From 1 July 2027, more businesses and individuals paying PAYG instalments are expected to have the option of reporting and paying monthly instead of quarterly. The Australian Taxation Office (ATO) may also gain the power to require certain taxpayers to make monthly payments if they have a history of failing to meet their tax obligations.

Announced in the 2026-27 Federal Budget, these proposed changes are currently subject to draft legislation and are not yet law. However, they could affect how businesses manage their cash flow and tax obligations, making it worthwhile to understand the potential impact ahead of time.

What Are the Proposed Changes?

PAYG instalments are regular payments towards your expected annual income tax liability. They allow businesses and individuals to spread their tax payments throughout the year rather than facing a larger tax bill when their annual tax return is assessed.

Currently, most taxpayers in the PAYG instalment system pay quarterly, while certain larger taxpayers are already required to pay monthly.

Under the proposed changes, the following arrangements are expected to apply from 1 July 2027:

• Monthly payments as an option: Most taxpayers already paying PAYG instalments could choose to report and pay monthly instead of quarterly.
• Mandatory monthly payments for certain taxpayers: The ATO could require taxpayers with a demonstrated history of failing to meet their tax obligations to move to monthly payments.
• Instalments that better reflect business performance: The changes form part of broader reforms designed to make tax instalments more responsive to current business performance, including through accounting software.

Monthly instalments would generally be due by the 21st of the following month, subject to the final rules.

For more information, visit the ATO’s guidance on dynamic PAYG instalments.

How Could Monthly Payments Affect Cash Flow?

For many businesses, the main consideration will be whether paying monthly makes cash-flow management easier or creates additional financial pressure.

Potential benefits

Smaller, more frequent payments may be easier to budget for than larger quarterly amounts. This could be particularly beneficial for businesses with steady monthly income, regular bookkeeping and established monthly reporting processes.

Paying monthly may also help businesses monitor their tax position more closely throughout the year. If instalments better reflect current earnings, there may be less risk of paying too much or too little during the year.

However, the actual benefits will depend on how the final rules operate and each taxpayer’s circumstances.

Potential drawbacks

On the other hand, monthly payments mean money leaves the business more frequently. This could reduce financial flexibility for businesses experiencing seasonal income, irregular customer payments or tight working capital.

More frequent reporting may also create additional administrative work, although accounting software could help automate parts of the process.

For businesses that rely on retaining cash between payment dates, quarterly payments may remain the more suitable option.

Ultimately, the right approach will depend on your income patterns, available cash reserves and existing accounting processes.

Who Could Be Required to Pay Monthly PAYG Instalments?

Businesses and individuals with a history of late lodgements, overdue tax debts or repeated failures to meet their tax obligations should pay particular attention to these proposed changes.

If the legislation becomes law, the ATO could require affected taxpayers to move to monthly PAYG instalments. This may create additional cash-flow pressure, particularly for businesses that are already experiencing financial difficulties.

However, these changes are not only relevant to taxpayers with compliance issues.

Taxpayers with a good compliance record may also consider voluntarily moving to monthly payments if doing so would make budgeting and tax management easier. Others may find that retaining their existing quarterly arrangements is more appropriate.

What should you do now to prepare for monthly PAYG instalments?

Although the proposed legislation has not been finalised, businesses can take several practical steps to prepare for the potential changes.

1. Review your cash flow: Consider whether monthly payments would fit your income and expense patterns better than quarterly payments.
2. Check your accounting processes: Assess whether your bookkeeping, reporting and banking arrangements can accommodate more frequent payments.
3. Review your current PAYG instalments: Compare your existing instalments with your expected annual income tax liability. If you notice any significant differences, consider discussing them with your accountant.
4. Address outstanding tax obligations: If you have overdue tax debts or a history of missed lodgement deadlines, seek professional advice early to manage your obligations and reduce the risk of further difficulties.

Monthly payments would change the timing of your tax payments, not your underlying tax liability. Planning ahead can help you avoid unexpected cash-flow pressure and choose an approach that suits your business.

We will provide further updates as the rules are finalised. In the meantime, contact us if you would like to review your current PAYG instalments or assess how monthly payments could affect your cash flow.

Frequently Asked Questions

Are monthly PAYG instalments law yet?

No. The changes were announced in the 2026–27 Federal Budget and are currently the subject of draft legislation. The proposed start date is 1 July 2027.

Will monthly PAYG instalments be compulsory?

Not for most taxpayers. Most taxpayers already paying PAYG instalments could choose to pay monthly. However, the ATO could require taxpayers with a demonstrated history of failing to meet their tax obligations to pay monthly.

When would monthly instalments be due?

Monthly instalments would generally be due by the 21st of the following month, subject to the final rules.

Will paying monthly change how much tax I pay?

No. Monthly payments would change the timing of your tax payments, not your underlying tax liability.

Need help?

If you are unsure whether monthly PAYG instalments would be suitable for your business, Pitt Martin Group can help you review your current tax instalments, assess the potential impact on your cash flow, and understand how the proposed changes may affect your tax obligations. We can also help you consider the most appropriate payment arrangement based on your business circumstances.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Nora Pham @ Pitt Martin Tax

The ATO has extended the deadline for credit card tax payments until 30 June 2027, giving Australian businesses more time to prepare for the removal of direct credit card payments. However, from 1 July 2027, taxpayers will need to use an alternative payment method when paying the Australian Taxation Office (ATO) directly.

If your business uses a credit card to pay tax bills, manage cash flow or meet ATO payment plan instalments, now is the time to review your arrangements and plan ahead.

Why Is the ATO Removing Credit Card Payments?

In early October 2026, the ATO announced that it would stop accepting direct credit card payments after 30 November 2026.

The decision followed the Reserve Bank of Australia’s (RBA) ban on card surcharges, which commenced on 1 October 2026. Without being able to pass these costs on to taxpayers, the ATO estimated it would incur almost $200 million in additional annual costs.

The announcement raised concerns among small businesses that rely on credit cards to manage short-term cash flow and spread the timing of tax payments.

In response, the Australian Government provided transitional funding, allowing the ATO to continue accepting credit card payments until 30 June 2027.

While this extension provides businesses with additional time to adjust, it does not mean credit card payments will remain available indefinitely.

When Will the ATO Stop Accepting Credit Card Payments?

The revised deadline for direct ATO credit card payments is 30 June 2027.

Here is what you need to know:

• 1 October 2026: The Reserve Bank’s card surcharge ban commenced.
• Early October 2026: The ATO announced plans to discontinue direct credit card payments.
• 30 November 2026: Original proposed deadline for ending credit card payments.
• 30 June 2027: Extended final date for direct ATO credit card payments.
• 1 July 2027: Direct credit card payments will no longer be available.

Businesses that currently use credit cards to pay income tax, GST, PAYG instalments or other ATO liabilities should prepare to transition to another payment method before the deadline.

What Payment Methods Can You Use Instead of a Credit Card?

From 1 July 2027, taxpayers will need to use another method to pay the ATO directly.

Available alternatives include:

• Debit card: Pay directly from your bank account using an eligible debit card.
• BPAY: Make tax payments through your participating bank or financial institution.
• Bank transfer: Transfer funds directly to the ATO using the relevant payment details.
• Direct debit: Arrange automatic payments from your nominated bank account.
• Australia Post: Make payments at participating Australia Post outlets, where available.
• International money transfer: Use an applicable international payment service if you are paying from overseas.

Some third-party payment providers may continue to offer credit card payment facilities for tax liabilities. However, these providers may charge additional transaction or processing fees, and payments may take longer to reach the ATO.

Before using a third-party provider, check the total fees, processing times, payment conditions and whether the service is suitable for your tax obligations.

How Will the ATO Credit Card Changes Affect Small Businesses?

The removal of direct credit card payments will not affect all taxpayers equally.

During the 2024–25 financial year, approximately 5% of small businesses and just over 2% of individuals used credit cards to pay the ATO.

For businesses that rely on credit cards, the change could have a noticeable impact on cash-flow management.

Credit cards can provide an additional interest-free period between making a tax payment and settling the credit card balance. This can be particularly useful when business income and expenses do not fall due at the same time.

Without this option, businesses may need to reconsider how they manage upcoming tax liabilities, particularly during periods of tight cash flow.

The key is to establish a payment strategy that allows you to meet your ATO obligations without placing unnecessary pressure on your working capital.

What Happens to Existing ATO Payment Plans Linked to Credit Cards?

If you have an existing ATO payment plan that uses a credit card for regular instalments, you should review your arrangements before the transition deadline.

The ATO has been contacting affected taxpayers about the changes. However, you should not assume your existing payment arrangements will continue automatically.

Make sure you:

• Confirm how future payment plan instalments will be collected.
• Check whether your current credit card details need to be replaced.
• Arrange an alternative payment method with the ATO.
• Allow sufficient time for new payment arrangements to take effect.
• Monitor your account to ensure future instalments are processed successfully.

Missing an instalment or failing to meet an agreed payment date could result in additional interest or other consequences.

How Should Your Business Prepare for the ATO Credit Card Payment Changes?

Although the extended deadline is 30 June 2027, it is worth reviewing your payment arrangements well in advance.

Here are five practical steps to help your business prepare.

1. Review Your Current ATO Payment Arrangements

Identify whether you use a credit card for one-off tax payments, regular tax instalments or an existing ATO payment plan.

Understanding how frequently you rely on credit cards will help you determine what changes are required.

2. Choose an Alternative ATO Payment Method

Compare the available payment options and consider which ones best suit your business.

For example, BPAY and bank transfers may provide a straightforward way to pay tax liabilities, while direct debit may be more convenient for businesses with regular payment commitments.

Consider transaction fees, processing times and when funds are available in your business bank account.

3. Update Recurring Tax Payments Early

If you have recurring payments or an existing ATO payment plan, arrange an alternative payment method before 30 June 2027.

Do not wait until the final days to make changes. Allow enough time to update your details and confirm that your payments are being processed correctly.

4. Reassess Your Business Cash Flow

If your business relies on the interest-free period offered by credit cards to manage tax payments, consider how removing this option will affect your cash flow.

You may need to:

• Set aside funds for upcoming tax liabilities earlier.
• Establish a separate tax savings account.
• Review your cash-flow forecasts.
• Adjust your budgeting for quarterly and annual tax obligations.
• Build a sufficient cash reserve to cover future tax payments.

Planning ahead can help reduce the risk of cash-flow shortages when tax payments become due.

5. Speak With Your Accountant or Business Adviser

If your business regularly relies on credit cards to pay the ATO, it may be worth reviewing your broader cashflow and tax payment strategy.

An accountant or business adviser can help you assess your current arrangements, forecast upcoming liabilities and identify practical ways to manage tax payments under the new system.

Frequently Asked Questions About the ATO Credit Card Payment Changes

When will the ATO stop accepting credit card payments?

The ATO is expected to stop accepting direct credit card payments from 1 July 2027. The extended transition period allows credit card payments until 30 June 2027.

Why is the ATO removing credit card payments?

The ATO’s decision follows the Reserve Bank’s ban on card surcharges from 1 October 2026. Without being able to recover credit card processing fees from taxpayers, the ATO estimated it would face almost $200 million in additional annual costs.

Can I still pay my tax bill using a credit card after 30 June 2027?

You will no longer be able to pay the ATO directly using a credit card. However, some third-party payment providers may continue to offer credit card payment services, potentially with additional fees and longer processing times.

What are the alternatives to paying the ATO by credit card?

Alternative payment methods include debit card, BPAY, bank transfer, direct debit and eligible Australia Post payment services. International money transfer services may also be available for applicable payments.

Will my existing ATO credit card payment plan continue?

You should review your existing payment plan and confirm how future instalments will be processed. If your payment plan is linked to a credit card, contact the ATO to arrange an alternative payment method before the transition deadline.

How will the changes affect small businesses?

Businesses that rely on credit cards to manage tax payments may need to adjust their cash-flow planning. Without the additional time provided by a credit card’s interest-free period, businesses may need to set aside funds earlier or adopt a different payment strategy.

Need Help?

If your business currently relies on credit cards to pay ATO tax liabilities, the upcoming changes could affect your cash flow and tax payment arrangements. Pitt Martin Group’s experienced Sydney tax accountants can help you review alternative payment methods, manage existing ATO payment plans, forecast upcoming income tax, GST and PAYG obligations, and develop a practical tax payment strategy. Contact Pitt Martin Group for professional tax and business advisory assistance to help your business prepare for the transition before 1 July 2027.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Alex Cramery @ Pitt Martin Tax

More than $21 billion in lost super and unclaimed superannuation is currently waiting across Australia, according to the ATO figures cited in the original article. The average lost account holds around $41,000, and the ATO reunited more than $1.1 billion with members last year.

That money could be contributing to your retirement savings instead of sitting in a forgotten account. Checking for lost super is free, usually takes only a few minutes, and tax time can be a useful opportunity to review where your super is held.

How does lost super happen?

Lost super generally occurs when a super account becomes inactive and the fund can no longer contact the member. This can happen for several common reasons, including:

• Changing jobs and leaving an old super account behind
• Moving house without updating your address with the fund
• Changing your phone number or contact details
• Changing your name and not notifying the fund

When a fund cannot contact you, the account may eventually be classified as lost. In some cases, the balance is transferred to the ATO, which holds the money until it can be reunited with its rightful owner.

The important point is that lost super does not simply disappear. It may still be waiting for you to claim it.

How to find lost super through myGov

Finding lost super is straightforward and free. One of the quickest ways is through ATO online services linked to myGov.

1. Log in to myGov and open the ATO service.
2. Select Super, then Fund details.
3. Review your active super accounts and any lost or ATO-held super linked to your tax file number.

You may also be able to search through the ATO app, use the automated lost super search service on 13 28 65, or complete a paper form.

Old accounts can easily be forgotten, particularly after changing jobs several times. Even a small balance from an early job may have grown over time.

Why it matters near retirement

Finding lost super can be valuable at any age, but it may be especially important if you are approaching retirement.

An additional $20,000, $40,000 or more could make a noticeable difference to the amount available in your retirement nest egg. Smaller balances may also continue to grow once they are brought together in an active account that earns investment returns and receives future contributions.

Consolidating super may also make your retirement savings easier to monitor and can help reduce unnecessary duplicated fees.

Check your insurance before consolidating

Before rolling several super accounts into one fund, check whether any of your existing accounts include insurance cover.

Super accounts can include death, total and permanent disability, or income protection insurance. In some circumstances, that cover may end when the account balance is rolled into another fund.

Losing insurance without realising it could leave an unexpected gap in your protection. Before consolidating, check with your super fund or adviser so you understand what cover may stop, continue or change.

Why checking your super is worthwhile

Money held in a lost or low-balance account may be earning less than it could or attracting unnecessary fees. Bringing your super together can make it easier to track your overall position, reduce duplicated costs and review your investment options.

The ATO reunification figures show that meaningful amounts are regularly returned to members who search for lost super.

With more than $21 billion waiting to be claimed, checking whether you have lost or ATO-held super could be well worth a few minutes.

You can start a free search through the ATO’s lost superannuation service:

https://www.ato.gov.au/forms-and-instructions/superannuation-searching-for-lost-superannuation

Need professional tax assistance?

If you are unsure whether you have lost or ATO-held super, or whether consolidating multiple super accounts is right for you, Pitt Martin Group can help you review your super position, understand the potential impact on fees and insurance cover, and consider the next steps based on your circumstances.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Nora Pham @ Pitt Martin Tax

If you travel overseas regularly for work, family or personal reasons, your Australian tax residency status and international travel records could become increasingly important when managing your tax affairs.

On 24 August 2026, the Australian Taxation Office (ATO) gazetted its latest passenger movements data-matching program. Under the program, the Department of Home Affairs is expected to provide the ATO with international travel information relating to approximately 115,000 individuals each year, covering the 2026–27 to 2028–29 income years.

The ATO can use this information to compare travel movements against existing tax records and identify potential discrepancies involving tax residency, income reporting, tax return lodgements and other tax obligations.

For Australians working overseas, people who have moved abroad and taxpayers who spend extended periods outside Australia, understanding the relevant tax residency rules and maintaining accurate travel records can help reduce uncertainty and support a consistent tax position.

What Is the ATO’s Passenger Movements Data-Matching Program?

The ATO’s passenger movements data-matching program allows it to obtain international travel information from the Department of Home Affairs and compare that information with its own records.

The information may include:

• An individual’s name and date of birth
• International arrival and departure dates
• Passport details
• Citizenship and visa status

The program is intended to help the ATO identify potential inconsistencies in tax registration, lodgement, income reporting, payment obligations and tax residency.

For example, if a taxpayer reports that they moved overseas on a particular date but passenger movement records indicate a different departure date, the ATO may seek further information to understand the discrepancy.

A difference in travel dates does not automatically mean that a taxpayer has made an error. However, accurate records can help explain the circumstances and support the position adopted in a tax return.

Why Is Australian Tax Residency Important?

Your Australian tax residency status can significantly affect how your income and other tax obligations are treated.

Australian tax residents are generally taxed on their worldwide income, while foreign residents are generally taxed on their Australian-sourced income, subject to applicable Australian tax law and any relevant double tax agreements.

Your residency status may also affect:

• Income tax: Whether foreign employment income, overseas investments and other foreign income must be reported in Australia.
• Tax-free threshold: Whether you qualify for the Australian tax-free threshold and how it applies to your circumstances.
• Medicare levy: Whether you have Medicare levy obligations or qualify for an exemption.
• Capital gains tax (CGT): How gains from Australian property and other assets are treated, including eligibility for certain exemptions.
• Part-year residency: How your tax obligations are calculated if you become or cease to be an Australian tax resident during an income year.

If you have moved overseas, returned to Australia after an extended absence or maintained connections with Australia while living abroad, reviewing your residency position can be an important part of preparing your tax return.

For further information, refer to the Australian Taxation Office’s guidance on Australian residency for tax purposes.

Does Spending Time Overseas Automatically Make You a Foreign Tax Resident?

No. Spending time overseas does not automatically make you a foreign resident for Australian tax purposes.

The ATO considers the relevant residency tests and the overall circumstances of each individual. Depending on the circumstances, relevant factors may include:

• The purpose and intended duration of your overseas stay
• Whether your spouse, children or other immediate family remain in Australia
• Whether you maintain a home or other significant connections in Australia
• Your employment arrangements and economic ties
• Your living arrangements and connections in another country
• Your intentions and behaviour before, during and after the move

The number of days you spend outside Australia may be relevant, but it does not determine your residency status in every case.

For example, someone working overseas temporarily may retain Australian tax residency, while another individual who establishes a life in another country may have different residency outcomes depending on their circumstances.

The key point is that Australian tax residency is determined by the applicable legal tests and your overall circumstances, not simply by the number of days you spend overseas.

Keeping a clear record of your travel dates, living arrangements and significant changes in circumstances can help support an assessment of your residency position.

When Can Your Overseas Travel History Affect Your Tax Return?

Your international travel history may be particularly relevant in several common situations.

1. Becoming or Ceasing to Be an Australian Tax Resident

If you become or cease to be an Australian tax resident during an income year, your arrival and departure dates may help establish the timeline of your move.

These dates can form part of the evidence supporting your residency position and may be relevant when determining how income is treated during different periods of the year.

They may also affect the calculation of your part-year tax-free threshold, where applicable.

However, departure from Australia does not, by itself, establish that you have ceased to be an Australian tax resident. Your living arrangements, intentions, family connections and other relevant circumstances must also be considered.

2. Working Overseas or Earning Foreign Income

If you regularly travel overseas for work, your travel records may help establish when you were in Australia and when you were working or staying overseas.

This can be relevant if you:

• Work for an overseas employer
• Undertake international assignments
• Earn foreign employment income
• Operate a business across multiple countries
• Receive overseas investment income while maintaining Australian connections

Your Australian tax obligations will depend on factors such as your residency status, the nature and source of your income, and any applicable double tax agreement.

Maintaining accurate travel records alongside employment contracts, payslips and other supporting documents can help substantiate the tax treatment adopted in your return.

3. Selling an Australian Property After Moving Overseas

If you move overseas and later sell an Australian property, your tax residency history may affect the capital gains tax treatment of the sale.

Australian real estate can remain subject to Australian CGT even when the owner is a foreign resident. Foreign residency can also restrict access to certain concessions, including the main residence exemption, subject to applicable exceptions and transitional rules.

The dates you lived in your property, moved overseas, changed tax residency status and eventually sold the property may be relevant when assessing your CGT position.

If you are considering selling an Australian property while living overseas, obtaining tax advice before the sale can help you understand the potential tax consequences and any applicable restrictions.

For more information, see the ATO’s guidance on Capital Gains Tax.

How to Keep Accurate Overseas Travel Records

Maintaining accurate records is a practical way to support your Australian tax residency position and respond to questions if the ATO requests further information.

Consider the following steps.

Keep a Detailed Travel History

Record the departure and arrival dates for each international trip, including the relevant income year. Where necessary, distinguish between your physical travel dates and the dates you established or ceased a particular living arrangement.

Retain Supporting Documents

Keep relevant documents where available, including:

• Flight itineraries and boarding passes
• Passport records and travel confirmations
• Employment contracts and overseas assignment details
• Overseas accommodation or residential records
• Documents relating to a move to or from Australia

These records may help explain your movements and provide context for your residency position.

Document Significant Changes in Your Circumstances

If you move overseas, relocate your family, change employers or establish a home in another country, retain records of those changes.

Travel dates alone may not establish your tax residency status, so documenting the wider circumstances can be valuable.

Review Your Tax Residency Before Lodging Your Return

Before lodging your Australian tax return, check that your travel dates and other relevant information are accurate and consistent with your supporting documents.

If you have spent substantial time overseas or your circumstances have changed during the year, consider reviewing your residency position before finalising your return.

Seek Professional Advice When Your Position Is Unclear

Australian tax residency can be complex, particularly when you maintain homes, family connections, employment or financial interests in more than one country.

An experienced tax adviser can help you assess the relevant residency tests, understand potential tax obligations and identify the records needed to support your position.

What Happens If Your Travel Records Do Not Match ATO Information?

If the dates reported to the ATO differ from passenger movement information, the discrepancy could prompt the ATO to request clarification or supporting evidence.

A discrepancy does not automatically mean you have breached your tax obligations. Differences may arise for legitimate reasons, and international travel dates are only one part of assessing tax residency.

However, having reliable records can make it easier to explain the difference and demonstrate how you arrived at your tax position.

This is particularly important if you have moved between countries, worked overseas for extended periods or have a residency position that depends on several factors.

Rather than waiting for a query, reviewing your records before lodging your tax return can help identify potential inconsistencies early.

Frequently Asked Questions About Australian Tax Residency and Overseas Travel

Does the ATO track overseas travel?

Under its passenger movements data-matching program, the ATO is expected to receive travel information from the Department of Home Affairs for approximately 115,000 individuals each year from 2026–27 to 2028–29. The information may be compared with tax records to identify potential discrepancies and compliance issues.

How long can I stay overseas without losing Australian tax residency?

There is no single period of overseas absence that automatically determines whether you remain an Australian tax resident. The applicable residency tests and your overall circumstances must be considered, including your intentions, family connections, living arrangements and ties to Australia.

Do Australian tax residents need to declare overseas income?

Australian tax residents are generally required to declare their worldwide income, including relevant foreign income, subject to applicable tax rules and any available relief. The treatment of specific income depends on your circumstances and any relevant double tax agreement.

Can I be an Australian tax resident while living overseas?

Yes. Living or working overseas does not automatically mean you cease to be an Australian tax resident. Your status depends on the relevant residency tests and the facts of your situation.

Why should I keep records of my arrival and departure dates?

Accurate travel records can help establish the timeline of your movements, support your residency assessment and explain differences between the information reported in your tax return and the information available to the ATO.

Can my tax residency affect the sale of my Australian home?

Yes. Your residency status can affect the availability of certain capital gains tax concessions, including the main residence exemption. The outcome depends on the applicable rules, the property and your individual circumstances. Seek advice before selling if you live overseas or expect to change residency status.

Need Help?

Pitt Martin Group’s Sydney tax accountants can assist with Australian tax residency assessments, international tax compliance, foreign income reporting, capital gains tax implications and tax return preparation. Whether you are relocating overseas, returning to Australia or concerned about discrepancies between your travel history and tax records, contact our experienced tax advisers for professional guidance tailored to your circumstances.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Alex Cramery @ Pitt Martin Tax

The Federal Parliament has now fixed an unintended issue in the recent negative gearing and capital gains tax reforms that became widely known as the “widow tax”.

A separate technical issue affecting homeowners who later decide to rent out their former main residence has also been addressed.

These changes provide greater certainty for property owners, particularly where a property is transferred following death or relationship breakdown, or where a former home is later rented out.

What was the ‘widow tax’ issue?

From 1 July 2027, new rules will generally quarantine losses from residential rental properties. These losses will only be available to offset income or capital gains from other residential rental properties.

However, properties acquired before 12 May 2026 are generally protected from these new restrictions.

The ‘widow tax’ issue arose where an ownership interest in a property was transferred after 12 May 2026 due to the death of an owner or a relationship breakdown.

Under the original rules, the transfer could potentially have been treated as a new acquisition. This could have resulted in a surviving spouse or former partner losing the protected negative gearing treatment that applied to the property when it was originally purchased.

What has changed?

The new rules specifically protect certain property interests transferred because of the death of a spouse or a relationship breakdown.

In some circumstances, the rules can also apply where someone inherits an additional interest in a rental property from a co-owner who is not their spouse.

As a result, an eligible transfer will not automatically cause the property interest to lose its original protected treatment for negative gearing purposes.

Case study 1 – Transfer after the death of a spouse

Sarah and David bought a rental property in 2019 as equal joint owners. The property has always been negatively geared, with annual rental losses of approximately $8,000.

Because they acquired the property before 12 May 2026, it was protected under the new rules.

If David died and his 50% interest passed to Sarah, the original rules could potentially have treated Sarah’s inherited interest as a new acquisition. This could have affected her ability to offset the rental losses against her other income.

Under the updated rules, this outcome is avoided. Because the transfer occurred following the death of her spouse, Sarah can retain the original protected treatment.

Former main residences

A separate technical issue involved properties that were originally purchased as a main residence before 12 May 2026 but were first rented out after that date.

Existing tax rules can, in certain circumstances, treat a former main residence as being reacquired at market value when it is first used to produce income. Under the original drafting, this could potentially have affected the property’s acquisition date for the new negative gearing rules.

The new legislation addresses this issue by disregarding the “first use to produce income” rule when determining the acquisition date for these purposes.

Case study 2 – Renting out your former home

James bought his home in 2018 and has lived there as his main residence ever since. In 2027, he decides to move in with his partner and rent out the property.

Under the original rules, first renting out the property after 12 May 2026 could potentially have resulted in a new acquisition date for negative gearing purposes.

The updated rules prevent this outcome. As James originally acquired the property before 7:30 pm on 12 May 2026, its original acquisition date is preserved for these purposes.

What does this mean for property owners?

The changes provide greater certainty for property owners whose circumstances change after 12 May 2026.

If you own an investment property jointly with your spouse, the new rules provide protection where an interest is transferred following death or relationship breakdown.

If you own a former main residence that you may rent out in the future, the new rules mean that first renting out the property should not, by itself, reset its acquisition date for the new negative gearing restrictions.

However, other tax considerations, particularly capital gains tax, may still need to be reviewed.

What should you do?

If you own property acquired before 12 May 2026, we recommend keeping clear records of:

• the original purchase date;
• ownership interests;
• changes in ownership; and
• the date a property is first used to generate rental income.

The rules around negative gearing and CGT can be complex, particularly when ownership changes or a former home becomes an investment property.

If you are affected by these changes on ‘widow tax’ or are considering renting out your home or transferring an interest in a property, please contact us to discuss your circumstances.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Yvonne Shao @ Pitt Martin Tax

Every self-managed super fund (SMSF) must have an investment strategy, and superannuation law requires trustees to formulate it, review it regularly, and give effect to it, having regard to the whole of the circumstances of the fund. Reviewing your SMSF investment strategy is not a tick-a-box exercise. It is how you make sure the fund’s assets still match the members’ retirement needs, and it is one of the things your auditor will check each year.

The law does not set a fixed timeframe for what “review regularly” means. It is widely accepted, and consistent with the ATO’s expectations, that the review should happen at least once a year. This guide explains how often to review your investment strategy, what the strategy must cover, and how to document it so your fund stays compliant.

Why Review Your SMSF Investment Strategy?

Superannuation law requires SMSF trustees to formulate, regularly review, and give effect to an investment strategy for the fund. The obligation is ongoing, not a one-off task completed when the fund is set up.

Whichever way you approach it, you need to be able to show your fund’s auditor that you have reviewed the investment strategy and documented any decisions made. That documentation should record either the changes you decided were necessary, or your conclusion that the existing strategy remains appropriate. Without that evidence, the review effectively did not happen as far as the audit is concerned.

How Often Should an SMSF Investment Strategy Be Reviewed?

At a minimum, the review should take place at least annually.

Some trustees carry out the review leading up to, or at the start of, a new financial year. Others do it as part of reviewing the completed financial accounts from the previous year. Neither approach is right or wrong, and you should consider what suits your situation. The important point is that the review is done and documented each year, ready for the auditor.

When Else Should You Review Your Investment Strategy?

Beyond the annual review, there are other times when it is appropriate to revisit the strategy. These include when:

• there is a market correction;
• a member joins or leaves the fund; or
• a member starts a pension in the fund.

Each of these events can change the fund’s risk profile, cashflow needs, or liquidity requirements, which is why they are natural triggers for a fresh look at the strategy.

What Goes Into an SMSF Investment Strategy?

An investment policy is generally made up of two parts.

The first is the investment objective. This outlines the fund’s goals and expected outcomes, for example achieving a certain level of return over a certain period. It usually takes into account the age of the members, their retirement needs, and their investment risk profile.

The second is the investment strategy itself. This outlines how the fund will achieve the stated objectives, for example by setting investment asset ranges or naming the specific assets the fund will hold.

What Must Trustees Consider in the Investment Strategy?

When reviewing the strategy, trustees must give consideration to:

• the risk and likely return of the fund’s investments, having regard to the fund’s objectives and expected cashflow requirements;
• the composition of the fund’s investments, including the risk that comes from inadequate diversification;
• the liquidity of the investments, having regard to expected cashflow requirements;
• the fund’s ability to discharge its existing and prospective liabilities; and
• whether the fund should hold insurance cover for one or more members.

These points must be considered, but it is up to the trustees to decide how they apply them based on the circumstances of the fund.

Does an SMSF Need a Diversified Investment Strategy?

Diversification must be considered, but considering it does not mean you are required to have a diversified strategy.

Many funds hold just a property and a bank account, and that may be perfectly appropriate for those funds. The key is documentation. If the fund is concentrated, the trustees should record what consideration they gave to diversification, why the lack of diversification is appropriate, and why they chose those particular assets.

Do You Need Insurance for Members?

There is no legal requirement to hold insurance cover for the members of an SMSF. However, trustees do need to document that insurance has been considered, even if the decision is not to hold any.

How Does Starting a Pension Change Your Investment Strategy?

A member starting a pension is a common reason to review the strategy, because it usually changes the liquidity considerations and investment profile of the fund.

While members are all in the pre-retirement growth phase, expenses tend to be more predictable, and many funds do not need to hold large cash reserves. Once members reach the point of accessing their benefits, whether as pension payments, lump sums, or both, cashflow, liquidity, and a potential cash buffer become far more important.

It is not unusual, in the lead-up to the end of a financial year, for trustees to find they do not have the cash to satisfy even the minimum pension requirements. There can be several reasons for this, but it should raise questions about whether the current investment strategy is still appropriate and whether the fund’s asset holdings need to be reviewed.

Example: The One-Property, One-Bank-Account Fund

Consider a fund that holds a single property and a bank account. This may have been a reasonable strategy during the growth phase. In the drawdown phase, the question is whether it still works.

Australian investors often have an affinity for bricks and mortar, but that does not make property appropriate in every situation. If the rental income from the property cannot support the members’ retirement needs and minimum pension withdrawals, something has to change. The same issue applies to any asset that cannot be sold easily, such as holdings in unlisted companies or trusts.

Example: A Member Starts a Pension

A fund has operated for years with all members in the growth phase, holding mostly long-term assets. One member then starts an account-based pension and must be paid at least the minimum pension each year. The trustees review the strategy, consider the fund’s new cashflow and liquidity needs, adjust the asset mix or build a cash buffer, and document the reasons for the change. The review is what keeps the fund both compliant and able to meet its payments.

Key Questions for Trustees Reviewing Their Investment Strategy

Before signing off on the review, trustees can work through the following:

• Have you reviewed the investment strategy at least once this year?
• Does your documentation show either the changes made or that the existing strategy remains appropriate?
• Have you considered risk, return, diversification, liquidity, and the fund’s ability to meet its liabilities?
• If the fund is concentrated, have you documented why that is appropriate?
• Have you documented whether insurance for members was considered?
• Has anything changed, such as a member joining or leaving, a pension starting, or a market correction, that calls for a review?
• Can the fund meet its minimum pension payments and expected cashflow from its current assets?

Frequently Asked Questions

Does an SMSF have to review its investment strategy every year?

The law says the strategy must be reviewed “regularly” without setting a fixed timeframe. At least once a year is widely accepted and consistent with the ATO’s expectations.

Who is responsible for reviewing the investment strategy?

The trustees are responsible. They must also be able to show the fund’s auditor that the review was carried out and documented.

Does an SMSF investment strategy have to be diversified?

No. Diversification must be considered, but a concentrated fund, such as one holding a property and a bank account, can be appropriate if the trustees document why.

Is insurance for members compulsory in an SMSF?

No. There is no requirement to hold insurance for members, but trustees must document that they considered it.

What happens if the fund cannot meet its minimum pension payments?

It is a warning sign that the investment strategy may need review, particularly around liquidity and whether the asset mix still suits the drawdown phase.

When should the strategy be reviewed outside the annual review?

After events such as a market correction, a member joining or leaving the fund, or a member starting a pension.

Need Help?

If you are unsure whether your SMSF’s investment strategy still suits the fund, or whether it needs reviewing after a change such as a member starting a pension, Pitt Martin Group can help you review and document your strategy, weigh up diversification, liquidity and insurance, and prepare the evidence your auditor will expect.

As Sydney tax accountants, we assist trustees with SMSF compliance, investment strategy reviews and practical superannuation advice.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

SMSF property valuation is an important part of the annual compliance and audit process for self-managed super funds. For many SMSF trustees, property is one of the largest assets the fund holds, making an accurate and well-supported market valuation particularly important at audit time.

Unlike shares or cash, property does not have a live market price you can simply look up on 30 June. Yet every SMSF asset must be reported at its market value each financial year, and your fund auditor needs to see clear, objective evidence supporting the value you have used.

The good news is that a property audit becomes far smoother when trustees prepare the right evidence in advance, rather than scrambling once the auditor asks for it. This guide explains what is required, what evidence your auditor will look for, and the steps trustees can take now to make the financial year 2026 (FY2026) audit as painless as possible.

Why Is Property Harder to Audit Than Other SMSF assets?

Superannuation law requires that all SMSF assets are valued at market value each 30 June. For assets with a ready market, such as ASX-listed shares or managed funds, this is straightforward, because a reliable closing price is readily available.

Property is different. There is no daily quoted price, values can move significantly from year to year, and each property is unique. Because of this, trustees need to actively determine the market value and be able to back it up with supportable evidence. This is where many audits slow down. Often the value itself is fine; it is the supporting documentation that is missing or incomplete.

Who Is Responsible for Valuing SMSF assets?

The trustees are responsible for determining the market value of the fund’s assets, including property. This responsibility cannot be handed to the accountant or the auditor. The auditor’s role is to review the valuation and the evidence behind it, not to set the value.

After the fund’s annual financial statements are prepared, the auditor will ask to see objective and supportable evidence showing how the trustees arrived at the reported market value. If that evidence is not available, the auditor may be unable to sign off without qualification, which can lead to delays and additional cost.

When Do SMSF Assets Need to Be Valued?

SMSF assets, including property, must be valued as at 30 June each year for the fund’s financial statements and annual return. Even though your FY2026 audit may not take place for several months, the valuation still needs to reflect the market value at that 30 June date. Gathering evidence close to year end, while it is current, is far easier than trying to reconstruct it later.

Should You Use an Independent Valuer for SMSF assets?

Trustees have the option to engage a qualified independent valuer, and it is worth seriously considering where:

• the property represents a significant portion of the fund’s total value; or
• the property is unusual or otherwise difficult to value.

An independent valuation is not compulsory in every year, but it provides strong, defensible evidence and can remove a lot of uncertainty from the audit. For high-value or hard-to-value properties, the cost of a valuer is often small compared with the risk of an audit issue.

What Evidence Supports an SMSF Assets Valuation?

Where trustees choose not to use an independent valuer, they generally need to support the valuation with evidence drawn from more than one source. A single data point is rarely enough on its own.

For property, acceptable evidence typically includes:

• Recent comparable sales: generally at least three sales of genuinely comparable properties, similar in size and location to the fund’s property.
• A real estate agent appraisal: ideally one that also sets out the comparable sales it is based on.
• Net income yields for commercial property: useful supporting evidence, but generally not sufficient on its own.

The Australian Taxation Office (ATO) sets out helpful guidance on acceptable methods and evidence in its Guide to valuing SMSF assets, which is a useful reference point for trustees.

Example: Valuing a Residential Property Held by an SMSF

An SMSF owns a residential unit. Rather than commission a full valuation every year, the trustees gather three recent sales of comparable units in the same complex and suburb, along with a written appraisal from a local real estate agent that references those sales. Together, this gives the auditor multiple, consistent sources supporting the reported market value, so the audit proceeds without a valuation query.

Can an SMSF Rent Its Property to a Related Party?

Where an SMSF holds property that meets the business real property (BRP) definition, it is possible to lease that property to a business operated by a member or a related party of the fund. This is a common and legitimate arrangement. For example, a fund might own the premises its members’ business trades from.

However, the fact that a related-party lease is permitted does not mean trustees can charge whatever rent they like. Any lease with a related party must be on arm’s length (commercial) terms.

A simple way to test this is to ask: would every term of this lease be agreed to if the tenant were a completely unrelated third party? If the rent is below market, or the terms are unusually favourable, the arrangement is unlikely to satisfy the arm’s length requirement.

What Evidence Does an Auditor Need for a Related-Party Lease?

To demonstrate that a related-party leasing arrangement is on arm’s length terms, the auditor should be provided with:

• A properly documented lease setting out the terms in writing.
• A rent appraisal from the time the lease was first entered into, supporting the rent as a market rate.
• Evidence that the arrangement is actually operating in line with the lease terms, such as rent being paid on time and in the agreed amount.
• Evidence that, where a prior lease term has expired, the rent has been reset to market value and backed by a new rent appraisal.

Example: Leasing Business Premises to a Related Party

An SMSF owns a commercial warehouse that meets the BRP definition and leases it to a company owned by the fund’s members. The trustees keep a signed lease, obtained a rent appraisal when the lease commenced, and can show consistent rent payments matching the lease. When the term expired, they obtained a fresh appraisal and reset the rent to the current market rate. Because the paperwork is complete and current, the auditor can readily confirm the arrangement is on arm’s length terms.

Key Questions for SMSF Trustees Before Audit

Before your SMSF audit, it helps to work through the following:

1. Has each property been valued at market value as at 30 June?
2. Is the valuation supported by evidence from more than one source?
3. Do you have at least three genuinely comparable recent sales, or a current appraisal?
4. Would an independent valuation be appropriate given the property’s value or complexity?
5. If the property is leased to a related party, is the lease properly documented?
6. Was a rent appraisal obtained when the lease commenced?
7. Is the rent being paid in line with the lease?
8. Has the rent been reset to market value at the end of any expired term, supported by a new appraisal?

How to Prepare Your SMSF Assets for the FY2026 Audit

Although your FY2026 audit may still be some months away, the smoothest audits are the ones where trustees are proactive. Rather than waiting for the auditor’s request, trustees can:

1. Gather comparable sales and appraisals close to 30 June, while the information is current.
2. Confirm whether an independent valuation is warranted for any significant or hard-to-value property.
3. Review related-party leases to ensure they are documented, current, and on market terms.
4. Store all valuation and lease evidence in one place, ready to hand to the auditor.

Taking these steps early means fewer queries, faster sign-off, and less stress at audit time.

Frequently Asked Questions

Does an SMSF have to value its property every year?

Yes. All SMSF assets, including property, must be valued at market value each 30 June for the fund’s financial statements and annual return.

Who decides the market value of SMSF property?

The trustees are responsible for determining the market value used for an SMSF property valuation. The auditor reviews the value and the supporting evidence but does not set it.

Does an SMSF need an independent valuation of property each year?

Not necessarily. Trustees can support a valuation with evidence such as comparable sales and agent appraisals. However, an independent valuation should be considered where the property is a significant part of the fund or is difficult to value.

How many comparable sales does an SMSF need?

Generally at least three sales of genuinely comparable properties, similar in size and location, are expected as supporting evidence.

Can an SMSF lease property to a related party?

Yes, where the property meets the business real property definition. The lease must be on arm’s length (commercial) terms, supported by a rent appraisal.

What rent can an SMSF charge a related party?

The rent must reflect market value, meaning the same rent an unrelated third party would pay. Charging below-market rent to a related party can create compliance problems.

When should trustees start preparing for the audit?

As early as possible. Gathering valuation and lease evidence soon after 30 June, rather than waiting for the auditor’s request, makes for a much smoother audit.

Need Help?

Pitt Martin Group can assist SMSF trustees with SMSF accounting, annual compliance and audit preparation, including reviewing property valuation evidence and related-party lease documentation. If you are preparing for your FY2026 SMSF audit or are unsure whether your property valuation evidence is sufficient, contact our Sydney SMSF accountants for professional assistance.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

A recent Tribunal decision highlights an important point for taxpayers claiming work-related computer deductions: using computer equipment for activities that benefit your employer does not automatically mean the related expenses are tax deductible.

Work-Related Computer Deductions: What Happened?

A recent Tribunal decision highlights an important issue for employees claiming work-related computer deductions: computer equipment and technology expenses are not automatically deductible simply because the activities benefit an employer.

In Hartley and Commissioner of Taxation [2026] ARTA 1590, the Tribunal considered whether a senior IT sales employee could claim substantial deductions for a home computer “lab”. Although the employee demonstrated that several projects undertaken at home were encouraged by and benefited his employer, the Tribunal ultimately denied the deductions in full.

The decision is a useful reminder that the connection between an expense and an employee’s actual income-earning duties is critical when determining whether a work-related deduction is available.

What Were the Work-Related Computer Deductions?

Mr Hartley was employed by Ericsson Australia as a Domain Sales Manager. He argued that his employment involved responsibilities beyond traditional sales activities. According to his evidence, his role also involved innovation, identifying new product opportunities and providing thought leadership within the industry.

During the 2022 income year, Mr Hartley claimed a substantial amount of work-related and capital allowance deductions associated with his home computer “lab”.

The total amount ultimately disputed before the Tribunal was $31,870. Most of the claim related to technology and computing expenses, including:

• Digital storage devices
• Computers
• Computer monitors
• Computer software
• Subscriptions to various computing services

The ATO denied the claims during its audit of Mr Hartley’s tax affairs. The taxpayer subsequently objected to the decision, but the deductions remained denied. The matter was then considered by the Tribunal.

The size and nature of the claim made the case particularly relevant for taxpayers who incur significant technology costs in connection with their employment.

The computer activities benefited the employer

Mr Hartley provided evidence of several projects undertaken using his home computer lab. These included:

• A network virtualisation project that was later developed and marketed by Ericsson;
• Cloud infrastructure work undertaken through an industry collaboration involving Ericsson; and
• Work on video interface technology that was featured in an Ericsson press release and later deployed in the business.

The Tribunal accepted that Mr Hartley had specialised expertise and that his senior role involved contributing to the development of marketable technologies.

However, this was not enough to establish that the expenses were deductible.

Why were the work-related computer deductions denied?

Despite that, the Tribunal denied the deductions in full. The reasoning turned on whose purpose the expenditure served:

1. The activities weren’t required by the role. Ericsson neither mandated the work nor permitted Mr. Hartley to use company equipment to perform it.
2. The taxpayer stood to keep the benefit. Evidence suggested the work was done at home partly so Mr. Hartley could retain ownership of any development if he left Ericsson.
3. General professional interest isn’t enough. The Tribunal found the activities were closer to maintaining general professional standing and personal interest in IT than to discharging his actual employment duties.

Citing the High Court’s decision in Federal Commissioner of Taxation v Hatchett [1971] HCA 47, the Tribunal confirmed that employer encouragement of an activity without more does not convert it into a deductible work expense.

What Does the Hartley Case Mean for Work-Related Computer Deductions?

The ATO has repeatedly flagged work-related deductions as a compliance priority, and large or unusual claims attract particular scrutiny. Hartley is a useful reminder of where the line sits:

For businesses and taxpayers, it is not enough to demonstrate that:

• the equipment is used at home;
• the employer is aware of or encourages the activity;
• the employer benefits from the work; or
• the taxpayer uses the equipment to develop professional skills or maintain industry knowledge.

The nature of the taxpayer’s actual employment duties and the purpose for which the expenditure was incurred remain important considerations.

This is particularly relevant where an employee is claiming significant amounts for computers, monitors, storage equipment, software or online computing services.

Key takeaway for taxpayers

Before claiming a work-related computer deduction, taxpayers should consider whether the expense genuinely relates to their current income-producing duties rather than broader professional interests or personal projects.

The Hartley decision demonstrates that even substantial work that ultimately benefits an employer may not qualify for a deduction if it falls outside the employee’s actual employment responsibilities.

For significant claims, businesses and employees should retain appropriate records and carefully consider the connection between the expense, the employment duties and the income being earned.

Frequently Asked Questions

What was the outcome of Hartley and Commissioner of Taxation [2026] ARTA 1590?

The Administrative Review Tribunal upheld the ATO’s decision to deny Mr Hartley’s $31,870 claim for home computer “lab” expenses, finding the costs were not sufficiently connected to his actual employment duties.

Does employer encouragement make a work-related expense deductible?

No. The Tribunal confirmed that an employer encouraging or benefiting from an activity is not, on its own, enough to support a deduction. The expense must relate to the performance of the employee’s specific duties.

What case law did the Tribunal rely on?

The Tribunal cited Federal Commissioner of Taxation v Hatchett [1971] HCA 47, a longstanding authority on the limits of deductibility for self-education and work-related expenditure.

What should you take from this decision?

Before claiming large work-related deductions, test whether the expense was actually required to perform the client’s job not merely useful, encouraged, or professionally beneficial. Also consider who ultimately retains the benefit of any work product created.

Is the computer use directly connected to your employment duties?

A general professional interest may not be enough.

Need Help?

If you are unsure whether your computer, technology or other work-related expenses are deductible, Pitt Martin Group can help you assess the connection between the expense and your income-earning activities, determine any required apportionment, and understand the record-keeping requirements.

As Sydney tax accountants, we assist individuals and businesses with work-related deductions, tax compliance and practical tax advice.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group, Sydney tax accountants, is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Nora Pham @ Pitt Martin Tax

The Australian Taxation Office (ATO) has released its reasonable travel and overtime meal allowance rates for the 2026–27 income year in Taxation Determination TD 2026/4.

The updated rates include a $40.00 reasonable amount for overtime meal expenses, together with updated reasonable amounts for domestic and overseas work-related travel based on salary levels and travel destinations.

However, there is an important distinction employees and employers need to understand:

The ATO’s reasonable travel allowance rates are not automatic tax deductions.

Receiving a travel or overtime meal allowance does not automatically entitle an employee to claim the ATO’s published amount as a tax deduction. The employee must satisfy specific requirements, and incorrectly claiming an amount can result in a deduction being denied, as well as potential interest and penalties.

ATO Travel Allowance Rates

The ATO publishes reasonable amounts each income year for certain work-related travel and overtime meal expenses.

For the 2026–27 income year, the updated amounts are contained in TD 2026/4 and cover certain:

• Domestic travel expenses;
• Overseas travel expenses;
• Meal and incidental expenses while travelling for work; and
• Overtime meal expenses.

These amounts can be useful because, where the relevant conditions are satisfied, an employee may be able to claim certain deductible expenses without keeping receipts for every individual expense.

However, the ATO’s reasonable amounts should be regarded as a substantiation concession or benchmark, not as an automatic deduction available to every employee.

ATO Overtime Meal Allowance Rates

The ATO’s reasonable amount for an overtime meal expense for the 2026–27 income year is $40.00.

This does not mean every employee who works overtime can automatically claim $40 as a tax deduction.

The employee must generally receive a genuine overtime meal allowance from their employer and satisfy the applicable requirements. The meal expense must also have actually been incurred and be deductible under the tax rules.

In simple terms:

The $40.00 reasonable amount is not a standard $40 tax deduction for everyone who works overtime.

ATO Travel Allowance Rates Tax Deduction Rules

An employee cannot simply receive a travel allowance and automatically claim the corresponding ATO reasonable amount as a tax deduction.

The underlying expense must still be genuinely incurred and satisfy the requirements for a work-related tax deduction.

The ATO’s reasonable amount may allow an employee to rely on simplified substantiation rules in certain circumstances. It does not create a deduction where there is no deductible expense.

For more information, employees should also review your firm’s guide to work-related tax deductions.

When Does the ATO Travel Allowance Rates Apply?

The ATO’s reasonable amounts generally become relevant where an employee receives a genuine travel or overtime meal allowance from their employer.

As a practical matter, the allowance should generally:

• Be paid specifically to cover work-related travel or overtime meal expenses;
• Relate to particular work travel or overtime rather than being a general payment;
• Be separately identified from normal salary or wages; and
• Be intended to cover expenses the employee is expected to incur.

The exact tax treatment will depend on the employee’s circumstances and the applicable ATO requirements.

If Your ATO Travel Allowance Rates are Included in Salary?

If an amount has simply been incorporated into an employee’s normal salary package, or is not separately identified as a travel or overtime meal allowance, the ATO’s reasonable amount provisions may not apply.

Instead, the employee may need to rely on the normal substantiation and record-keeping rules when determining whether an expense can be claimed.

This is an important issue for employers when establishing payroll arrangements.

Employers should make sure allowances are properly structured, separately identified and supported by appropriate documentation.

What ATO Travel Allowance Rates Can an Employee Claim?

The ATO’s reasonable amount is not a guaranteed deduction.

Generally, an employee can only claim an expense where it:

1. Was actually incurred;
2. Was incurred in earning assessable income;
3. Is not private or domestic;
4. Has not been reimbursed by the employer; and
5. Meets the applicable substantiation and record-keeping requirements.

For example, if an employee receives a travel allowance and spends less than the applicable ATO reasonable amount, they should not assume they can automatically claim the full published rate.

Similarly, an employee should not claim an expense that was never actually incurred.

The reasonable amount is primarily relevant to substantiation, rather than creating an entitlement to a particular deduction.

Do You Need Receipts If You Receive an ATO Travel Allowance Rate?

Not necessarily.

Where the relevant conditions are satisfied, an employee may be able to rely on the ATO’s reasonable amount provisions without keeping receipts for every individual meal or incidental expense.

However, this does not mean that employees should keep no records.

Employees should maintain sufficient information to demonstrate:

• They travelled for work;
• The relevant travel occurred;
• They received a travel allowance;
• They incurred deductible expenses; and
• Their claim satisfies the relevant requirements.

Keeping supporting records can be particularly important if the ATO reviews the employee’s tax return

What Records Should Employees Keep?

Even where individual receipts are not required under the applicable reasonable amount provisions, good record keeping remains important.

Useful records can include:

• A diary of work-related trips and overnight travel;
• Dates and locations of business travel;
• Details of meals and incidental expenses;
• Bank or credit card records showing expenses personally paid;
• A representative selection of receipts; and
• Documentation from the employer confirming the allowance and travel arrangements.

Employees should not rely solely on the ATO’s published rates without maintaining supporting evidence of their travel and expenses.

Do You Need a Travel Diary for Six or More Nights?

Additional travel diary requirements can apply where an employee travels for work for six or more consecutive nights.

In these circumstances, employees will generally need to maintain a travel diary recording relevant information such as:

• The dates of travel;
• Locations visited;
• The activities undertaken; and
• The purpose of the travel.

Employees undertaking extended work travel should therefore pay particular attention to their record-keeping obligations.

ATO Travel Allowance Rates Tax Deduction Mistakes

Understanding the common mistakes can help employees avoid incorrect claims.

1. Treating the ATO rate as an automatic deduction

The published rate is not an automatic deduction. The employee must satisfy the relevant requirements.

2. Claiming expenses that were never incurred

The reasonable amount does not allow an employee to claim an expense they did not actually pay.

3. Treating ordinary salary as a travel allowance

An amount incorporated into ordinary salary or wages does not necessarily qualify as a separate travel allowance.

4. Claiming reimbursed expenses

Employees generally cannot claim a tax deduction for an expense that has already been reimbursed by their employer.

5. Keeping no supporting records

Even where individual receipts may not be required, employees should maintain sufficient evidence to support their claim.

6. Forgetting travel diary requirements

Extended work travel can trigger additional travel diary obligations. Employees should check these requirements before undertaking longer trips.

Practical Tips for Employees

If you receive a travel or overtime meal allowance during the 2026–27 income year, consider the following:

• Check your payslip: Make sure the allowance is separately identified from ordinary salary or wages.
• Understand what the allowance covers: Confirm whether it relates to travel, meals, incidentals or overtime meals.
• Keep records throughout the year: A simple travel diary can be much easier than reconstructing travel months later.
• Retain supporting documents: Keep bank statements, credit card records and relevant receipts where available.
• Only claim genuine expenses: Do not treat the ATO reasonable amount as an automatic deduction.
• Take extra care on extended trips: Check the travel diary requirements when you are away for six or more consecutive nights.
• Review your tax return carefully: Make sure any deduction is supported by the actual circumstances.

Practical Tips for Employers

Employers should also review their employee travel and overtime meal allowance arrangements for 2026–27.

Consider whether:

• Allowances are separately identified in payroll records;
• Employees understand what each allowance is intended to cover;
• Allowances are supported by appropriate policies and documentation;
• Employees know what records they should retain;
• Payroll and tax reporting processes correctly identify allowances; and
• The business’s allowance arrangements remain appropriate for the current income year.

Clear documentation can help reduce confusion for both employers and employees.

ATO Travel Allowance Rates 2026–27: Key Takeaway

The ATO reasonable travel allowance rates for 2026–27, set out in TD 2026/4, provide useful benchmarks for employees and employers.

The $40.00 overtime meal allowance rate, together with the updated domestic and overseas travel amounts, should not be interpreted as an automatic tax deduction.

The key distinction is:

An ATO reasonable amount may allow certain substantiation requirements to be relaxed, but it does not create an entitlement to claim an expense that was not actually incurred.

Employees should ensure they have received a genuine allowance, incurred genuine deductible expenses and maintained appropriate records.

Employers should ensure their allowance arrangements are properly structured, documented and communicated to employees.

Reviewing these arrangements early in the 2026–27 income year can help reduce the risk of incorrect deductions, ATO scrutiny, interest and penalties.

If you or your employees receive travel allowances or overtime meal allowances, now is a good time to review your arrangements. We can help you assess whether your allowances meet the relevant ATO requirements, understand the reasonable amounts and establish appropriate record-keeping processes.

ATO Travel Allowance Rates 2026–27: FAQs

What is the ATO overtime meal allowance for 2026–27?

The ATO’s reasonable amount for overtime meal expenses for the 2026–27 income year is $40.00. This is not automatically a $40 tax deduction. The relevant conditions must be satisfied before the reasonable amount provisions can be relied upon.

Can I automatically claim the ATO travel allowance rate?

No. The ATO’s reasonable travel amounts are not automatic tax deductions. Generally, the employee must have actually incurred deductible work-related expenses and satisfy the applicable requirements.

Do I need receipts if I receive a travel allowance?

Not necessarily. Where the relevant conditions are satisfied, an employee may not need receipts for every individual expense. However, appropriate supporting records should still be maintained.

What is TD 2026/4?

TD 2026/4 is the ATO Taxation Determination that sets out the reasonable amounts for certain domestic and overseas travel expenses and overtime meal expenses for the 2026–27 income year.

Do I need a travel diary for work travel?

Additional travel diary requirements can apply when an employee is travelling for work for six or more consecutive nights. Employees undertaking extended work travel should check the applicable requirements and maintain the necessary records.

Are ATO reasonable travel amounts the same as tax deductions?

No. The reasonable amounts are primarily relevant to substantiation requirements. They do not mean an employee is automatically entitled to claim the published amount as a tax deduction.

Need Help?

By working with us as your professional tax accountant and mortgage broker, you can be confident that your loans are structured to protect your tax position, maximise deductions, and avoid costly mistakes, giving you greater peace of mind and more control over your financial future.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Alex Cramery @ Pitt Martin Tax

The Australian Government has proposed a significant change to the taxation of discretionary trusts, commonly known as family trusts.

From 1 July 2028, the Government proposes to introduce a 30% minimum tax on the taxable income of discretionary trusts, subject to certain exclusions. The Government has also proposed a three-year rollover period from 1 July 2027 to help eligible businesses and taxpayers restructure their affairs if required.

While discretionary trusts remain a common structure for Australian families, business owners and investors, the proposed changes may affect the way some trusts distribute income and manage their tax affairs.

It is important to note that the proposed 30% minimum tax is not yet law. Treasury is consulting on the design and implementation of the proposed reforms, so some details may change before legislation is introduced.

What Is a Discretionary Trust?

A discretionary trust is a trust structure where the trustee generally has discretion over how trust income and capital are distributed among eligible beneficiaries.

Discretionary trusts are commonly used in Australia for:

• Operating family businesses
• Holding investment assets
• Managing family wealth
• Asset protection
• Succession planning
• Estate planning
• Distributing income among family members

One of the key features of a discretionary trust is its flexibility. Subject to the trust deed and applicable tax rules, the trustee can generally determine which beneficiaries receive distributions each year.

The proposed 30% minimum tax on discretionary trusts may reduce some of this tax flexibility for affected family groups.

What Is the Proposed 30% Minimum Tax?

Under the Government’s proposal, trustees of discretionary trusts would generally be required to pay a minimum tax rate of 30% on the trust’s taxable income from 1 July 2028.

The proposed measure is intended to ensure that income distributed through discretionary trusts is subject to a minimum level of tax and to reduce opportunities for income splitting.

The Government has stated that the reform is intended to bring the taxation of certain trust income more closely into line with the tax rates applying to Australian workers and families who earn income from employment.

How would the tax paid by the trustee be treated?

The proposal includes a mechanism intended to recognise tax already paid by the trustee.

Where trust income is distributed to individuals or certain other non-corporate beneficiaries, those beneficiaries would generally receive a non-refundable tax offset for the tax paid by the trustee.

However, the proposed treatment is different for corporate beneficiaries. This is an important issue for family groups that currently use companies as beneficiaries of discretionary trusts.

The exact operation of the proposed rules will depend on the final legislation.

Will All Discretionary Trusts Be Affected?

No.

The Government has proposed a number of exclusions from the 30% minimum tax regime.

The proposed exclusions include certain:

• Fixed trusts
• Widely held trusts
• Complying superannuation funds
• Charitable trusts
• Deceased estates
• Special disability trusts
• Genuine testamentary trusts

The Government has also indicated that primary production income and certain income relating to vulnerable minors would be excluded.

The Government estimates that more than 90% of small businesses are not expected to be affected by the proposed reform. However, the impact on an individual taxpayer will depend on the type of trust, the trust’s activities, the beneficiaries and the way income is distributed.

How Could the Proposed Changes Affect Family Businesses?

The impact is likely to be most relevant for family groups that actively use the flexibility of discretionary trusts for tax and business planning.

For example, some family trusts distribute income to different family members depending on their individual circumstances. Other trusts distribute income to a corporate beneficiary to retain funds within the broader business structure.

The proposed minimum tax may change the tax outcome of these arrangements.

Corporate beneficiaries

The treatment of corporate beneficiaries is likely to be particularly important.

Under the proposal, corporate beneficiaries would generally not receive the same non-refundable tax offset for tax paid by the trustee.

This could result in additional tax being payable where income is distributed from a discretionary trust to a company.

As a result, family groups with a discretionary trust and corporate beneficiary should review how their current structure operates and consider whether the proposed rules could affect future distributions.

However, no changes should be implemented solely on the basis of the current proposal while the legislation remains under development.

Could the Changes Affect Tax Losses?

Potentially.

Many family groups use discretionary trusts as part of a broader structure involving businesses, investments and multiple beneficiaries. The proposed minimum tax could affect the way taxable income and existing tax losses are managed within some structures.

The actual outcome will depend on the nature of the trust’s income, the type of losses involved and the final rules.

This means that taxpayers should consider the overall tax position of the family group, rather than looking at the trust in isolation.

Proposed Rollover Relief for Restructuring

The Government has also proposed three years of rollover relief from 1 July 2027 to assist small businesses and other taxpayers who choose to restructure out of discretionary trusts.

The proposed relief may make it easier for some eligible taxpayers to move from a discretionary trust into an alternative structure, such as a company or fixed trust, without immediately triggering certain income tax or capital gains tax consequences.

However, a trust restructure can involve much more than income tax.

Before changing an existing structure, taxpayers may need to consider:

• Capital gains tax
• Stamp duty
• Existing loans and financing arrangements
• Bank requirements
• Asset ownership
• Commercial contracts
• Licences and registrations
• Existing tax attributes
• Estate planning
• Asset protection

Professional advice should therefore be obtained before implementing any significant restructure.

When Will the 30% Minimum Tax Start?

The proposed start date is 1 July 2028.

The Government has also proposed rollover relief for three years from 1 July 2027 for eligible taxpayers who choose to restructure their affairs.

This means affected family groups have time to understand the proposed changes and consider their options.

There is generally no need to make immediate structural changes simply because the proposal has been announced.

Is the 30% Minimum Tax on Discretionary Trusts Law Yet?

No.

This is an important point for trustees and business owners.

The 30% minimum tax is currently a proposed tax reform, rather than an enacted law. Treasury released a consultation paper in July 2026 seeking feedback on the implementation and design of the proposed discretionary trust reforms.

The final legislation may therefore differ from the current proposal.

Taxpayers should be careful when making long-term restructuring decisions based on proposed legislation that has not yet been enacted.

What Should Discretionary Trust Trustees Do Now?

For most trustees, the best approach is to review, monitor and plan, rather than immediately restructure.

Consider reviewing:

1. How your trust currently earns income
   Determine whether the trust mainly receives business income, investment income, capital gains or other types of income.
2. Who receives trust distributions
   Review whether income is distributed to individuals, companies or other entities.
3. Whether a corporate beneficiary is used
   If a company regularly receives trust distributions, consider how the proposed minimum tax could affect the overall tax position.
4. Existing tax losses and carried-forward amounts
   Consider whether the proposed rules could affect the use of existing tax attributes.
5. The purpose of the trust structure
   Tax is only one consideration. Asset protection, succession planning, estate planning and business flexibility may remain important.
6. Potential restructuring options
   If the current structure may become less suitable, consider whether a company, fixed trust or another structure could be appropriate.

Any restructuring decision should take into account, tax, legal, commercial and family considerations.

Should You Restructure Your Family Trust Now?

Not necessarily.

The proposed 30% minimum tax on discretionary trusts is an important development, but the legislation has not yet been finalised.

For many families, discretionary trusts provide benefits beyond tax planning. These may include asset protection, succession planning and flexibility in managing family businesses and investments.

Accordingly, the right response will depend on the circumstances of each family group.

Rather than restructuring immediately, trustees should monitor the legislation, understand the potential impact and seek professional advice when the final rules become clearer.

Key Takeaways

The proposed changes represent a significant development for Australian discretionary trusts and family businesses.

The key points are:

• A 30% minimum tax is proposed for discretionary trusts from 1 July 2028.
• Certain trusts and types of income are proposed to be excluded.
• The Government expects more than 90% of small businesses to be unaffected.
• Corporate beneficiaries may be an important area of concern under the proposed rules.
• Three years of proposed rollover relief would be available from 1 July 2027 to assist eligible restructures.
• The proposal is not yet law, and the final rules may change.

For trustees and business owners, now is a good time to review the purpose and structure of existing discretionary trusts and consider whether the proposed reforms could affect future distributions.

If you operate a family business or hold investments through a discretionary trust, we recommend reviewing your structure before making any significant changes. Our team can help you assess the potential tax implications and consider whether your existing structure remains appropriate as the proposed legislation develops.

Need Help?

By working with us as your professional tax accountant and mortgage broker, you can be confident that your loans are structured to protect your tax position, maximise deductions, and avoid costly mistakes, giving you greater peace of mind and more control over your financial future.

Pitt Martin Group is a firm of Chartered Accountants, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

Pitt Martin Group qualifications include over fifteen years of professional experience in accounting industry, Registered Australia Tax Agents, membership certification of the Chartered Accountants Australia and New Zealand (CA ANZ), certified External Examiner of the Law Societies of New South Wales, Victoria, and Western Australia Law Trust Accounts, membership certification of the Finance Brokers Association of Australia Limited (FBAA), Registered Agents of the Australian Securities and Investments Commission (ASIC), certified Advisor of accounting software such as XERO, QUICKBOOKS, MYOB, etc.

This content is for reference only and does not constitute advice on any individual or group’s specific situation. Any individual or group should take action only after consulting with professionals. Due to the timeliness of tax laws, we have endeavoured to provide timely and accurate information at the time of publication, but cannot guarantee that the content stated will remain applicable in the future. Please indicate the source when forwarding this content.

By Yvonne Shao @ Pitt Martin Tax