Below are the latest tax insights and essential updates to keep you informed and compliant.

What Has Labor Promised Amid the 2025 Election Campaign?

We’ve summarised some of the key tax proposals announced by the Labor party during the 2025 election campaign, including as part of the recent Federal Budget. The proposals primarily focused on cost-of-living assistance and greater access to housing.

Update On Bendel Decision Regarding Division 7A and Unpaid Trust Entitlements

As discussed in our March 2025 newsletter, the Full Federal Court sided with the taxpayer (Bendel) in a landmark decision which determined that unpaid present entitlements (“UPE”) from a discretionary trust to a corporate beneficiary (i.e. a ‘bucket company’) did not constitute a loan for Division 7A purposes.

This is contrary to the ATO’s longstanding interpretation, which is that a UPE from a trust to a corporate beneficiary constitutes ‘financial accommodation’ in the form of a loan by the company to the trust, and therefore must be put onto complying Division 7A loan terms (with principal and interest repayments) to avoid triggering a deemed dividend under Division 7A.

The Commissioner has since applied for special leave to appeal the decision in the High Court.

Additionally, the ATO issued an interim Decision Impact Statement (“DIS”) explaining that:

• Until the appeal process is finalised, the ATO will continue to administer the law in line with their existing interpretation (as per Taxation Determination TD 2022/11).

• However, in the meantime the ATO does not intend to make any decisions relating to the issue in question, such as amended assessments, private rulings or objections (unless a decision is required to be made – for instance, if the taxpayer’s amendment period is going to expire).

• These arrangements may also be at risk of other integrity provisions applying, such as Section 100A (which deals with someone other than the beneficiary receiving the benefit of a trust distribution to which the beneficiary is entitled) or Subdivision EA (where there is a UPE to a corporate beneficiary and the trust makes a separate loan to another entity who is a shareholder or associate of that corporate beneficiary).

Should the High Court grant the Commissioner’s special leave application, the case will be heard one final time in front of the High Court. However, there is a chance that the High Court may deny the special leave request given the matter has already been determined unanimously by both the appeals tribunal and the Full Federal Court.

As the High Court’s decision on whether they will allow the Commissioner’s appeal is likely to take several months, this leaves taxpayers in an uncertain position as to whether to adopt the view of the ATO or of the Full Federal Court. For instance, FY23 UPEs would ordinarily need to be put onto complying Division 7A loan terms by the lodgement due date of the company’s 2024 tax return.

In an attempt to address some of this uncertainty, the ATO has published additional views on how they will administer the matter, explaining that:

• The ATO will not grant a ‘blanket’ extension of time for affected companies to lodge their 2024 tax returns pending the High Court decision, and recommends taxpayers refer to the DIS when determining how to treat their UPEs.
• Where a deemed dividend has arisen due to a group arranging their affairs in reliance on the Full Federal Court decision, the Commissioner will not grant a ‘blanket exercise’ of the discretion (as per the discretion available to the Commissioner under section 109RB) to disregard any deemed dividends if he is ultimately successful in the High Court. Instead, each case will be considered on a case-by-case basis.
• Section 100A and subdivision EA can be applied regardless of the outcome of the Bendel case.

Given the uncertainty about such arrangements, we would still strongly recommend you reach out to your SiP advisor to discuss your Group’s specific circumstances.

No Tax Deduction for GIC or SIC

Where taxpayers have outstanding tax liabilities with the ATO, the ATO can apply either General Interest Charge (“GIC”) or Shortfall Interest Charge (“SIC”). GIC is imposed for the late payment of a tax liability, while SIC is applied when there is a shortfall in tax paid.

Currently, taxpayers can claim income tax deductions for GIC and SIC. However, legislation has now been passed that such costs will no longer be deductible from 1 July 2025, regardless of when the primary tax debt arose.

This is likely to be a further blow for businesses already struggling to meet their tax obligations and feeling the pressure of high interest rates, with a disproportionate impact on sole traders on the highest marginal tax rate. Effectively, the non-deductibility of GIC and SIC increases the penalty rate by 25% for small companies, and up to 47% for sole traders (depending on their marginal tax rate).

Although the ATO has advised that taxpayers can still apply for a remission of GIC and SIC, this comes as the ATO has significantly tightened their stance on remissions of interest charges.

It would be prudent to consider your financing options in the event your business is facing cash-flow difficulties as external interest payments continue to be deductible subject to the usual limitations. In other words, Taxpayers using the ATO as a short-term financier by deferring the payment of tax debts may need to consider using traditional bank funding to pay their tax debts where there is not sufficient cash flow in the business.

Merchant Case Reminds Us to Avoid Wash Sales

The Full Federal Court has handed down its decision relating to a ‘wash sale’ scheme involving the sale of Billabong shares within the private group of founder Gordon Merchant, determining that the general anti-avoidance rules in Part IVA applied.

A typical wash sale involves the disposal of assets (such as shares) just before the end of a financial year, where after a short period of time, the taxpayer re-acquires the same or substantially similar assets, or the assets are transferred to a related entity to crystalise a capital loss. This is generally done to create a loss to offset against an existing gain, or a gain expected to be derived in a future income year.

Where a taxpayer enters into a scheme for the dominant purpose of obtaining a tax benefit, the Commissioner can apply Part IVA to reverse the tax benefits achieved from the relevant scheme, as well as applying additional penalties. Generally, wash sale schemes would fall into the net of Part IVA.

The broad facts in the Merchant case were:

• The Merchant Family Trust (“MFT”) owned shares in various companies, including Billabong and Plantic Technologies.
• MFT wanted to sell Plantic, which was going to result in a large capital gain.
• Prior to selling the shares in Plantic, MFT sold approximately 10 million high-cost shares in Billabong to the Gordon Merchant Superannuation Fund (“GMSF”) for $5.8M, resulting in a capital loss of $56.5M for MFT.
• MFT, together with other entities within the Group, had loans to Plantic of approximately $55M. MFT and the other entities forgave those loans in full.
• MFT sold the shares in Plantic to a third-party buyer for around $85M.
• MFT’s capital gain from the sale of Plantic was predominantly offset by the capital loss from the sale of the Billabong shares.

The Commissioner determined that the predominant reason MFT disposed of the Billabong shares to related entity GMSF was to crystalise a capital loss that could be applied against the capital gain from MFT’s anticipated sale of its shares in Plantic, resulting in a reduction in the taxable income for MFT’s beneficiaries. This constituted a scheme that was entered into for the dominant purpose of obtaining a tax benefit.

The Commissioner denied the capital loss under Part IVA and issued an amended assessment that increased the taxpayer’s assessable income by $54M. The taxpayer subsequently appealed the decision, which the Full Federal Court rejected.

As can be seen, care needs to be taken when disposing of assets and implementing restructures to ensure that you are not triggering a wash sale or another arrangement to which Part IVA could apply. It is crucial to document the commercial reasoning for undertaking such transactions so that it’s not perceived as being undertaken for the sole purpose of obtaining a tax benefit.

Extension to Duty Concession for Off-The-Plan Purchases in Victoria

As discussed in our December 2024 newsletter, in October last year the Victorian government introduced a new duty concession to reduce the land transfer (stamp) duty liability for residential dwellings purchased off-the-plan. Initially it was offered for 12 months until 21 October 2025, however Jacinta Allan announced in recent days that the concession will be extended for a further 12 months until 21 October 2026.

There is no purchase price threshold to be eligible for this concession. Additionally, if the eligibility criteria are satisfied, it is available to all purchasers (such as investors, companies and trusts), unlike the existing first home buyer duty concession or the principal place of residence duty concession.

Under the concession, land transfer duty is essentially calculated based on the property’s value on the contract date, meaning any construction costs that are incurred after the contract date are excluded from the property’s dutiable value. In other words, the duty saving depends on how much construction has occurred when the contract is entered into. According to the Government, since the concession was introduced in October 2024, Victorians buyers claiming the concession have saved an average of $24,517 in land transfer duty.

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The above tax summary is intended to be general in nature and does not constitute advice. Should you believe that any of the above matters may be relevant to you or your Group’s particular circumstances, please discuss the specific details with your Slomoi Immerman Partners advisor.