Tax Update – November 2025

What’s new?

Small business instant asset write-off

A Bill before Parliament will extend the $20,000 instant asset write-off until 30 June 2026. The instant asset write-off is available to a small business (annual aggregated turnover under $10 million) that uses the simplified depreciation rules.

This means that if your business qualifies for the instant asset write-off, it can deduct in the current income year (2025-26) the full cost of an eligible depreciating asset costing less than $20,000 if it is first used, or installed ready for use, before 1 July 2026. This also applies to additional expenditure under $20,000 on an existing depreciating asset.

The low value pool threshold is extended until 30 June 2026 – this means that if the value of the general small business pool (at the end of the 2025-26 income year) is less than $20,000, it can be written off in full.

Payday super

From 1 July 2026, employers will be required to pay their employees’ superannuation guarantee (SG) at the same time as their salary and wages. This is called “Payday super” and legislation to implement the “Payday super” regime was recently introduced into the Parliament.

The key reforms are:

– SG contributions will generally need to reach employees’ super funds within 7 business days;
– a new concept called “qualifying earnings” (QE) will be used to calculate both SG contributions and the SG charge;
– the deadline for super funds to allocate or return contributions that cannot be allocated will be reduced to 3 business days, down from 20;
– the Small Business Superannuation Clearing House (SBSCH) will be closed to new registrants from 1 October 2025, and all users from 1 July 2026; and
– employers will need to report both QE and Super Liability via Single Touch Payroll (STP).

The ATO has published draft guidance on its compliance approach for employers for the first year of Payday super.

The proposed compliance approach will recognise that employers who try to do the right thing from 1 July 2026 to 30 June 2027, and resolve any issues quickly, should not be the focus of ATO compliance action.

Super reforms

You may have been aware that the Government had proposed a 15% tax rate on earnings attributable to the part of an individual’s total superannuation balance (TSB) that exceeds, as at the end of a financial year, $3 million. The 15% rate (called Div 296 tax) would be in addition to the existing 15% tax rate.

The Government has decided to make changes to the proposed Div 296 tax. The key changes are:

the $3 million threshold will be indexed to the Consumer Price Index (in $150,000 increments),
Div 296 tax will not apply to unrealised gains,
an additional tax rate of 10% (ie in addition to the 30% rate) will apply to TSBs that exceed $10 million; and
the start date will be 1 July 2026.

ATO compliance activities

Small business tax risks

The ATO is focusing on small businesses in:

– the property and construction industry – including builders, contractors and tradies.
– the professional, scientific and technical services sector – such as engineering, design, IT, management and consulting professionals.

Common errors in these industries include:

– incorrect claims for the R&D tax incentive, especially for activities that do not meet the eligibility criteria.
– omitting sales and income in the BAS and tax returns, including income from related entities.
– overclaiming expenses and GST credits.
– private expenses incorrectly reported as business-related or not properly apportioned between business and personal use.
– failure to register for GST when required.

Private groups: what’s on the ATO’s radar

The ATO refreshed its areas of focus for privately owned and wealthy groups to reflect its priorities for 2025-26.

This year the ATO is paying close attention to:

– the use of business money for personal or other group purposes, with a particular focus on Division 7A arrangements and the tax treatment of lifestyle assets;
– the tax consequences of succession planning activities, including where private groups restructure, dispose of assets, transfer wealth or implement arrangements aimed at minimising or avoiding tax – the ATO is focused on ensuring private groups understand the tax implications of the decisions they make;
– tax risks arising from specific industries or activities such as property and construction, private equity and international dealings; and
– ensuring compliance with core tax obligations, including correctly reporting income, sales, capital gains, meeting eligibility requirements for concessions or entitlements claimed and timely lodgment of returns and schedules and payment of tax debts.

Loans and other payments from your company

Division 7A is one of the most significant tax measures affecting private companies and their shareholders.

What does Division 7A do? Very broadly, if a private company makes a payment or loan to a shareholder or forgives a debt owed by a shareholder, the amount may be treated as a deemed dividend in the hands of the shareholder. The deemed dividend (a Division 7A dividend) will be taxable and generally cannot be franked so the recipient will not be entitled to a tax offset in relation to the dividend.

A payment includes providing an asset for use by a shareholder or their associate or a right to use assets under a licence or lease.

The total of all deemed dividends that a private company is taken to pay under Division 7A is limited to its “distributable surplus” for the income year. There is a formula to work out the distributable surplus. A company’s distributable surplus is not necessarily the same as its retained earnings.

Trusts

Division 7A applies to certain payments, loans and debt forgiveness made by trustees to a shareholder or an associate of a shareholder of a private company, where the company is entitled to an amount from the net income of the trust estate, and it has not been paid by a specified date.

This is called an unpaid present entitlement (UPE). However, the rules do not apply in all cases where there is an UPE.

For 15 years or so, the ATO has generally treated an UPE as a loan for Division 7A purposes but now the Full Federal Court (and earlier the Administrative Appeals Tribunal) effectively concluded that the ATO’s position is wrong. However, the matter is before the High Court and it will be ruling on this issue in due course.

Exemptions

There are a number of situations where Division 7A does not apply. These include:

– distributions that form part of the recipient’s assessable income;
– the private use of a dwelling connected with a business, for example, a farmhouse on a farm;
– loans in the ordinary course of business on arm’s length terms;
– loans that satisfy the relevant minimum interest rate (8.37% for 2025-26) and maximum term (25 years if the loan is secured by a registered mortgage, otherwise 7 years); and
– loans to another company.

ATO’s discretion

The ATO has a discretion to disregard the operation of Division 7A or to allow a dividend to be franked if the failure to comply with Division 7A was the result of an honest mistake or an inadvertent omission.

The ATO also has the discretion in certain circumstances to not treat a payment, loan or debt forgiveness as a Division 7A dividend, for example:

where the failure by an entity to make the specified minimum yearly repayment in relation to an amalgamated loan (one where a private company makes multiple loans to an entity during an income year) was because of circumstances beyond the entity’s control, and the entity would suffer undue hardship if the loan was taken to be a Division 7A dividend; or
where payment of a debt that is forgiven would cause hardship.

Private use of work vehicles – When does private use attract 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, such as:

– taking the vehicle on beach or camping trips;
– school drop-offs and pick-ups (even if it is on the way to or from work);
– running personal errands (like picking up groceries);
– transporting friends or family for non-work-related purposes; and
– parking the vehicle at the employee’s home (even if only for security reasons).

The records your business needs to keep depend on which method is used to calculate the taxable value of car fringe benefits provided to employees but may include logbooks and odometer readings. Even if the benefit is exempt from FBT because of limited private use, your business needs to keep records to support this.

Exemptions

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

– private work-related travel in an eligible commercial vehicle such as a single cab ute, a dual cab ute (see more below), a panel van, a goods van, a taxi not on hire or any other road vehicle that is designed to carry either a load of 1 tonne or more than 8 passengers (including the driver);
– the vehicle is an eligible electric car;
– the benefit is minor – that is, the taxable value of the benefit is less than $300 and it would be considered unreasonable to treat it as a fringe benefit;
– the employee’s duties relate to a public hospital, unless the amount of benefit provided to the employee exceeds the relevant threshold ($17,000);
– the car is provided for compassionate travel.

Common FBT mistakes to avoid

The most common issues the ATO sees are:

– incorrectly treating private use as business use;
– assuming dual cab utes are exempt from FBT – more on this below;
– incorrectly classifying vehicles;
– poor record keeping that does not support the claims or FBT calculations made; and
– not reporting or paying on time.

Dual cab utes and FBT

There is a common myth that dual cab utes are automatically exempt from fringe benefits tax (FBT). However, that is not the case.

If your business provides dual cab utes to staff to complete their duties and the vehicle is available for personal use, then the benefit may be subject to FBT. By understanding how your employees use their dual cab utes, you can work out if FBT applies.

When FBT doesn’t apply

To qualify for an exemption, two conditions must be met. The dual cab ute must be:

– an eligible vehicle, which means it is designed to

(a) carry a load of one tonne or more,

(b) more than 8 passengers (including the driver) or

– only used for limited private use (ie minor, infrequent and irregular), such as the occasional trip to the tip or helping a mate move house.

So, if a work dual cab ute doubles as the family taxi or is regularly used for weekend personal trips, it is not exempt.

When FBT applies

If an employee’s personal use does not meet both exemption conditions, your business will be liable for FBT. You must ensure your business keeps accurate records – even if the benefit is exempt from FBT because of limited private use, your business needs to keep records to support this.

Don’t forget to report the reportable fringe benefits on each employee’s income statement or payment summary.

Entertaining your employees?

With the festive season approaching, you may be planning a party or similar event (eg a golf day) for your employees. If so, make sure you consider the fringe benefits tax (FBT) implications of the party or other event.

These will depend on:

– the amount spent on each employee;
– when and where the event is held;
– the value and type of gifts provided; and
– who attends – is it just employees or are partners, clients and/or suppliers also invited?

Don’t forget to keep all records relating to the entertainment-related fringe benefits your business provides, including how the taxable value of benefits is worked out.

Tax Update – November 2025