Welcome to our March 2026 newsletter—packed with key tax deadlines, updates, and tips to help you stay compliant and informed.
 

$20,000 instant asset write-off extended

The Government recently passed legislation to extend the $20,000 instant asset write-off for small businesses by 12 months to 30 June 2026.

Taxpayers should note that if their business has an aggregated annual turnover of less than $10 million, they may be able to use the instant asset write-off ('IAWO') to immediately deduct the business portion of the cost of eligible assets which cost less than $20,000.

Eligible assets must basically have been first used (or installed ready for use) between 1 July 2025 and 30 June 2026. The $20,000 limit applies on a per asset basis, so taxpayers can instantly write-off multiple assets.

The IAWO can be used for both new and second-hand assets (but some exclusions and limits apply).

Please contact our office if you require assistance regarding the above, including in relation to also claiming deductions for improvement costs for certain assets.

Businesses using cash to dodge obligations

The ATO is 'cracking down' on businesses that use cash to avoid meeting their tax, employer and business obligations. Businesses that do this may:

• fail to report all sales transactions and fail to issue receipts;
• avoid paying GST, income tax, PAYG withholding, super guarantee, insurance and work cover protection;
• report their income below the $75,000 threshold to avoid registering for GST;
• exploit workers by not meeting award conditions and work cover protections; or
• undercut honest businesses by offering cheaper prices for cash.
  
  

The ATO warns that workers who are paid cash-in-hand or working 'off the books' are often disadvantaged. Apart from not receiving the entitlements they should be, if they are injured at work, they may not be protected.

Contractors omitting income

Through data matching, the ATO is seeing some contractors incorrectly reporting or omitting contractor income. Contractors need to report all their income in their tax return, including payments made by businesses for their contracting work.

Note that, as part of the taxable payments reporting system ('TPRS'), certain businesses must lodge a 'Taxable payments annual report' ('TPAR') to report payments made to contractors for providing the following services:

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

For taxpayers who work as a contractor and provide any of these services, the business they contract to should be reporting those payments to the ATO on their TPAR. Contractors obviously then need to include this income on their tax return.

If the ATO suspects a contractor may have omitted TPRS income on their tax return, it may contact them to request they amend their tax return. If the contractor does not take action, the ATO may conduct a review and audit of their business, and penalties and interest may apply.

Government payments programs

The ATO is reminding taxpayers that receive government payments for delivering services under a Commonwealth program, such as healthcare, disability support or child care, that they have an obligation to:

• keep accurate records; and
• report any such income they receive in their tax return.

The ATO recently advised that it would be contacting taxpayers and tax agents in February by email to ensure that income received from government agencies (such as the Aged Care Subsidy or under the National Disability Insurance Scheme) is reported correctly in their tax returns.

The ATO has updated its Government Payments Program data-matching program protocol to better detect non-compliance, and work more effectively with other government entities.

Check GST credit claims before lodging BASs

Taxpayers who are registered for GST can claim GST credits (or 'input tax credits') for the GST included in the price of goods and services they buy for their business.

However, if they buy something for both business and private use, they need to apportion their GST credit to only claim the business use.

For example, if they buy a car for ride-sourcing (e.g., to use as an Uber driver), they should work out the percentage they use it for business purposes and only claim a GST credit on that amount.

Please contact our office if you require assistance with any of this, including potentially using 'annual private apportionment' to account for the private portion of your business purchases.

When completing their next BAS, the ATO is asking taxpayers to remember that they cannot claim GST credits for purchases:

• where they do not have a tax invoice;
• that were cancelled or reversed; or
• that do not have GST in the price (such as bank fees).

Taxpayers that have nothing to report still need to lodge a 'nil' BAS by the due date.

Work-related expense claims rejected by ART

The Administrative Review Tribunal ('ART') recently disallowed a taxpayer's claims for many different types of work-related expenses.

The taxpayer was employed full-time as an engineer, working from home two days a week. For the 2023 income year, he claimed deductions totalling over $61,000, in relation to (among other things) car expenses, travel expenses, clothing expenses, and home office expenses, all of which he claimed were work-related. 

The ATO largely disallowed these deductions, and the ART affirmed the ATO's decision, primarily due to problems with substantiating these claims.

For example, in relation to the car expenses, the ART noted that none of the log books were contemporaneous, and the log book entries were inconsistent with independent records (e.g., car service records).

In relation to travel expenses (taxi and Uber fares), the ART noted that the taxpayer did not provide evidence clearly identifying which travel expenses had been reimbursed by his employer, and the ride share documentation did not include the date, time or destination of travel.

In relation to home office utility expenses, the ART noted that the taxpayer only provided calculations estimating the business use proportion of those expenses, without providing any documentary evidence to substantiate the expenses themselves. In any case, the ART was not satisfied that the taxpayer's apportionment of those expenses was fair and reasonable.

Director Penalty Notice (DPN)Review: A Wake-Up Call for Business Owners on Personal Tax Risks

Running a successful business is hard work—and sometimes, despite best intentions, tax obligations slip. If the business is being operated through a company structure, then the ATO can potentially issue a Director Penalty Notice (DPN), holding company directors personally liable for unpaid taxes.

In 2024–25, DPNs skyrocketed by 136%, reaching over 84,000 notices, affecting directors of around 64,000 companies. The stakes are high, and now the Tax Ombudsman is reviewing how the ATO issues and manages these notices—a development all directors should take seriously.

So, what exactly is a DPN? Put simply, if your company fails to pay certain taxes—like PAYG withholding, GST, or Superannuation Guarantee Charge (SGC)—the ATO can target directors personally. There are two types:

• Non-lockdown DPNs: These apply if the company has lodged its activity statements or SGC statements but hasn’t made the relevant payments. In this case directors have 21 days to take appropriate action, such as arranging for payment of the debt, appointing an administrator, or entering liquidation. Acting promptly may allow the penalty to be remitted.
• Lockdown DPNs: These apply if reporting deadlines are missed as well. In this scenario directors can’t avoid personal liability by putting the company into administration or liquidation.
• The intent is to protect government revenue and employee entitlements—but for directors, the impact can be severe.

Why the Ombudsman is Involved

The review, announced in December 2025 by Tax Ombudsman Ruth Owen, responds to a surge in complaints, with DPNs topping the list. It will examine:

• How effectively the ATO uses DPNs to recover debts ($54.2 billion in collectable amounts by mid-2025)
• The fairness of selecting cases for enforcement
• How directors are notified and communicated with
• Treatment of vulnerable directors, including those coerced into roles or facing financial abuse

The review also aligns with broader government initiatives, including support for gender-based violence survivors and more empathetic engagement with business owners. While timelines are flexible due to resources, the review is part of the 2025–26 work plan, alongside assessments of ATO services for agents, First Nations engagement, and interest charge remissions.

Commercial Takeaways for Directors

DPNs are more than a compliance issue—they’re a real commercial risk. Ignoring a notice can disrupt personal finances, damage credit ratings, and even trigger bankruptcy. At the same time, the Ombudsman review could improve transparency and fairness, giving directors a clearer understanding of options if financial stress arises.

Practical steps to protect yourself now

• Stay on top of obligations: make sure the company lodges returns and pays liabilities on time.
• Lodge statements even if payment isn’t possible: Failing to lodge activity statements just makes things worse.
• Consider using ATO payment plans if cash flow is tight but remember that this won’t necessarily enable directors to escape personal liability if a DPN has been issued already.
• Monitor company cash flow and tax health closely, especially during economic dips.
• Act fast if you receive a DPN: Consult immediately your accountant or lawyer to explore options because strict deadlines might apply.
• Consider director insurance or business structuring to limit personal exposure—but compliance always comes first.

The Ombudsman’s review is a timely reminder: tax is a key business risk, not just paperwork. Being informed, proactive, and prepared can protect both your business and your personal assets. If you’re concerned about DPN exposure, reach out for a tailored review—we can help you stay ahead of risk, so your business thrives rather than just survives.

Navigating CGT on Your Home: New ATO Clarity for Home-Based Businesses

Running a business from home—whether as a sole trader, freelancer, or small operator—has many perks. But when it comes to selling your home and potentially saving on tax, recent guidance from the ATO serves as a reality check.

The ATO has provided its views on how home-based businesses interact with the small business capital gains tax (CGT) concessions, providing a warning on how the ATO approaches a long-standing area of confusion.

See: Home-based business and CGT implications | Australian Taxation Office

The Key Issue: Active Asset Test

When an individual sells their main residence, they will often enjoy a full CGT exemption. However, if part of the home is used for business purposes, this can potentially impact on the scope of the exemption.

If a full exemption isn’t available under the main residence rules then we typically look to other CGT concessions, including the CGT discount for assets that have been held for more than 12 months or the small business CGT concessions.

The small business CGT concessions can potentially reduce or eliminate a capital gain made on sale of a property, but only if certain conditions are passed. One of the key conditions is that the property must pass an active asset test.

In very broad terms, to pass the active asset test you need to show that the property has been actively used in a business activity for at least 7.5 years across the ownership period or for at least half of the ownership period.

The ATO is clear: the active asset test applies to the entire property, not just the business portion. When you are applying the active asset test, an asset either passes this test or fails it. It is not really possible for an asset to partially pass the active asset test. The entire property is either an active asset or it is not.

Simply having a home office, workshop, or even being able to claim home occupancy expenses as a deduction does not necessarily make your home an active asset. Where business use is incidental to the home’s primary residential purpose, the ATO’s view is that the small business CGT concessions generally do not apply.

Rus v FCT

The view that the entire property must qualify as an active asset—and that incidental or minor business use (such as a home office or storage in a largely residential setting) is insufficient—draws support from case law, particularly the Administrative Appeals Tribunal (AAT) decision in Rus and Commissioner of Taxation [2018] AATA 1854 (Rus v FCT).

In that case, a taxpayer sought access to the small business CGT concessions on the sale of a 16-hectare largely vacant rural property, where only a small portion (less than 10% by area) was used for business purposes: a home office, shed for storing tools/equipment/vehicles, and related supplies tied to a plastering and construction business operated through a controlled company. The balance of the land remained vacant or used residentially.  The AAT upheld the ATO's ruling that the property as a whole did not satisfy the active asset test, reasoning that the business activities were not sufficiently integral to the asset overall.

Minor or incidental use did not make the entire property an active asset, especially where the business was primarily conducted off-site. This precedent reinforces the ATO's strict approach in home-based business scenarios: the property is assessed holistically. This means that limited business use typically fails to tip the scales toward qualifying for the concessions.

Practical Examples - Let’s take a look at how the ATO approaches some common scenarios.

Minor home-based business: Harriet runs a hairdressing salon in a spare room, using 7% of the total floor space of the property and seeing clients eight hours a week. She claims deductions for occupancy expenses and gets a 93% main residence exemption. However, because her business use is minor, she cannot access small business CGT concessions. The 50% CGT discount can still apply.

Significant business use: Sue and Rob own a two-storey building, with the ground floor operating as a takeaway store (50% of the total floor area of the property) and the top floor as their private residence. The business has been running for decades with employees. Here, the property qualifies as an active asset, potentially giving them access to the small business CGT concessions for the portion of the capital gain that isn’t covered by the main residence exemption.

What This Means for You

• A partial main residence exemption doesn’t necessarily mean you have access to the small business CGT concessions. Many homeowners mistakenly assume that business deductions or a home office automatically open the door. The ATO clearly doesn’t share this view.
• Seek advice before changing the way your home will be used. Starting to operate a business from home can impact on deductions, CGT calculations and access to CGT concessions. We are here to help you make fully informed decisions.
• Keep thorough records. Floor plans, hours of business use, and detailed deductions can help strengthen your position and may help in any future planning or audits.
• Consult your accountant. If selling your home is on the horizon, professional advice is critical to assess any potential CGT exposure and explore concessions that might be available.

The Bottom Line

The ATO’s updated guidance suggests that many home-based business owners won’t have access to the small business CGT concessions on sale of their home, but this always depends on the facts. Business owners need to plan proactively, rather than assume that tax relief will be available. By understanding how your home’s business use is treated, you can make smarter decisions. For example, will the profits generated from a small business operated at home end up being wiped out by a higher CGT liability on sale of the property down the track?  After all, when it comes to CGT, every dollar you keep counts toward your next venture or your retirement nest egg.

ATO Update on Inherited Homes: What it Means for Your Family’s Wealth

 The ATO has issued a Draft Taxation Determination TD 2026/D1 which looks at how inherited family homes are treated for CGT purposes. Some industry commentators have dubbed it a “death tax by stealth”, but it is a bit more complex than this. The draft guidance focuses on a specific aspect of the rules around applying the main residence exemption to inherited properties, potentially exposing deceased estates and beneficiaries to significant tax if not planned correctly.

Here’s what you need to know in practical terms.

Why TD 2026/D1 Matters

Under current law, deceased estates or beneficiaries can potentially sell a deceased individual’s former family home without paying CGT if certain conditions can be met. This exemption is particularly valuable for properties owned long-term, where unrealised gains could be substantial.

In order to access a full exemption you normally need to ensure that the property is sold within 2 years of the date of death (but the ATO can potentially extend this deadline) or that the property has been the main residence of certain qualifying individuals from the date of death until the property is sold.

These qualifying individuals can include the surviving spouse of the deceased individual, the beneficiary selling an interest in the property or someone who has a right to occupy the dwelling under the deceased’s will.

The draft ATO guidance focuses on this last point. That is, what does it mean for someone to have “a right to occupy the dwelling under the deceased’s will.” In summary, the ATO’s view is that:

• The right to live in the home must be explicitly granted in the will to a named individual.
• Broad discretionary powers given to trustees, separate agreements, or even testamentary trusts (TTs) are not sufficient in the ATO’s view.

For example:

• A will giving an executor discretion to allow a family member to occupy the home does not meet this requirement.
• A trustee of a TT who allows a beneficiary to live in the house is seen as separate from the will and may trigger CGT on sale.

Some legal and real estate experts warn this could force families to sell homes within two years of death to avoid CGT, especially in high-value areas.

Consider this: inheriting a $2 million home with a capital gain of $1.5 million could expose the beneficiaries to $300,000–$600,000 in tax, depending on discounts and tax brackets.

However, it is important to remember that there are still other ways for the sale of the property to qualify for a full exemption. 

Practical Steps to Protect Your Estate

While we are waiting for the ATO to finalise its guidance in this area, there are steps you can take to protect your family’s assets:

• Review and update your will, especially if you are planning to provide certain individuals with the right to occupy a property. Does the will currently provide this right to specifically named beneficiaries?
• Plan the timing of sales – The two-year exemption window remains, but if you inherit a property and intend to hold it longer than this, weigh any potential CGT exposure against future rental income or family needs. Partial CGT exemptions might still apply, but the rules and calculations can be complex.
• Seek professional advice, especially if your estate plan uses TTs. You will normally need to work closely with tax and legal advisors to structure the plan appropriately.
• Be market aware – Estate planning can intersect with market timing. Quick sales may preserve CGT exemptions, but this needs to be weighed up against non-tax factors.

The key takeaway is clear: estate planning is a complex area and needs to be navigated carefully to preserve family wealth and avoid unintended tax implications.

Keeping Your Self-Managed Super Fund Compliant

Self managed superannuation funds (SMSFs) can offer significant flexibility, allowing the members to make investments and enter arrangements that may not be available through retail or industry superannuation funds. However, being an SMSF trustee does come with important responsibilities to ensure that all dealings comply with superannuation law.

Two critical areas to keep front of mind are:

• The sole purpose test, and
• The arm’s length requirements in both superannuation and taxation law.

The Sole Purpose Test 

The sole purpose test requires that superannuation funds should be managed for the sole purpose of providing retirement benefits to fund members. While some SMSFs may have dealings with or/investments in related entities, these are subject to strict limits and when arrangements are entered into it is important that first and foremost SMSF trustees are considering the retirement benefits of the fund members rather than the needs of any external parties.

The example below illustrates how SMSF trustees should apply the sole purpose test when looking at making a related party investment.

Example: Investing in a Related Business?

Sachin and Deepthi have an SMSF which has a total balance of $1.2m. Their son Hardik commenced a business 3 years ago using a company structure. Hardik has approached his parents to invest $50,000 into his company via their SMSF.

Although Hardik is passionate about the business it has not grown as he would like, and Sachin and Deepthi are aware that the business has had cashflow issues and profits are not at a point where the business is growing or generating a profit.

Although the proposed investment amount is within the 5% in-house asset limit would Sachin and Deepthi invest member funds in an unrelated business knowing the business was in this same situation? That is, would they be placing their son’s interests ahead of the interests of the fund members?

Based on Sachin and Deepthi’s knowledge of the business, if the SMSF was to go ahead and make this investment they as trustees may have contravened the sole purpose test.

Arm’s Length Requirements

In addition to the sole purpose test there are superannuation and taxation law requirements that SMSF trustees always deal on arm’s length commercial terms. This is again particularly important when arrangements are with fund members and/or related parties.

Where arrangements are not at arm’s length, SMSF trustees can be liable for superannuation law penalties and in some cases fund income may be taxed at a higher rate.

Some common examples and key issues are discussed below.

Example: An SMSF Owns a Commercial Property Which is Leased to a Related Party Business

The rent should be on commercial terms and this needs to be evidenced by a rental appraisal from a professional such as a real estate agent when a lease is entered into.

The lease agreement should:

• Be in writing;
• Clearly cover who is responsible for particular outgoings and maintenance; and
• Be prepared by a legal professional.

Example: A Member of the SMSF or a Related Party Completes Work on an SMSF Property

SMSF trustees should seek professional advice before commencing any work on SMSF properties where the work may be performed by a member or a related party.

All arrangements with related entities should be commercial, including:

• If a related building company is used, the SMSF must pay market rates (same as the general public) and this should be supported by documentation to satisfy the fund auditor.
• If members (who are also trustees) perform work personally, strict rules apply to whether they can be paid for their services.
• All materials should be purchased directly by the SMSF, not by individual members.

Please contact us to discuss these rules further if you are considering entering into any transactions or projects involving SMSF-owned property and related parties.

Need Help with your Business, Bookkeeping, Tax or SMSF requirements?

If you would like a little help, please get in touch with us for assistance. We can help with your business, bookkeeping, tax and SMSF requirements. To book an appointment, use our online booking system, give us a call on 07 3289 1700, or email us at reception@rgaaccounting.com.au.We look forward to assisting you this tax season!

Please also note that many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances. Should you have any further questions, please get in touch with us for assistance with your SMSF, business, bookkeeping and tax requirements. All rights reserved. Brought to you by RGA Business and Tax Accountants. Liability Limited by a scheme approved under Professional Standards Legislation.