As we approach the end of the 2025 financial year, tax planning presents a range of unique challenges and opportunities, particularly with the Federal Election just around the corner.
The outcome of the election will play a crucial role in determining whether proposed legislative measures are reintroduced to the next sitting parliament or merely remain as proposed measures from the previous government.
While we await clarity, it is important to focus on key areas that can impact your tax planning now. To help you and your business set up for success, we’ve compiled a list of what we know and what we don’t yet know, along with critical actions for you to consider. This includes impending changes and ATO focus areas.
To ensure you’re fully prepared for whatever comes next, look out for our upcoming comprehensive year-end guide and checklist, which will be released shortly after the Federal Election results are known.
a. Confirmed tax measures
Instant Asset Write-Off
The instant asset write-off for depreciating assets costing less than $20,000 was extended to 30 June 2025. This measure was passed into law on 26 March 2025, just before the election was called and applies to small businesses with an aggregated turnover of less than $10 million.
Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use. This applies to multiple assets, provided each individual asset is under the threshold and includes both new and second-hand assets. For example, if you purchase a new piece of machinery for $15,000 and a second-hand vehicle for $18,000, both can be written off immediately.
Action: If you qualify, consider purchasing assets before 30 June 2025 to take advantage of this instant deduction. This can significantly improve your cash flow by reducing your taxable income for the year.
Non-deductibility of General Interest Charges
From 1 July 2025, General Interest Charges (GIC) and Shortfall Interest Charges (SIC) imposed by the ATO will no longer be tax-deductible. This change means that any interest charges incurred on overdue tax debts will fully impact your finances without the benefit of a tax deduction. The current GIC rate is 11.17% per annum, making it a costly form of debt!
Action: Lodgement and payment extensions are now less frequently granted and GIC or SIC remissions are more difficult to negotiate with the ATO. If you have ATO debts, plan to address them promptly, as interest will not be deductible from 1 July 2025. Consider setting up a payment plan with the ATO to manage your liabilities effectively (noting that demonstrated compliance can assist in securing such plans).
Tax cuts
On 25 March 2025, Parliament passed tax cuts for individuals, effective from 1 July 2026, being:
- From 1 July 2026, the tax rate for income between $18,201 and $45,000 will be reduced from 16% to 15%.
- From 1 July 2027, this tax rate will be further reduced to 14%.
No action: These cuts don’t kick in until 2026 but keep an eye on potential changes if a Coalition government comes into power, as they have proposed providing cost of living relief sooner than 1 July 2026 by implementing cuts to fuel excise rather than the individual tax rate cuts.
b. Unpassed tax measures
Superannuation – $3M Cap (Division 296)
The draft legislation, known as Division 296, aims to reduce the tax concessions for individuals with total superannuation balances exceeding $3 million, with effect from 1 July 2025. If enacted, the measures will apply an additional tax rate of 15% on earnings relating to the proportion of an individual’s superannuation balance over $3 million. Importantly, this would include both actual and unrealised capital gains. Earnings on balances below $3 million would continue to be taxed at the concessional rate of 15% or less. Read our article for further detail on this legislation.
The 2025-26 Budget papers were silent on the Government’s stance regarding the future of this measure, causing uncertainty for impacted taxpayers with more than $3 million in superannuation.
Action: If you are close to the $3 million threshold, consider whether to hold off making additional contributions for now until after the election. If you are over the $3 million threshold, hold off on withdrawing funds until more details are confirmed. This measure could significantly impact estate planning and retirement strategies, so consult with your advisor.
Payday Super
Draft legislation released on 14 March 2025 proposed major reforms to the Superannuation Guarantee regime, set to take effect from 1 July 2026. These changes would require employers to pay Superannuation Guarantee contributions within 7 calendar days of paying their employees’ salary and/or wages.
If reintroduced into the next Parliament, the measures would replace the current quarterly due dates with a 7 day payment window from the date of salary payment. Employers will be liable for the superannuation guarantee charge (SGC) if contributions are not made on time, which includes an interest component and administrative penalties.
Action: Review and tighten your payroll processes to ensure compliance and avoid extra interest charges. This may involve upgrading payroll systems or processes to handle more frequent super payments and a review of your cashflow to ensure the change of timing for super payments won’t cause undue strain on business cashflow.
Employers should also prepare for the impact of the final increase in the Superannuation Guarantee rate from 11.5% to 12%, which will come into effect from 1 July 2025.
Tax cuts and fuel excise
As outlined above, the current government has implemented tax cuts set to start from 1 July 2026. However, the Coalition has proposed an alternative approach. If they come into power, they may repeal these tax cuts and instead focus on reducing the fuel excise. The fuel excise is a flat sales tax levied on petrol and diesel, currently set at 50.8 cents per litre. The Coalition’s plan includes halving the fuel excise for one year, which they argue will provide immediate cost-of-living relief by lowering fuel prices.
Action: Stay informed about potential changes and adjust your plans accordingly. If the Coalition’s proposal is implemented, it could impact your business’s operating costs, particularly if you rely on transportation. Conversely, the repeal of income tax cuts would mean less tax relief for the general public in the long term.
The treatment of Trusts and UPEs
Recently, the ATO has intensified its audit activities on private groups, particularly focusing on trusts and Division 7A.
For trusts, the ATO typically examines the validity of trust distribution resolutions. This includes ensuring that the definition, classification and streaming of income are consistent with the trust deed, along with the beneficiaries being eligible to receive income from the trust. They also review factors such as income tax return disclosures, consistency with financial statements and check if a Family Trust Election or Interposed Entity Election is required.
Following the ATO’s loss in the Full Federal Court in the Bendel case, there is significant uncertainty regarding the tax implications of Unpaid Present Entitlements (UPEs) owing from trusts to private companies and in particular how Division 7A may apply. In the Bendel case, the Court ruled that UPEs are not considered loans for Division 7A purposes, overturning the ATO’s long-held view. This decision means that income allocated but not paid to a corporate beneficiary may be able to be retained in the trust without triggering Division 7A’s strict requirements.
The specifics of the Bendel case and UPEs more broadly will be covered in further detail in future publications. However, the ATO’s application for special leave to appeal to the High Court, along with its interim Decision Impact Statement noting that it will continue to administer the law based on its view rather than the Full Federal Court’s position, is likely to cause much consternation. This will be particularly relevant in the lead-up to the lodgement of 30 June 2024 income tax returns and tax planning for the current financial year.
Action: For 30 June 2025 trust distributions, consider waiting until closer to 30 June before determining which beneficiaries to distribute to this year and the relevant distribution amounts. Whilst the Bendel decision may provide more flexibility to distribute to corporate beneficiaries, the ATO’s application for special leave to appeal the decision to the High Court means the final position is still uncertain. The ATO have also indicated they will closely scrutinise other trust aspects outside of Division 7A.
Accordingly, be ready to act promptly once more is known on the flexibility surrounding trust distributions.
Next steps
Navigating tax planning during uncertain times requires staying informed and proactive. By keeping abreast of both confirmed and pending tax changes and interpretations, you can make more informed decisions for your business.
Look out for our post-election comprehensive guide and checklist, which will help you work through these and other tax planning issues with your advisor. In the meantime, if you have any questions, please contact us for personalised assistance.
