Compliance

Compliance Tightened: What Businesses Need to Know About Expanding ATO Enforcement from 1 July 2025

From mid-2025, the Australian Tax Office is stepping up compliance and enforcement—especially for large corporates, foreign investors, and tax practitioners. Here's what you need to prepare for.

By NomadicTax Research Team • 5-8 min read • November 23, 2025

## New Compliance Landscape The Australian 2025-26 Federal Budget allocates **AU$999 million over four years**, starting 1 July 2025, for expanding the ATO’s tax compliance activities. ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai)) This includes expanded powers and resourcing for: the Tax Avoidance Taskforce, Shadow Economy Compliance, Personal Income Tax Compliance, and the Tax Integrity Program. ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai)) ## Where Enforcement is Increasing - **Multinationals and large business** under the Tax Avoidance Taskforce will face stricter scrutiny on cross-border transactions, transfer pricing, royalty arrangements, and profit shifting. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai)) - **Shadow economy** enforcement will expand, targeting underreporting, worker exploitation, illicit trade (especially tobacco). ([taxnews.ey.com](https://taxnews.ey.com/news/2025-0763-australias-2025-26-federal-budget?utm_source=openai)) - **High-risk tax practitioners** are being targeted with enhanced sanctioning, registration reforms, and closer oversight by the Tax Practitioners Board. ([au.andersen.com](https://au.andersen.com/federal-budget-report-2025/?utm_source=openai)) - **Foreign investor property transactions**: Foreign resident capital gains withholding (FRCGW) rates and notification requirements—for example on sales of assets worth over AU$20 million—will see stricter compliance. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai)) ## Steps Your Business Should Take Now ### 1. Assess Risk Exposures Review your cross-border investments, royalty or licensing structures, transfer pricing contracts. Ensure appropriate documentation and arm’s length pricing are in place. ### 2. Strengthen Internal Controls & Reporting Make sure your tax reporting systems are accurate. Collect all required data (including for Div 296, foreign dealings, large asset disposals) in a timely manner. Create a compliance audit trail. ### 3. Review Tax Agent & Practitioner Relationships If using external tax or advisory services, verify that agents are registered with the TPB, check their track record, and ensure they are aware of new sanction regimes. Poor or unlawful advice may now have sharper consequences. ([au.andersen.com](https://au.andersen.com/federal-budget-report-2025/?utm_source=openai)) ### 4. Document Transactions Rigorously For property sales, foreign stake-sales, or transfers between related parties, maintain clear contracts, valuations, and justification for rate variation notices. For super funds, ensure valuation of defined benefit interests are robust. ([dlapiper.com](https://www.dlapiper.com/en-AU/insights/publications/2025/03/australian-federal-budget-2025?utm_source=openai)) ## Example Scenario A multinational company enters a loan/royalty agreement with a related entity offshore. Under enhanced TPB and transfer pricing rules, the ATO may challenge any terms that appear to shift profit artificially. The company should: - ensure comparable market data supports interest/royalty rates - retain evidence of arm’s length negotiations - consider whether foreign jurisdictions’ tax treaties change withholding obligations ## Final Words of Advice These compliance enhancements are **already law or well underway**. Delaying preparations risks facing audits, penalties, or reputational damage. Small businesses, large corporations and tax practitioners alike must assess upcoming legal requirements, invest in compliance infrastructure, and seek guidance from qualified advisors to avoid costly missteps.