Highlighted Compliance Changes: What You Need to Know
- PAYG instalments modernised: Small and medium businesses may opt in to monthly Pay-As-You-Go instalments calculated via ATO-approved software. More frequent payments, tighter timelines. (pwc.com.au)
- Stricter trust and discretionary trust taxation: From 1 July 2028, discretionary trusts—often used in family or investment settings—must pay a minimum 30% tax rate on distributions. (pm.gov.au)
- Foreign investment review reforms: Faster decision targets (30 days for low-risk applications from 1 January 2027), removal of ineffective conditions, improvements in laws and register obligations. (pwc.com.au)
Trusts and Income Splitting: Staying Compliant
- Ensure proper documentation for distributions: amounts paid to beneficiaries, timing, trust deeds. With new minimum rates, improper distributions could lead to higher tax liabilities.
- If you operate multiple entities (trusts, companies, partnerships), map out income flow to ensure that you’re not unintentionally triggering penalties or minimum rates.
- Keep in mind that trust structures will now face greater scrutiny under the ATO’s expanded information-gathering powers. Extra record-keeping will help defend against audits.
Dealing with PAYG, Foreign Investment, and Email Secrecy
- Businesses opting for monthly PAYG using approved software must ensure they have correct reporting systems in place for accurate instalment income estimates.
- Foreign investors or locals with foreign income/assets should monitor evolving foreign resident CGT rules and foreign investment framework changes to avoid unexpected withholding or excess tax.
- The government broadened ATO powers around taxpayer secrecy—particularly in fraud and mischaracterisation cases. Be conservative, transparent, and maintain full audit trails. (pwc.com.au)
Example Compliance Walk-throughs
- SME business with trust distributions: A family-owned business uses discretionary trust to distribute income. Starting 1 July 2028, any undistributed profits or distributions to minor or non-active beneficiaries may be taxed at 30% minimum rate, negating tax advantages. Planning distributions or changing structure ahead can help.
- Foreign resident investor selling a residential property: CGT discount reduced/eliminated for assets acquired after 8 May 2012 and where owner was foreign resident. Sellers must also watch whether indexes apply or if withholding obligations have changed.
What You Should Do Now
- Audit trust deeds and distribution policies to see whether structure modifications make sense before 2028 deadlines.
- Upgrade accounting and payroll systems to handle monthly PAYG and reporting requirements from 2026-27.
- Foreign investors or residents should seek specialist advice ahead of property buys, particularly given changes to foreign CGT discounts and foreign investment screening rules.
- Maintain strong financial records—date of acquisition, purchase price, improvements—for all assets, trusts and foreign income sources to withstand the new compliance environment.
In summary: recent reforms significantly raise compliance hurdles—especially for trust structures, PAYG instalments and foreign transactions. Planning ahead is essential to manage risk and cost.