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ATO Introduces Relief Measures as Fuel Pressures Impact Businesses

Written by webadmin on . Posted in budgeting, cashflow, News, Tax.

ATO Responds to Fuel Cost Pressures with Relief Initiatives

Australian businesses are set to receive targeted support as the Federal Government responds to growing economic pressure caused by global fuel supply disruptions.

Treasurer Jim Chalmers has announced a suite of measures aimed at helping small businesses manage rising costs and ongoing uncertainty linked to the conflict in the Middle East. The disruption to fuel supply chains has contributed to what has been described as a “significant economic shock,” with flow-on effects across inflation, operating costs and business confidence.

As part of the response, the Australian Taxation Office (ATO) will provide temporary relief to businesses experiencing difficulty meeting their tax obligations. This support is designed to offer flexibility during a challenging period, particularly for those most affected by rising fuel costs.

Key support measures may include:

  • More flexible payment arrangements for outstanding tax obligations
  • Remission of interest and penalties in certain circumstances
  • Adjustments to PAYG instalments where taxable income has declined
  • A more measured approach to compliance and, where appropriate, debt collection

Businesses are still encouraged to lodge on time, with relief assessed on a case-by-case basis.

In addition to ATO support, the Government is also taking steps to improve access to finance. The Small Business Responsible Lending obligations has been extended for a further 10 years, which will allow lenders to provide faster and more flexible access to credit, helping businesses manage short-term cash flow pressures.

Banks and lenders have also committed to working closely with affected businesses, with support options including repayment deferrals, loan restructuring and emergency credit limit increases.

While the economic outlook remains uncertain, the Government has emphasised its focus on providing flexibility and practical support as conditions continue to evolve.

We’re Here to Support You

We understand that many businesses may be feeling the strain of rising costs and ongoing uncertainty. If your business has been impacted, our team is here to help you understand your options, access available support, and plan ahead with confidence.

Please reach out to us if you would like assistance.

Taking Steps to Stay Compliant with ATO Rules

Written by webadmin on . Posted in budgeting, cashflow, News, People and Culture, Tax.

Staying on Track with ATO Compliance

“Every year we see small businesses run into avoidable issues because they haven’t kept accurate records, reported all their income or managed their cashflow effectively”

Angela Allen, ATO Assistant Commissioner

The Australian Taxation Office (ATO) is encouraging Aussie small businesses to stay compliant. By doing so, you avoid the problems, penalties and fines that can occur when your business fails to follow the rules and compliance duties set out by the ATO.

What can you do to improve your overall tax compliance position?

Here are 5 key ways you can ensure your business stays in the ATO’s good books.

1. Stay on top of your ATO debts

The ATO wants you to proactively manage your tax debts. If you can engage early with the ATO, whether that’s to set up a payment plan or even make a prepayment, this makes the debt easier to manage and removes the need for stronger enforcement.

2. Separate accounts for separate obligations

Make sure you have dedicated bank accounts for GST and PAYG withholding. This protects your essential cashflow and stops cash from being used for operational expenses, so you always have funds available for BAS lodgements and other contributions.

3. Good records, good business

Keeping accurate records is a legal requirement for a small business. The ATO is keen for businesses to transition from manual ‘shoebox’ methods to digital systems and ATO online services. This minimises errors and helps you provide all your tax information in a digital format.

4. Prepare for Payday Super

Starting 1 July 2026, Payday Super will come into force, making it mandatory for employers to pay Superannuation Guarantee contributions on each payday. Review your payroll systems now to make sure they can manage more frequent reporting and payment requirements.

5. Closing or winding down a business

If you’re closing down your business and exiting the market, you must meet your final obligations, including cancelling ABNs and lodging your final tax returns. This prevents future compliance issues and ensures all employee entitlements are settled.

ATO Advice

The ATO advises businesses to work with registered tax practitioners. Working with a qualified tax adviser from the Tax Practitioners Board keeps you in line with all current tax laws.

Talk to our team and let’s make sure you’re 100% compliant with ATO rules.

5 Things Your Balance Sheet Can Tell You About Your Finances

Written by webadmin on . Posted in budgeting, cashflow, Tax.

Balance Sheet Basics: 5 Insights Into Your Financial Position

Chances are you’ve heard of the accounting term ‘balance sheet’. But what is a balance sheet? And what does it tell you about your finances?

Your balance sheet is a financial statement that provides a snapshot of your company’s financial position at a specific point in time. It’s an overview of your finances that details three key elements of your accounting.

The formula for the balance sheet is Assets = Liabilities + Equity:

Assets: These are resources your business owns – things like cash, inventory or equipment – that provide future economic value and help generate your revenue.

Liabilities: These represent the company’s financial obligations or debts owed to outside parties – think bank loans, taxes or unpaid invoices.

Equity: This is the remaining interest in the assets after deducting liabilities. Equity represents the net worth of the business or, as the owner, your residual interest in assets after deducting all liabilities.

Ways the balance sheet informs your view of your finances

Liquidity and short-term solvency

By comparing your current assets to your current liabilities, you can use the balance sheet to reveal if the business can meet its immediate obligations. This is vital for ensuring you have enough cash or liquid assets to remain operational and trading.

Capital structure and leverage

The ratio of total debt to shareholders’ equity illustrates how your company finances its growth. Are you relying too heavily on borrowed money? Or are you maintaining a sustainable level of debt that helps you fund the next stages in your growth?

Efficiency of your asset management

By reviewing your total assets against revenue trends, you can find out how effectively the company is utilising its resources – things like inventory and equipment – to support your business operations and generate long-term value for your stakeholders.

Working capital position

Calculating the difference between your current assets and liabilities helps you spot the operational capital buffer that’s available. This indicates whether the business can comfortably fund its day-to-day activities or if it faces a looming cash deficit.

Net worth and book value

The equity section of the balance sheet reflects the total value remaining for you, as the owner, after all debts are paid. This gives you a clear idea of the company’s intrinsic value and the overall cumulative financial success of the business.

Want to dig deeper in your balance sheet and financials?

If you’d like to understand more about your balance sheet and accounts, book some time with our team. We’ll be happy to explain more about your financial health as a business.

Payday Super: What Could it Mean for Your Small Business?

Written by webadmin on . Posted in Uncategorised.

Payday Super Is Coming — Are You Ready?”

Back in 2023, the Australian Government announced a major change to how superannuation must be paid. From 1 July 2026, employers will be required to pay their employees’ super at the same time as salary and wages.

Under this new ‘Payday super’ model, super contributions will no longer follow the quarterly cycle. Instead, employers must ensure super is paid within seven business days of each pay cycle — whether weekly, fortnightly, or monthly.

But why the change? And what are the potential effects of moving to Payday Super?

Impact of Payday Super for your employees

This change will make it easier for employees to keep track of their Super and will boost their overall super fund at retirement. It will also remove the problem of casual workers habitually missing out on quarterly super payments under the current system.

By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 in today’s dollars or 1.5 per cent better off at retirement.

Impact of Payday Super for your business

Moving to a super system where employer contributions are made in line with the employee’s regular payment cycle may not seem like a huge shift. But moving away from the quarterly system could significantly affect your administration time and cash flow.

Let’s look at the potential downsides of Payday Super for your business:

Increased administrative burden

Paying superannuation with each pay cycle, rather than quarterly, will increase the frequency of your super payments. The added frequency of super payments will add to your administrative and payroll workload, stretching the already limited resources of your small business.

Unrealistic seven-business-day super payment timeframe

Small business groups are concerned about the seven-business-day timeframe for super contributions to reach employees’ funds. Many feel that administrative pressures, as well as banking and clearing-house delays, may make this target unrealistic.

Potential for late-payment penalties

The new legislation updates the Superannuation Guarantee Charge (SGC) rules. Employers may incur SGC liabilities and penalties if payments are late, even when delays stem from external clearing-house or fund processing issues.

Retirement of the Small Business Superannuation Clearing House

The Small Business Superannuation Clearing House has closed to new users from 1 October 2025 and will be fully retired from 1 July 2026. This free online service is widely used by small employers, and its retirement raises concerns around the availability of cost-effective alternatives for managing super obligations.

Let’s look at the potential upsides of Payday Super for your business:

Despite the challenges, Payday Super can also offer several advantages:

Smaller, more manageable payments

Rather than accumulating large quarterly super amounts, contributions will be smaller and more predictable, making cash-flow management easier for many employers.

Lower risk of Superannuation debt

By paying more frequently, businesses reduce the likelihood of significant super liabilities building up.

Improved payroll accuracy

Because super is calculated alongside wages each cycle, the risk of missed employees, incorrect calculations, or late payments naturally decreases.

Stronger employee trust and retention

Payday Super can become a selling point. Employees appreciate transparency and timely super payments — an easy win for employers competing for talent.

Preparing for Payday Super

With the legislation now passed and ATO guidance released, employers should begin preparation ahead of the 1 July 2026 commencement date.

Here are steps to consider:

  • Review and update your payroll system to process contributions every payday.
  • Confirm software integrates with updated SuperStream and Single Touch Payroll (STP) requirements.
  • Update employment contracts and onboarding processes to reflect new definitions and obligations.
  • Communicate with your employees so they understand the transition and know their super will be paid within seven business days of each payday.
  • Evaluate your cash-flow processes for more frequent super outflows.

If you’re concerned about the impact of more frequent super payments on your cash flow, we encourage you to book a meeting with us at Zweck to discuss cash-flow strategies and support.

Two important technical changes to prepare for:

  • Employers will calculate super using Qualifying Earnings (QE), a new measure that includes salary, overtime, bonuses and most standard pay items.
  • The Super Guarantee rate remains 12% — the reform changes timing, not the contribution percentage.

Talk to us about getting your payroll system ready for Payday Super

At Zweck we’re ready to support you through this transition. If your payroll processes or software systems are not yet aligned with payday super requirements, now’s the ideal time to speak with our team and update your payroll procedures.

The Basics of Strategic Advice: Why Your Business Needs an Evolving Strategy

Written by webadmin on . Posted in budgeting, cashflow, News, Tax.

Strategy Needs More of Your
Time — Here’s Why

Are you spending enough time working on your business strategy?

Past research from The Alternative Board found the average entrepreneur spends 68.1% of their time working ‘in’ their business (tackling day-to-day tasks, putting out fires, etc.) and only 31.9% of the time working ‘on’ their business (e.g., long-term goals, strategic planning).

Revisiting and updating your business strategy is vital for a growing business – and that means making more time to focus on strategic thinking.

Key things to revisit in your current business strategy

Test your financial scenarios, cash flow, and budgeting:

Stress-test your cash flow by creating worst-case scenarios and adjusting your operating budgets to reflect the current rising costs for raw materials or labour. Look for any non-essential spending and set clear targets for preserving your cash levels and working capital.

Revisit your customer value proposition

Re-evaluate your customer value proposition (CVP) to confirm it still meets the changing needs of your market and target audience. This might mean simplifying your product offerings, adding a high-value service tier or putting money into deeper customer research and development.

Diversify your product/service offerings

Diversify your products and services to help you engage with new or underserved customer segments. Reducing your dependence on a single revenue stream stops you ‘having all your eggs in one basket’ and helps you reduce the overall risk to the business.

Match talent and resources to your growth strategy

Review your team structure to make sure your key talent is focused on growth and high-return activities.

Putting money into targeted up-skilling and training can improve your overall capabilities, while outsourcing to fill any critical gaps will help you capture new opportunities.

Helping you create a viable business strategy and growth plan

If you’ve not revisited your business strategy in a while, now’s the time to get proactive. Talk to our team and we’ll work with you to review, revise, and rework your strategy.

ATO Interest Deductibility Ended 1 July 2025

Written by webadmin on . Posted in budgeting, cashflow, News, Tax.

Tax Update: ATO Ends Interest Deductibility

Homeowners Benefit from Rate Cuts & Refinancing Strategies

As of 1 July 2025, important tax and finance shifts are reshaping homeowners’ strategies.

  1. ATO Interest No Longer Tax-Deductible from 1 July 2025

Starting 1 July 2025, General Interest Charges (GIC) and Shortfall Interest Charges (SIC) applied by the ATO for late or underpaid taxes will no longer be tax-deductible—regardless of when the underlying tax debt originated.

Interest incurred before 1 July 2025 remains deductible in your 2024–25 return. So, now is the final opportunity to claim those deductions.

For context, the GIC currently stands at around 10.78%, compounding daily.

What this means:

  • Carrying ATO debt after 1 July becomes an entirely non-deductible expense, making it significantly more costly to delay tax.

Actionable steps:

  • Pay off ATO debt.
  • If unable to pay outright, consider refinancing through a commercial or home loan—interest on such loans remains tax-deductible for business-related debt in certain situations, provided it is properly structured.
  • Explore options for remission, though recent trends suggest the ATO is being stricter, so success isn’t guaranteed. In requesting a remission, the ATO will assess whether the delay in payment was outside of your control and if you have taken reasonable steps to rectify the issues.
  1. Home Loan Interest Rate Cuts & Refinancing Trends

Australia is seeing a wave of interest rate relief that homeowners can leverage.

  • On 13 August 2025, the RBA cut the cash rate by 25 basis points to 3.60%—the third reduction of the year (RBA).
  • Major banks (CBA, NAB, ANZ, Westpac) promptly passed on these cuts to their variable-rate home loan customers, with effective dates ranging from 22 to 26 August (ABC News).

Strategic refinancing opportunities:

  • Refinancing can provide several potential benefits such as reduced interest rates, lower repayments, access to equity, debt consolidation, debt recycling & extended repayment terms and improved cash flow.

The ATO is Escalating Enforcement

The Australian Taxation Office (ATO) has significantly shifted its approach in recent months, becoming far more stringent in its dealings with taxpayers. Where once the ATO was relatively flexible and accommodating, it is now taking a harder stance.

Requests for remission are being declined with increasing frequency (despite the requests meeting Tax Administration Act criteria for remission). Applications for payment arrangements are being subjected to stricter scrutiny, with many being refused outright or only granted after detailed financial information has been provided to justify capacity to pay. Audit activity is also expected to increase, placing further pressure on businesses already carrying tax debt.

The message from the ATO is clear: outstanding debts must either be paid in full or placed under an approved arrangement that is strictly adhered to. Failure to do so will quickly trigger escalated recovery action.

Bottom Line & Essential Reader Takeaways

  • Act now: Consider your options for reducing your ATO debt.
  • Watch the mortgage market: With rate cuts rolling out, homeowners should evaluate whether refinancing or switching lenders can deliver savings or better loan terms.
  • Talk to Zweck Consulting: About how to structure refinancing – especially mixing personal vs. business uses – this can have major implications for deductibility and long-term costs. We work with trusted brokers and advisers to help you find the best approach.

Key EOFY Dates & Deadlines to Watch for

Written by webadmin on . Posted in budgeting, cashflow, News, People and Culture, Tax.

As the End of Financial Year (EOFY) approaches, it’s crucial for both businesses and individuals to keep track of important dates to meet tax obligations, avoid penalties, and make the most of financial planning opportunities. Staying on top of deadlines isn’t just vital for the current financial year — it’s equally important to prepare for the upcoming one.

At Zweck, we’ve compiled a list of essential EOFY dates and key deadlines for this financial year and the next (1 July 2025 – 30 June 2026) to help you plan ahead confidently.

Key Dates for the 2025–26 Financial Year

July 2025:
  • 14 July – Due date for Final Single Touch Payroll (STP) declaration due.
  • 28 July – Superannuation Guarantee contributions (SGC) for the quarter ending 30 June 2025 must be paid to avoid penalties.
August 2025:
  • 1 August – Can start lodging QBCC Financial Reporting.
  • 21 August – Monthly July IAS (PAYG Withholding & PAYG Instalments) return due.
  • 25 August – Quarterly June BAS Return due.
  • 28 August – Taxable Payments Annual Report (TPAR) due.
September 2025:
  • 21 September – Monthly August IAS (PAYG Withholding & PAYG Instalments) return due.
 October 2025:
  • 28 October – Super Guarantee contributions due for the quarter ending 30 September 2025.
  • 28 October – Annual BAS lodgment due.
  • 31 October – Deadline for annual individual income tax return lodgment & deadline for taxpayers who lodged late in the previous year without a lodgement concession or if they are a first-year lodger & for QBCC licensee’s you must lodge MFR reports for licence upgrades.
November 2025:
  • 1 November – Can start lodging QBCC Financial Reporting.
  • 21 November – Monthly October IAS (PAYG Withholding & PAYG Instalments) return due.
  • 25 November – Quarterly September BAS return due.
December 2025:
  • 21 December – Monthly November IAS (PAYG Withholding & PAYG Instalments) return due.
  • 31 December – QBCC Financial Reporting due: Categories 1-7 (turnover >$800k).
 January 2026:
  • 28 January – Super Guarantee contributions due for the quarter ending 31 December 2025.
February 2026:
  • 21 February – Monthly January IAS (PAYG Withholding & PAYG Instalments) return due.
  • 28 February – Quarterly December BAS due.
March 2026:
  • 21 March – Monthly February IAS (PAYG Withholding & PAYG Instalments) return due.
  • 31 March – QBCC Financial Reporting: SC1 & SC2 Categories (Turnover <$800k) due.
April 2026:
  • 28 April – Super Guarantee contributions for the quarter ending 31 March 2026.
May 2026:
  • 15 May – Company income tax returns to be lodged.
  • 20 May – Tax Planning (if required).
  • 21 May – Monthly April IAS (PAYG Withholding & PAYG Instalments) return due.
  • 25 May – Quarterly March BAS return due.
June 2026:
  • 21 June – Monthly May IAS (PAYG Withholding & PAYG Instalments) return due.
  • 30 June – Trust Resolution due & date marks the end of the 2025–26 financial year.
July 2026:
  • 1 July – This date marks the commencement of the 2026–27 financial year.
  • 14 July – STP Payroll.
  • 28 July – Super Guarantee contributions due.

Why These Dates Matter

Missing deadlines can lead to penalties, interest, and missed opportunities for tax optimisation. Staying ahead allows better cash flow management and reduces last-minute pressures.

How Zweck Can Help

Our expert team works closely with you to ensure all your financial obligations are met on time. From lodgement reminders and payroll compliance to strategic tax planning, we guide you through each step of the financial year.

Contact us today to discuss how we can help you stay ahead with your EOFY and ongoing compliance requirements.

Important Update: ATO’s New Approach to Payment Plans

Written by webadmin on . Posted in budgeting, cashflow, News, Tax.

 

Important Update: ATO’s New Approach to Payment Plans

The Australian Taxation Office (ATO) has significantly ramped up its approach to managing overdue tax debts — particularly when it comes to payment plans. Businesses and individuals can no longer assume the ATO will take a lenient or slow-paced approach. The message is clear: proactive communication is essential.

Payment Plans Under Stricter Scrutiny

Over the past year, the ATO has sharpened its focus on debt collection, with a noticeable tightening around the approval and extension of payment plans. We’re seeing more cases where payment plan requests are being declined or where existing arrangements are being cancelled due to missed deadlines or insufficient engagement.

In short, it’s no longer enough to submit a request

and wait. The ATO is expecting more from taxpayers — timely lodgements, realistic repayment proposals, and clear evidence of financial position where relevant.

Get on the Front Foot

If you or your business are facing challenges meeting ATO obligations, the most effective step you can take is to engage early and openly. Acting before a due date passes allows more flexibility in negotiating terms. Once debt becomes overdue or lodgements fall behind, your options narrow quickly.

At Zweck, we work closely with clients to:

  • Engage with the ATO early on your behalf
  • Structure realistic and compliant payment plans
  • Request deferrals or extensions where possible
  • Monitor compliance with existing arrangements

Avoiding or delaying contact with the ATO often leads to penalties, interest, or even legal action — all of which can usually be prevented with proactive planning.

Interest No Longer Deductible from 1 July 2025

Another important change to be aware of: from 1 July 2025, interest charged by the ATO on outstanding tax debts will no longer be tax deductible. This means businesses will no longer receive a tax benefit on General Interest Charges (GIC) — further increasing the real cost of unpaid tax.

For the 2025–26 income year, the GIC rates have also been announced. For the July to September quarter, the GIC annual rate is 10.78%, which equates to a daily rate of approximately 0.0295%. This underscores how costly carrying unpaid tax debt will become under the new rules.

This upcoming change reinforces the need to stay ahead of your obligations. Carrying tax debt will soon become even more expensive, both financially and from a compliance perspective.

Final Thoughts

The ATO’s position is clear — it’s time to take your tax obligations seriously and stay ahead of the curve. If you’re unsure where you stand or need help managing payments, don’t wait until it’s too late. Reach out to the Zweck team to discuss your situation and get the right plan in place.

Is Your Business Ready for FY26?

Written by webadmin on . Posted in budgeting, cashflow, News, Tax.

What FY26 Means for Your Business: Key Changes Incoming

With the 2025–26 financial year just around the corner, now is the time to start preparing your business for the changes ahead. From tightening ATO compliance measures to potential new legislation impacting payroll, FY26 is shaping up to be a year of increased responsibility — and opportunity — for business owners.

Staying Ahead of Compliance

The ATO has signalled a continued focus on timely lodgements, accurate reporting, and early engagement — particularly when it comes to tax debts and payment arrangements. As outlined in recent updates, interest on outstanding ATO debts will no longer be tax deductible from 1 July 2025, increasing the cost of carrying overdue amounts. This change, coupled with higher General Interest Charge (GIC) rates (currently 10.78% annually for Q1 of FY26), means businesses must be more proactive than ever in managing cash flow and compliance.

Same Day Super – What You Need to Know

One of the most significant proposed changes that may impact businesses in FY26 is the introduction of same day superannuation payments. If legislated, this would require employers to pay employees’ superannuation contributions at the same time as wages, rather than quarterly.

While this change is not yet law, it’s expected to have a major operational impact — especially for small businesses. Moving to same day super would require real-time payroll systems, tighter cash flow management, and closer alignment between finance and HR functions.

What this means for your business:
  • Payroll systems may need to be upgraded or reconfigured
  • Payment processes will need to align closely with super clearing houses
  • More frequent outflows could affect weekly or fortnightly cash flow
  • Compliance risk will increase without real-time tracking and automation

It’s important to begin assessing whether your systems and processes can handle this shift, and consider speaking with your accountant or bookkeeper to get ahead of the curve.

Other Considerations for FY26

In addition to ATO changes, there may be updates to:

  • Award wages and super guarantee rates
  • STP (Single Touch Payroll) Phase 2 compliance checks
  • Digital record-keeping requirements
  • Reporting deadlines for small businesses and trusts

Now is the ideal time to conduct a financial health check, review your internal processes, and set up the right support for the new financial year.

How Zweck Can Help

At Zweck, we help businesses prepare for financial year transitions with clarity and confidence. Whether it’s updating your payroll software, reviewing superannuation processes, or navigating new tax rules, our team is here to keep you compliant and in control.

Need help getting ready for FY26?

Contact Zweck today for a tailored EOFY prep session and start the new year strong.

Bendel Case: Landmark Decision on UPEs and Division 7A

Written by webadmin on . Posted in News, Tax.

In recent legal developments, the Full Federal Court of Australia delivered a landmark ruling on 19 February 2025, in the case of Commissioner of Taxation v Bendel [2025] FCAFC 15. This decision has shed light on an important aspect of trust distributions and the implications for Division 7A (Div7A) of the Income Tax Assessment Act 1936 (ITAA 1936).

For businesses and individuals involved with trusts, the key takeaway is that unpaid present entitlements (UPEs) arising from trusts allocating income to corporate beneficiaries, do no, under the circumstances outlined in this case, constitute loans for Div7A purposes.

What is a UPE?

Before diving into the specifics of the Bendel case, let’s define UPE. A UPE arises when a beneficiary of a trust is entitled to a share of the trust’s income, but that income is not immediately distributed in cash. Instead, the entitlement remains unpaid and is often recorded as a liability in the trust’s accounts.

The Bendel Case Overview

The Bendel case involved Gleewin Investments Pty Ltd, a corporate beneficiary of a discretionary trust, which was entitled to income distributions from the trust during the 2013 to 2017 income years. Although income was allocated to Gleewin Investments Pty Ltd, it was not physically paid out. The Australian Taxation Office (ATO) sought to apply Division 7A, maintaining that these UPEs should be treated as loans, potentially triggering adverse tax consequences.

The ruling clarified that a UPE allocated to a corporate beneficiary is not automatically considered a loan under Div7A, even if the amount remains unpaid. This decision has significant implications for businesses and individuals who operate trusts and use corporate beneficiaries to manage income distributions.

The Full Federal Court unanimously dismissed the ATO’s appeal, concluding that:​

  • A “loan” under section 109D(3) of the ITAA 1936 requires an obligation to repay a sum, not merely an obligation to pay.​
  • A UPE represents an obligation to pay, establishing a debtor-creditor relationship, but does not equate to a loan since there’s no obligation to repay an advanced sum.​

The Court emphasized that expanding the definition of “loan” to include UPEs would be inconsistent with the statutory context and could lead to unintended double taxation.

Implications for Your Business

Historically, UPEs were converted to Division 7A loans in Year 2 under the former TR 2010/2 and PS LA 2010/3, as this was the point at which they were considered to provide financial accommodation and therefore constituted loans under common law, triggering Division 7A.

Where such conversions were undertaken in compliance with the law as understood at the time, current legal and specialist opinion is that they cannot now be reversed to UPEs, as the loan conversion has already occurred.

For UPEs arising in the 2024 income year that have not yet been converted into complying Division 7A loans in the 2025 income year, there remains an opportunity to crystallise these UPEs without triggering a loan conversion and, for now, avoid Division 7A consequences.

That said, the ATO has been granted special leave by the High Court to appeal the relevant decision and has issued a Decision Impact Statement indicating its view that Division 7A continues to apply. Even if the appeal is unsuccessful, the ATO has flagged ongoing compliance activity regarding UPEs under section 100A of the ITAA 1936.

Our recommended approach is to crystallize the UPEs for now, defer lodgement of any 2025 income tax returns that may involve non-complying loans in the event the ATO succeeds, and await further expert commentary.

Commissioner of Taxation v Bendel [2025] FCAFC 15 (Published 19 March 2025) | Legal database

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