., $3 million and $10 million) will be indexed to maintain alignment with the Transfer Balance Cap and to reflect inflation over time.
4. ‘Realised earnings’ taxed under changes
   The new rates will apply only to future realised earnings and not to unrealised gains.This shift addresses strong criticism that the original design could create cash-flow issues for SMSFs or funds with illiquid assets. Treasury will consult on how realised gains will be calculated and attributed to members.
5. Defined benefit parity
   Defined benefit schemes will receive commensurate treatment to ensure equivalent tax outcomes. Treasury will consult on the calculation method.

These changes mark a significant improvement on the original proposal and reflect the strong, coordinated feedback provided by the wider profession.

Employers that supply work vehicles to their employees need to check how the work vehicles are used and whether any exemptions apply to determine if they attract fringe benefits tax (‘FBT’).

FBT generally applies when a work vehicle is made available for private use, even if it is not actually used. Private use includes any travel not directly related to the employee’s job.

Exemptions may apply depending on the vehicle’s specifications and the nature of the private use.

The most common issues the ATO sees include the following:

• incorrectly treating private use as business use;
• assuming dual cab utes are exempt from FBT — exemptions only apply if the vehicle is eligible for the specific FBT exemption and private use is limited;
• incorrectly classifying vehicles;
• poor record keeping that does not support the claims or the FBT calculations made; and
• not reporting or paying on time.

Taxpayers who have had work done on their rental property should ensure the expense is categorised correctly to avoid errors when completing their tax return.

A deduction for ‘repairs and maintenance’ expenses can be claimed for work done to remedy, or prevent defects, damage or deterioration from using the property to earn income. These expenses can be claimed in the year they were incurred.

However, some ‘capital’ expenditure may not be immediately deductible, such as for ‘initial repairs’, ‘capital works’, ‘improvements’ and depreciating assets.

Initial repairs include fixing any pre-existing damage or deterioration that existed at the time of purchasing the property, even if the damage or deterioration was unknown to the taxpayer at the time of purchase. Initial repairs are treated as part of the acquisition cost and included in the cost base of the property for CGT purposes, unless they are capital works or depreciating assets.

Capital works are structural improvements, alterations and extensions to the property, and can generally be claimed at 2.5% over 40 years. Capital works deductions can only be claimed after the work has been completed, regardless of when the taxpayer pays the deposit and instalments.

Improvements or renovations that are structural are also capital works. Work that goes beyond remedying defects, damage or deterioration that improves the function of the property is regarded as an improvement.

Repairs to an ‘entirety’ are capital and cannot be claimed as repairs. Repairs to an entirety generally involve the replacement or reconstruction of something separately identifiable as a capital item.

Depreciating assets are treated as follows:

• Deductions for ‘new’ assets must generally be claimed over time according to their effective life.
• Second-hand depreciating assets generally cannot be deducted.

Employers are reminded that employee super contributions for the quarter ending 30 September 2025 must be received by the relevant super funds by Tuesday, 28 October 2025. If the correct amount of SG is not paid by an employer on time, they will be liable to pay the SG charge, which (as noted above) includes a penalty and interest component.

The ATO is warning businesses that if they incorrectly treat an employee as an independent contractor, then they risk receiving penalties and charges, including:

• PAYG withholding penalty for failing to deduct tax from worker payments and send it to the ATO;
• Super guarantee charge (‘SGC’), which is more than the super that would have been paid if the worker was classified correctly. SGC consists of a super guarantee shortfall amount, nominal interest, and an administration fee; and
• Additional SG penalties, including a penalty amount of up to 200% of the SGC.

‘Sham contracting’ may also contravene the Fair Work Act 2009. Courts can impose penalties against a business or person that incorrectly informs an employee that they are an independent contractor.

In a recent decision, the Administrative Review Tribunal (‘ART’) held that a taxpayer could not claim a tax deduction for medical expenses incurred by him in relation to his total and permanent disability pension.

The taxpayer had been terminated from his employment due to total and permanent disablement (‘TPD’). For the 2024 income year, his only income was a TPD pension.

The taxpayer wanted to claim a deduction for medical expenses to be incurred, estimated to be approximately $100,000 in the 2024 income year.

The ART agreed with the ATO that the medical expenses were not deductible. The ART noted in this regard that the medical expenses were “incurred by (the taxpayer) to better live with his medical condition, not incurred ‘in’ gaining or producing the TPD pension.” That is, “the occasion of the Medical Expenses is to assist (the taxpayer) with his medical condition, not to gain or maintain his eligibility to the TPD pension.”

The ART also did not accept the taxpayer’s argument that the medical expenses were not private or domestic in nature, as they were essentially personal in character.

Running a business is rewarding – but it can also be complex, especially when it comes to your tax and super obligations. Getting the basics right can make a big difference.

When we see businesses operating well, the common theme is getting the basics right:

• Use digital tools and business software to streamline your processes and improve efficiency.
• Keep accurate and complete records all year round. Good record keeping makes tax time easier and helps you stay on top of your obligations.
• Get the right advice from trusted sources, like us or the ATO’s website.
• Lodge and pay your tax in full and on time. If you’re worried you won’t be able to lodge and pay on time, please contact us. Proactivness is key.
• Set aside GST, pay as you go (PAYG) withholding and super from your cash flow, so you have the funds available when it’s time to pay.

Taking the time now to put these good habits in place will help you stay compliant, reduce stress, and give you more time to focus on growing your business. We’re here to help you put the right systems in place and guide you every step of the way.

Tax time is in full swing and so are the scammers! Their aim? To trick you into handing over your personal information so they can steal your identity and commit fraud in your name.

Scams Awareness Week is from 25 to 29 August 2025. It’s a great reminder to stop and take a second to check it’s really the ATO contacting you. We know you’re busy, juggling multiple deadlines, but scammers plan on you being distracted.

Do these 3 things to help protect yourself:

1. Don’t be fooled by emails and texts with QR codes or links to an online portal that claim to be about your tax – that’s a scammer trying to steal your personal information.
2. When checking the status of your tax return or using online services, always type the URL into your web browser – don’t click a link in a message.
3. Make sure you protect your TFN, ABN and myID/RAM login details. Never give out your personal information to anyone unless they genuinely need it.

If you think a phone call, SMS, voicemail, email or social media interaction claiming to be from the ATO is not genuine, do not engage with it. You should:

• go to verify or report a scam to see how to spot and report a scam; or
• if you have divulged information or paid a scammer money, phone us immediately on 1800 008 540; or
• Contact us for further assistance.

The ATO reminds shareholders of private companies that understanding how Division 7A of the tax legislation applies is crucial to avoiding costly tax consequences when accessing the company’s money or other benefits.

When Division 7A applies, the recipient of a payment, loan or other benefit can be deemed to have been paid an unfranked dividend that will be included in their assessable income.

While Division 7A can be complex, most errors the ATO sees that result in its application are simple in nature, including:

•      shareholders not recognising that a company’s money is not their money, and they cannot access it for personal use without tax consequences;
•      loans being made without complying loan agreements; and
•      applying the wrong benchmark interest rate when calculating Division 7A loan repayments.

These errors are often the result of common myths about Division 7A and how it works.

To support taxpayers’ understanding of their tax obligations when managing private company money, the ATO has launched new content: ‘Division 7A Myths debunked’ on its website.

This page debunks common myths about Division 7A, breaking them into topics such as ‘business structure’, ‘record keeping’, and ‘payments to other entities’.

Taxpayers may need to lodge a Taxable payments annual report (‘TPAR’) online by 28 August if they have paid contractors to provide any of the following services on their behalf:

•        building and construction;
•        cleaning;
•        courier and road freight;
•        information technology; or
•        security, investigation or surveillance.

If the ATO is expecting a TPAR from a taxpayer who does not need to lodge one, they can complete a ‘TPAR non-lodgment advice form’ by 28 August.

Taxpayers who no longer pay contractors can also use this form to tell the ATO they will not need to lodge a TPAR in the future (although if their circumstances change they may need to lodge a TPAR).

Editor: Please contact our office if you need assistance with completing and/or lodging a TPAR. 

Note that paper lodgments of TPARs will no longer be accepted after 28 August 2025.