Federal Budget tax changes may 2026

IN THIS ISSUE:

• 2026-27 Federal Budget — A Night of Significant Change

• The $1,000 Instant Tax Deduction

• $250 Working Australians Tax Offset

• Changes to the Fringe Benefits Tax Exemption for Electric Vehicles

• Changes to the Capital Gains Tax Discount

• What the CGT Changes Mean for Business Owners

• Changes to the Taxation of Trust Distributions

• Changes to Negative Gearing — What Property Investors Need to Know

• Superannuation — Key Changes From 1 July 2026

• Research and Development Tax Incentive — Changes From 2028

• Good News for Companies — Loss Carry-Back and Start-Up Incentives

• Instant Asset Write-Off — Now a Permanent Feature

• Fuel Excise and Other Budget Updates • What Should You Do Now?


2026-27 Federal Budget — A Night of Significant Change


The 2026-27 Federal Budget, delivered by Treasurer Jim Chalmers on the evening of 12 May 2026, is one of the most significant overhauls of the Australian tax system in nearly three decades. In a single budget, the Government has made changes to capital gains tax, negative gearing, trust distributions, superannuation, electric vehicles, research and development, and a range of cost-of-living measures. Almost every one of our clients will be affected in some way. The centrepiece of the Budget is the replacement of the 50% capital gains tax (CGT) discount with cost base indexation for gains arising from 1 July 2027, combined with a new 30% minimum tax on net capital gains. This is effectively a return to the approach that applied in Australia from 1985 to 1999. The change has wide-reaching consequences for property investors, business owners, and anyone who holds assets that have grown in value. What makes this Budget particularly complex is that many of these changes interact with each other. The impact of the CGT changes, for example, is magnified when combined with the negative gearing changes and the new trust distribution rules. For many clients, the combined effect is considerably larger than any single measure considered on its own. This newsletter sets out the key measures and what they mean for you. We have focused on the practical implications rather than the fine technical detail. Many of these changes are still subject to draft legislation and a number of details are not yet fully confirmed. What is clear is that these changes are significant, they are broad, and for many clients they will require a review of existing arrangements. We encourage you to read through the articles that follow and to contact us to discuss anything that may be relevant to your situation.


These changes will affect most of our clients in some way. We are already working through the implications and will be reaching out to those we believe are most directly affected. Please do not wait to hear from us if you have questions — get in touch and we can talk through what matters most for your situation. 


The $1,000 Instant Tax Deduction


From 1 July 2026, eligible taxpayers will be able to claim a flat $1,000 deduction for work-related expenses without needing to keep receipts or itemise individual costs. This is a choice, not an automatic change — you will still need to decide whether the flat deduction or your actual expenses gives you the better result.


Who Is Eligible

Australian tax residents who earn income from work are eligible. If your income comes only from investments or rental properties, this does not apply to you — though you can continue claiming deductions under the existing rules.


Will It Actually Save You Money?

The deduction reduces your taxable income by $1,000. The actual tax saving depends on your tax rate:

● At a combined rate of 18% (16% plus the 2% Medicare Levy), the saving is $180.

● At 32% (30% plus Medicare Levy), the saving is $320.

● At 47% (45% plus Medicare Levy), the saving is $470.

If you currently claim more than $1,000 in legitimate work-related expenses, claiming your actual expenses remains the better approach. If you typically claim less than $1,000, the flat deduction could give you a modest boost at no administrative cost. A Few Important Points Charitable donations, union and professional association fees, and other non-work deductions can still be claimed on top of the $1,000 flat deduction. We will review your specific situation when preparing your return and work out which approach puts you in the best position.


When we prepare your return, we will compare both options and make sure you claim in the way that gives you the best result. If you have any questions about your work-related expenses in the meantime, please give us a call.


$250 Working Australians Tax Offset


The 2026-27 Budget introduces a permanent Working Australians Tax Offset of up to $250 for Australians who earn income from work — including wages, salaries, and the business income of sole traders.


Who Is Eligible

The offset applies to individuals who earn income from work and have a tax liability against which it can be applied. If you pay little or no tax, you will receive a reduced benefit or none at all — the offset reduces tax owed rather than providing a direct payment. Sole traders whose income comes from their own labour are also eligible.


When Will You See the Benefit?

This offset does not apply until the 2027-28 financial year. Most people will first see the benefit when their 2027-28 tax return is processed — generally between July and October 2028. There are no changes to how your employer withholds tax in the meantime.


This Is a Permanent Measure

Unlike some previous cost-of-living offsets, this one is permanent. From 2027-28 onwards it will be a standing feature of the tax system. The Government has also confirmed it will increase the effective tax-free threshold for work income by nearly $1,800, to approximately $19,985 — or up to $24,985 for those also eligible for the Low Income Tax Offset. 


One Thing to Watch

If you have an outstanding tax debt or other liabilities, the benefit may be absorbed rather than showing up as a visible refund. It is worth reviewing your overall position before you lodge your 2027-28 return. Note that the offset reduces income tax only — it does not reduce the 2% Medicare Levy.


If you have an outstanding tax debt or other liabilities, this offset may be used to reduce what you owe rather than appear as a refund. Please reach out to us ahead of your 2027-28 return so we can review your full position and make sure you receive the maximum benefit available.


Changes to the Fringe Benefits Tax Exemption for Electric Vehicles


Since 2022, battery electric vehicles provided through novated lease or salary packaging arrangements have been fully exempt from Fringe Benefits Tax (FBT), making them significantly more cost-effective than equivalent petrol or diesel vehicles. The 2026-27 Budget now announces a phased wind-back of that exemption.


What Is Changing and When

The full FBT exemption will remain in place until 31 March 2027. From 1 April 2027, the full exemption will only apply to EVs priced at $75,000 or less. EVs above $75,000 but below the Luxury Car Tax threshold will attract a reduced 25% FBT discount only. From 1 April 2029, the 25% discount applies to all EVs below the Luxury Car Tax threshold regardless of price.


What Existing Arrangements Mean in Practice

The Budget states that all eligible electric cars will retain the FBT discount rate that was in place when the arrangement began. However, the word 'eligible' is critical. Reading the Budget papers as a whole, it appears that 'eligible' refers to eligibility under the new rules — meaning only EVs priced at $75,000 or less retain the full 100% exemption beyond 1 April 2027. If your current EV is priced above $75,000, you will likely lose the full exemption at 1 April 2027 regardless of when you entered the arrangement. This is a materially different outcome from what many people may be expecting. 


A Further Complication

The Budget papers do not define what 'commenced' means for grandfathering purposes. When plug-in hybrid vehicles were removed from the exemption, grandfathering required not just that a lease existed, but that there was a financially binding ongoing commitment. Optional lease extensions did not qualify. It is possible a similar test will apply here. No assumption should be made that an existing arrangement is automatically protected until the legislation is released.


If you currently have an EV under a novated lease or are thinking about entering one, the rules are changing in ways that could significantly affect your after-tax cost. Please contact us before making any changes to your arrangement, or before committing to a new lease, so we can walk through the numbers with you.


Changes to the Capital Gains Tax Discount


One of the most significant measures in this Budget is the replacement of the 50% CGT discount with cost base indexation for capital gains arising on or after 1 July 2027, combined with a new 30% minimum tax on net capital gains. This applies to all CGT assets — including shares, investment properties, and business assets — held by individuals, trusts, and partnerships. The Indexation was the method used for CGT in Australia from 1985 through to 1999 — in effect, we are returning to the pre-1999 approach.


The Good News: Generous Transitional Rules

The 50% CGT discount will continue to apply to all gains arising before 1 July 2027. If you sell an asset before that date, the existing rules apply in full — regardless of when you bought it. There is also a specific concession for new residential properties: investors in new builds can choose between the 50% CGT discount or cost base indexation, whichever produces the better outcome. Income support and Age Pension recipients will be exempt from the minimum tax.


What Does This Mean in Practice?

Here is an example. Suppose you purchased an asset 11 years ago for $500,000. It is worth approximately $1,000,000 today and you plan to sell it in 2037 for $2,000,000. For the pre2027 portion of the gain (approximately $786,000), the 50% discount applies — leaving approximately $393,000 taxable. For the post-2027 portion (approximately $714,000), indexation reduces the taxable gain to approximately $476,000. Total tax: approximately $408,000 at the 47% combined rate. Under the current rules, the tax would have been approximately $353,000 — an additional cost of roughly $56,000 on this one asset.


What If You Sold Before 1 July 2027 Instead?

If you sold the same asset on 30 June 2027, the $500,000 gain produces tax of approximately $118,000. Holding the original asset and selling in 2037 produces a lower total tax outcome in this example — but it also means a larger tax bill deferred to the future rather than paid today. Note: These examples assume an asset purchased 11 years ago for $500,000, worth $1,000,000 on 30 June 2027, and sold in 2037 for $2,000,000. All calculations assume CPI of 3% per annum and a 47% combined rate. All figures are illustrative only and subject to final legislation.


Whether to hold or sell an existing asset will be a different decision for every client — the right answer depends on your individual tax rate, your specific asset, and how long you plan to hold it.

Please contact us before making any decisions, so we can model the numbers for your situation.


What the CGT Changes Mean for Business Owners


The shift to indexation for capital gains arising from 1 July 2027 has significant implications for business owners, particularly those operating as sole traders or through discretionary trusts. In many cases it will fundamentally change the economics of selling, and raises urgent questions about whether the current business structure is still the right one.


The Problem With a Zero Cost Base

The most significant issue for many business owners is goodwill. When a business is built from scratch, the goodwill that develops over time has a cost base of zero. Under the current rules, the goodwill gain qualifies for the 50% CGT discount when the business is sold. Under the new rules, any growth in goodwill from 1 July 2027 onwards will only be reduced by indexation — but if the cost base is zero, there is nothing to index. Every dollar of goodwill gain accruing after 1 July 2027 will be fully taxable at up to 47% combined. In practical terms, the tax on that portion of the goodwill is effectively doubled.


Small Business CGT Concessions Still Apply — But Are Worth Less

The Small Business CGT Concessions — including the 50% active asset reduction, the retirement exemption of up to $500,000 (lifetime), and the 15-year exemption — remain available. However, where indexation produces no reduction on a zero cost base, the starting gain is larger, and the concessions are applied to a higher taxable amount. In effect, the value of those concessions is eroded.


Is Your Business Structure Still Right?

The Budget confirms expanded rollover relief for three years from 1 July 2027, specifically to support businesses wishing to restructure out of discretionary trusts into a company or fixed trust — without triggering a capital gains tax liability at the time of transfer. This is a genuine and time-limited opportunity. While rollover relief removes the immediate tax consequences of restructuring, it does not eliminate stamp duty — however, given the potential long-term tax saving, this is often a necessary upfront cost.


If you operate a business through a trust or as a sole trader, the question of whether your current structure still makes sense is now more pressing than it has been in 25 years. Please contact us to arrange a review — we can assess what your business is worth today, model the tax outcomes under different structures, and help you understand whether the rollover window from 1 July 2027 is an opportunity worth taking


Changes to the Taxation of Trust Distributions


The 2026-27 Budget announces the introduction of a 30% minimum tax on discretionary trusts from 1 July 2028. While the headline is straightforward, the detail is complex — and it is important to be direct about what is known, what is not known, and why the gap between the two matters for anyone who operates through or benefits from a discretionary trust.


What Has Been Announced

From 1 July 2028, trustees of discretionary trusts will be required to pay a minimum tax of 30% on the taxable income of the trust. Beneficiaries — other than corporate beneficiaries — will receive non-refundable credits for the tax paid by the trustee, similar in concept to franking credits. If the credit exceeds a beneficiary's actual tax liability, the excess is permanently lost — it cannot be refunded.


What This Means in Practice

A family member with no other income who receives a $20,000 trust distribution would currently pay approximately $288 in tax. Under the new rules, the trust pays $6,000 in minimum tax on that income. The beneficiary receives a non-refundable credit of $6,000 against their $288 tax liability — with $5,712 permanently lost. The breakeven point falls at approximately $131,600 of income. Every beneficiary earning below that level results in some portion of the trust's tax being unrecoverable. 


What We Do Not Yet Know

The Budget announcement raises far more questions than it answers. What happens to corporate beneficiaries is not yet clear — it may mean no credit at all, resulting in double taxation. The announcement lists a number of exclusions, including primary production income, income relating to vulnerable minors, and income from discretionary testamentary trusts existing at the time of announcement. Each exclusion will require precise legislative definition. No assumption should be made until the legislation is released.


The Rollover Relief Window

The Budget confirms expanded rollover relief for three years from 1 July 2027, to support businesses and others wishing to restructure out of discretionary trusts. This provides a meaningful window to act before the minimum tax takes effect. Draft legislation is expected during the second half of 2026.

Note: This article is based solely on the Budget announcement of 12 May 2026. No legislation has been released. All details are subject to change and no planning decisions should be made on the basis of this announcement alone. We cannot provide definitive advice on this measure yet — the legislation does not exist — but early engagement will maximise your options when it does. Please contact us so we can begin reviewing your trust arrangements now and be ready to act quickly once the detail is confirmed.


Changes to Negative Gearing — What Property Investors Need to Know


Negative gearing has been a cornerstone of Australian property investment strategy for decades. The 2026-27 Budget confirms changes that will affect investors who own or are planning to acquire investment properties — though the impact will vary significantly depending on your current position.


What Is Negative Gearing?

Negative gearing occurs when the costs of owning an investment property — including loan interest, property management fees, maintenance, council rates, and depreciation — exceed the rental income it generates. Under the current rules, that net loss can be deducted against your other income, including salary or wages, reducing your overall tax bill.


What Has Changed

Existing investment properties are fully protected. If you already own a negatively geared investment property, your ability to offset those losses against your other income will continue unchanged for as long as you hold that property. For established residential properties acquired after 7:30pm AEST on 12 May 2026, the rules change from 1 July 2027. Losses from these properties will only be deductible against rental income or capital gains from residential properties — they cannot be used to reduce your salary or wage income. An exception applies for new builds: negative gearing deductions remain fully available for newly constructed properties.


Who Is Affected

If you own existing investment properties and have no plans to acquire more, the practical impact is limited. The change becomes relevant when you consider your next acquisition. Any established residential property purchased after 7:30pm on 12 May 2026 will be subject to the new quarantining rules from 1 July 2027. Contracts entered into before that time — including those not yet settled — are covered by the grandfathering provisions.


The Combined Effect

For a high-income investor who has been using rental losses to reduce their taxable income, the loss of that deduction against salary income represents a real increase in annual after-tax cost. The negative gearing changes also interact directly with the CGT changes — the combined effect on the economics of acquiring a new established investment property is material. Note: Full details of this measure, including the precise definition of qualifying new builds, are subject to the release of draft legislation.


If you are considering purchasing another investment property, the rules have changed in ways that affect both your ongoing cash flow and your future capital gains position. Please contact us before you proceed — we can model the after-tax return under the new rules and help you decide whether a new build or established property better suits your circumstances. 


Superannuation — Key Changes From 1 July 2026


While much of the attention on Budget night focused on capital gains tax, negative gearing, and trust distributions, there are several significant superannuation changes taking effect from 1 July 2026. These were largely legislated prior to the Budget, but they are significant enough to warrant a timely reminder.


Higher Tax on Large Superannuation Balances

From 1 July 2026, if your total superannuation balance across all funds exceeds $3 million, the earnings attributable to the portion above that threshold will be subject to an additional 15% tax — effectively doubling the tax rate on those earnings from 15% to 30%. This legislation received Royal Assent on 13 March 2026 and is now law. Importantly, the tax now only applies to taxable income and not unrealised gains like originally proposed. The ATO will issue an assessment and you have 84 days to pay, with the option to release funds from your account to meet the liability.


Transfer Balance Cap Increase

The transfer balance cap — the maximum amount you can hold in a tax-free retirement phase pension — increases from $2.0 million to $2.1 million from 1 July 2026. If you are planning to commence a retirement phase pension in the near future, or were previously unable to move your full intended balance into retirement phase, this increase may present a planning opportunity.


Payday Super

From 1 July 2026, employers are required to pay superannuation contributions at the same time as wages, rather than quarterly. This is a significant change for small and medium businesses. Payroll systems will need to be updated before the changeover date, and contributions must reach the employee's fund within seven business days of each pay date.

Whether your superannuation balance is approaching $3 million, you are planning to commence a retirement pension, or you are a small business employer preparing for payday super — these changes need attention before 1 July 2026. Please contact us to discuss your situation so we can help you prepare in time. 


Research and Development Tax Incentive — Significant Changes From 2028


Businesses that claim the Research and Development (R&D) Tax Incentive will need to be aware of significant changes taking effect from 1 July 2028. The reforms are broadly positive for businesses engaged in genuine core R&D activity, though some aspects tighten the scope of what is eligible.


The Key Changes

The offset rates for core R&D expenditure will increase by 4.5 percentage points. The intensity threshold will be reduced from 2% to 1.5%, meaning more businesses will qualify. The turnover threshold for accessing the refundable tax offset increases from $20 million to $50 million, allowing a greater number of growing businesses to access cash refunds. The maximum R&D expenditure threshold also increases from $150 million to $200 million.


What Is Tightening

Supporting R&D expenditure — which has historically allowed businesses to claim a broader range of costs associated with their R&D activities — will no longer be eligible from 2028. Only core R&D expenditure will qualify. The minimum expenditure threshold also increases from $20,000 to $50,000. Research activities below this amount will only be eligible if undertaken with a registered Research Service Provider or Cooperative Research Centre.


If your business currently claims the R&D Tax Incentive, the removal of supporting R&D expenditure from 2028 could significantly affect your eligible expenditure base. We recommend reviewing your claim structure well ahead of that date — please get in touch so we can assess the impact and help you plan accordingly


Good News for Companies — Loss Carry-Back and StartUp Incentives


The Budget contains two welcome measures for company clients: one taking effect immediately, and one from 2028.


Loss Carry-Back for Companies — From 1 July 2026

Companies with aggregated annual global turnover of less than $1 billion will be able to carry back a tax loss and offset it against tax paid in either of the two previous financial years. If your company paid tax in 2024-25 or 2025-26 and subsequently incurs a loss in 2026-27 or later, you can apply that loss against the earlier tax paid and receive a cash refund. The carry-back applies to revenue losses only — not capital losses — and is limited by your company's franking account balance. This measure is particularly valuable for companies that were profitable in recent years but are now experiencing a downturn.


Loss Refundability for Start-Up Companies — From 1 July 2028

From 1 July 2028, small start-up companies with annual turnover of less than $10 million that generate a tax loss in their first two years of operation will be able to convert that loss into a refundable tax offset — meaning the ATO will pay out the offset as a cash refund even where no tax has previously been paid. The offset is capped at the value of FBT and withholding tax on wages paid to Australian employees in the loss year.


Expanded Venture Capital Incentives — From 1 July 2027

From 1 July 2027, the venture capital tax incentive programs will be expanded. The cap for standard venture capital limited partnerships increases from $250 million to $480 million; for early stage funds, from $50 million to $80 million. These changes apply to both new and existing funds. Note: the separate Eligible Venture Capital Investor program has been closed to new applications from Budget night, 12 May 2026.


If your company has paid tax in recent years and is now experiencing or expecting a loss, please contact us as a matter of priority — a cash refund may be available sooner than you think. For those starting a new business, or with an interest in venture capital investment, please get in touch to discuss how these measures may apply to you. 


Instant Asset Write-Off — Now a Permanent Feature


The $20,000 instant asset write-off has been confirmed as a permanent feature of the tax system for small businesses with annual turnover of less than $10 million from 1 July 2026. This removes the uncertainty that has surrounded the concession for several years, with successive governments extending it on a year-by-year basis. The write-off allows eligible small businesses to immediately deduct the full cost of any eligible asset costing less than $20,000 in the year it is first used or installed — rather than depreciating it over a number of years. The $20,000 limit applies on a per-asset basis, meaning multiple assets can be written off in the same year provided each individual asset is under the threshold.


If you have been holding off on equipment or other asset purchases pending clarity on whether this concession would continue, that uncertainty has now been resolved. If you are planning to purchase equipment or other business assets, the instant asset write-off is now permanent — but timing and eligibility still matter. Please contact us before making any significant purchases so we can confirm the asset qualifies and consider the timing relative to your financial year end. 


Fuel Excise and Other Budget Updates


Fuel Excise — Temporary Relief

Ending 30 June 2026 The 32 cent per litre cut to the fuel excise, introduced on 1 April 2026, was a temporary three-month measure. It has not been extended in this Budget. The cut will expire on 30 June 2026 and the full excise rate returns from 1 July 2026. Businesses that are heavy fuel users should factor this into their budgeting and cash flow planning. Businesses that use fuel in the course of their operations may also be eligible to claim fuel tax credits, which partially offset the cost of excise paid on fuel used for business purposes.


Foreign Purchases of Established Dwellings — Ban Extended

The temporary ban on foreign purchases of established residential dwellings, originally introduced for two years from 1 April 2025, has been extended by a further two years and three months to 30 June 2029. Foreign persons are generally prohibited from purchasing established residential properties in Australia during the ban. The existing exemptions — including for purchases that support housing supply, and for permanent residents and New Zealand citizens — continue to apply. For the vast majority of clients this measure will have no direct impact. However, if you have overseas connections or are involved in a property transaction with a foreign party, please seek advice before proceeding.


If your business is a heavy fuel user, contact us to check whether you are eligible to claim fuel tax credits — they can meaningfully offset the cost of excise. If you have any questions about the foreign property ban or are involved in a transaction that may be affected, please reach out before proceeding.


What Should You Do Now?


The measures announced in this Budget are far-reaching, and the right response will be different for every client. Some changes take effect immediately, some from 1 July 2026, some from 1 July 2027, and others from 1 July 2028. Waiting is not a strategy — the sooner you understand how these changes affect your specific situation, the more options will be available to you.


As a starting point, consider the following:

● If you own investment properties — the changes to both negative gearing and the CGT rules mean your current and future investment strategy needs to be reviewed.

● If you own a business through a sole trader structure or a discretionary trust — the question of whether your current structure remains appropriate is now more pressing than it has been in 25 years. The expanded rollover relief window from 1 July 2027 provides a genuine but time-limited opportunity to act.

● If you are a beneficiary or trustee of a discretionary trust — the new 30% minimum tax applying from 1 July 2028 will affect the overall tax cost of distributions. Early engagement will maximise your planning options once the legislation is released.

● If your superannuation balance is approaching or exceeds $3 million — the new earnings tax is now law and requires careful attention ahead of 1 July 2026.

● If you are a small business employer — the move to payday super from 1 July 2026 requires action on your payroll systems before that date. ● If your company has paid tax in recent years and is experiencing or anticipating a loss — the reintroduction of loss carry-back from 1 July 2026 may provide a valuable cash refund.

● If your business claims the R&D Tax Incentive — the changes from 1 July 2028 warrant a review of your claim structure now.


None of these issues need to be resolved overnight, but all of them benefit from early advice. We will be reaching out to clients we believe are most directly affected — but please do not wait to hear from us if you have concerns or questions.

Please contact our office to arrange a time to discuss your circumstances. We are available and ready to assist — the earlier we talk, the more options we have

AI will change jobs, not end them

By Lionel Walsh • May 6, 2026
There is fear that AI will cause mass unemployment. This will not happen. The study of Economics is based on the premise that human wants are endless. For as long as people continue to want something, there will be other people willing to satisfy those wants (for a price). This will go on to the end of time. We have experienced change before. When heavy machinery replaced manual labour, people feared jobs would disappear forever. When telephone exchanges were automated, switchboard operators were no longer needed. When electricity generation became centralised, many local power station jobs vanished. Typing pools faded away once computers and keyboards became ubiquitous. Computers themselves were once expected to cause huge redundancies. Unemployment did not permanently rise because of these changes. The reason is simple. Technology changes the nature of jobs. It enables businesses to be more productive. It enables them to perform tasks that were previously too slow, too costly or simply impossible. Some tasks will disappear, especially repetitive (and boring) ones. New and more interesting tasks will materialise. AI can be wrong. It can miss context. It does not replace human responsibility, common sense or experience. It cannot feel empathy. Psychology plays a vital role in accounting. Accountants cannot give the best advice if they do not know their clients well. AI cannot “feel”. Make no mistake. Even with its flaws, AI is sensational. I use it daily. It will soon enhance production, communication and service to levels previously beyond reach. Exciting times.

Sham Contractors

By Lionel Walsh • April 1, 2026
The ATO and Fair Work Australia are investigating sham contracting, which is when employers classify workers as contractors when they are actually employees. The penalties are savage, up to $19,800 for individual employers, $99,000 for businesses with 15 or fewer employees and, for larger business, the greater of $495,000 or three times the underpaid amount. In addition, employers risk penalties such as PAYG withholding and super guarantee penalties. Workers who are treated as contractors might be deprived of super, overtime, penalty rates and leave entitlements. Sometimes the employer simply does not want all the paperwork and pays a contract rate high enough to cover all these benefits (and more). The bad news for those employers is that all the penalties still apply. Data-matching, tip-offs and complaints from sham contractors increase the risk of detection. The best advice we can give to businesses is to take this very seriously. Assess whether your contractors are really in the nature of employees. Are the paid on an hourly or weekly rate or are they paid to produce a result? Who controls when and how they work? Can the contractors delegate or sub-contract? Who carries the risk of defects? Who supplies the major tools (minor tools do not usually influence the outcome)? Seek advice.  If there is a significant risk of your contractors being classified as employees, make them employees. Eliminate the risk. It is not worth it. If you do choose to accept the risk, make sure you stay very friendly with your contractors. A falling out could result in a complaint to the ATO and Fair Work Australia. Once this happens, an audit will investigate every one of your workers, not just the one who complained. It does happen.

Negative Gearing Means Losing Money

By Lionel Walsh • March 11, 2026
Negative gearing is getting some bad press lately

Tradies Beware

By Lionel Walsh • December 3, 2025
Tradies Beware On 28 November 2025, the Australian Taxation Office released Practice Compliance Guideline PCG 2025/5. It is long and complicated, but here is a summary. This guideline sets out a tougher approach to common business structures used by tradies and contractors. The ATO will focus on situations where – · One person does all or most of the work · The income is earned mainly (more than 50%) because of that person’s skill or labour · The income is then split or re-directed to another person or entity (for example, a trust, company or family member) · The outcome is less tax payable The ATO refers to these as income splitting or income-diversion arrangements The ATO focus will be on · tradies operating through a company or trust · Arrangements where profits are paid to a family member with little involvement · Contactors working mainly for one client, but using a company or trust. The ATO has flagged higher risk arrangements where – · One person does most of the work · That person is not paid a reasonable wage for the work · Profits are distributed to someone else · The business has the characteristics of a sole trader operation, but with a company or trust added · There is no significant reason for the structure other than the tax saving The ATO is less concerned where – · The tradie pays employees or contractors to do a significant part of the work · The contractor (not another entity) is paid a commercial, market-rate salary or wage You are less likely to have an issue if – · You operate from business premises · You employ workers to perform part of the work · You engage contractors to perform part of the work · You are paid a contract rate rather than an hourly or daily rate · You are responsible for remedying defects · You advertise and have several customers as a result of advertising. · You operate major equipment such as a grader. None of this is new law. The ATO is simply forewarning that it will be taking a tough new approach to these arrangements. Walsh Accounting can offer an opinion on whether your arrangement is high, medium or low risk.

Personal Services Income (PSI)

By Lionel Walsh • November 18, 2025
Personal Services Income (PSI) The Australian Taxation Office (ATO) introduced Personal Services Income (PSI) rules to restrict individuals from diverting income through companies, partnerships or trusts to gain tax advantages from strategies such as income splitting, accessing business deductions or lower tax rates. The core issue is whether you are earning money as a business or from personal services (similar to wages). You have personal services income if more than 50% of your income in a contract comes from your own personal skills, labour or services. If you do have personal services income, it is not quite the end of the world. You might be able to retain the taxation benefits if you can pass the 80% test and one of the following four tests: Results Test  You pass the results test if ALL the following apply · You are contracted to deliver a result, such as building a shed, rather than being paid for hours worked · You provide all the plant, equipment and tools needed. · You are responsible for rectifying any defects in your work (at your own cost) Unrelated Clients Test · You must have received PSI income from two or more unrelated clients and there must be a direct connection between the offer to the public and · you being engaged to perform the work Employment Test To pass the employment test, you must meet one of the following conditions · at least 20% of the principal work must be performed by others · One or more apprentices must be employed for at least six months of the year Business Premises Test You pass the business premises test if at all times in the income year you maintained and used a business premises which meets all the following conditions. It must be · used mainly to gain PSI · used exclusively by you · physically separate from your private premises · physically separate from your clients’ premises For the unrelated clients test, the business premises test and the employment test, you first have to meet an 80% test. If 80% or more of your personal services income is derived from one client (and associates) you cannot self-assess anymore. If you still believe that you can pass one of the tests, you must apply to the ATO for a Personal Services Business (PSB) determination. If you pass the 80% test, you can self-assess the Unrelated Clients Test, the Employment Test and the Business Premises Test. Of course, this is no guarantee that the ATO, on audit, will reach the same conclusion as you. If you are an individual with an ABN and you are thinking about income-splitting with your spouse or operating through a company, partnership or trust, please make sure you are not breaching any of the above rules. Otherwise, it might not end well.

Celebrating 45 Years in Business

By Jamie Walsh • November 8, 2025
Why did Walsh Accounting open its doors on a Sunday? Walsh Accounting commenced business on 9 November 1980. It was not even Walsh Accounting at that stage. Here is Lionel’s story. I was Manager of the Barcaldine Hospitals Board in 1980. Marg and I had seven children aged from four to sixteen. Marg had to be a stay at home Mum which was, of course, a full-time job. For example, she had to wash between 90 and 100 items of clothing every day (I counted them). We were therefore a single income family and were nearing the stage when our children would have to go to University if they wanted to continue their studies. There did not seem to be any way that we would be able to pay the costs involved. Early in November 1980, out of the blue, Geoff rang me at the hospital office and asked me if I would like to buy his accounting practice. He also had another full-time job. His accounting practice was a side hustle which he had only started a few months beforehand, so it was very small. Geoff and his wife were leaving town. He wanted $1500 for the practice. Marg and I had a discussion. We agreed that this seemed like a good opportunity to earn extra income. Marg said that she could man the office on weekdays (in addition to her household duties) and I could take interviews and prepare financial statements and tax returns on weekends and in the evenings. We did not have $1500 so I went to the Commonwealth Bank and was granted a loan. We paid Geoff his $1500 and opened to clients on Sunday 9 November 1980. Why a Sunday? Because I was working at the hospital from Monday to Friday. We had to set up on Saturday so Sunday had to be our first day. I was not a registered Tax Agent, so I had to engage a Tax Agent in Brisbane to lodge the returns in his name. His name was Vic Hill and our first business name was A.V. Hill & Associates. Later it became Wilkes and Stewart (accountants in Emerald). Our office was on the top floor of the building now owned by Yachatdac (next to the Radio Theatre) It was difficult trying to look after the children at home while Marg was away from home all day and I was away from home evenings and weekends, so we decided to build an office in our front yard where we would be near the children. This made life somewhat easier. By 1986 we had both been working about 90 hours a week since 1980 and neither we nor the children had had a holiday for seven years. It was unsupportable. We made the decision to leave the Hospital and practice fulltime, which was a scary move as our accounting revenue was only $26,000 per year. I had a commerce degree but I needed more accounting qualifications and Tax Agent registration. I contacted CPA Australia for advice in November 1985 and was told that my last opportunity to gain the necessary qualifications quickly was to attend a full week course in Brisbane and pass an exam. If I missed that, the rules were changing and I would have to do two more years’ study. It was lucky that I inquired in 1985 when we were still thinking about our options. I did the course and successfully applied for Tax Agent registration. My last day working at Barcaldine Hospital was Friday, 4 July 1986. I missed it. I was called to the Department of Health in Brisbane to offer advice on medical services in the West. I was due to fly home in time for my farewell party but the planes were grounded because of fog so by the time I arrived home the party was over. The dirty dishes were still on the verandah. Thus ended one chapter of our lives (after 27 years). A new chapter was beginning.

Payday Super is now law

By Jamie Walsh • November 6, 2025
On 4 November, the Treasury Laws Amendment (Payday Superannuation Bill) 2025 passed parliament. From 1 July 2026, employers will be required to make superannuation contributions for their employees as the same time as they pay their salary or wages. The new law changes the rules about when super must be paid. The current default rules do not change. Importantly, employers still have options if an employee does not have a fund or does not provide the fund details to the employer. For employees, this is very good news. Currently, it is estimated that super guarantee contributions totalling more than $5 billion dollars remain unpaid each year. Under the present quarterly payment system, the ATO is not alerted to unpaid super until 28 days after the end of the quarter and often much later if BASs are lodged late. In some cases, BASs are not lodged for years. Often, the business runs out of cash so the super payments are never made. For employers, it is good news and bad news. The super guarantee has to be paid much earlier than before, which could cause cash flow problems. On the other hand, it is the ultimate budgeting solution. The employer is less likely to pay super guarantee late with resulting penalty and interest payments.

Excess contributions tax de-mystified.

By Jamie Walsh • October 28, 2025
Excess contributions tax de-mystified

The ATO's new Tax Toolkit for small business owners

By Jamie Walsh • September 9, 2025
The ATO's new Tax Toolkit for small business owners the buck stops firmly at your desk as the owner, CEO or company director. The Australian Taxation Office (ATO) has just published its latest Tax Time toolkit for small businesses, with guidance and advice on keeping your tax affairs compliant. How the Tax Toolkit helps your tax planning and compliance The ATO knows the realities of running a small business. So the Tax Toolkit is designed to give you all the information and advice you need to stay compliant. Angela Allen, Assistant Commissioner for small business experience at the ATO, outlines the aims of the Tax Toolkit and how the ATO supports your tax planning. “Our role in helping you get your tax right is important. We're here to help you boost your tax and super knowledge. We want you to be more resilient to the unexpected challenges that small businesses face. We'll keep doing this through tailored and timely advice, and through our informational and educational support resources.” What resources does the Tax Toolkit contain? The ATO’s Tax Time toolkit gives you key resources to help you meet your tax obligations. The advice, information and support included is updated throughout the year, so you always have the correct tax rates and rules to refer to. You can also find 300 free short courses in the ATO’s Essentials to strengthen your small business, helping you learn the skills and gain the knowledge needed to run your business and your tax affairs as smoothly as possible. Helping you plan your tax and stay compliant The ATO’s Tax Time toolkit is an invaluable resource that helps you get to grips with all the basics of business taxation. If you do not have the inclination or time to study the Tax Toolkit or the 300 short courses, Walsh Accounting is a good alternative.

Customer Service

By Jamie Walsh • September 9, 2025
Customer Service We formed the Barcaldine Business Council in the 1980s. At one stage we had over 100 financial members. A record 68 members attended one night-time meeting. The two big issues on the agenda were “buy local” and “customer service”. All members pledged to buy from each other wherever possible. Our main goal was to persuade people to buy local. After a number of years, it became apparent that only (at a guess) 15% of people would almost always buy local. The figure had hardly moved from what it was before our buy-local campaigns. Even members were not buying from other members causing some resentment. We learnt a lesson. No matter how much work we put into the campaigns, in the end most people buy in their own best interests. It took a further while to understand that this is how it should be. People can only live their best lives if they act in their own best interests. We should not want people to live less than their best lives in our town. This is a bitter pill for businesses to swallow. It means that local businesses somehow have to convince consumers that it is their best interests to buy locally. In some cases, this is just not possible. There are better deals elsewhere. However, there are strategies which can at least improve the odds. (I understand that it is difficult for small business owners. 75% of them earn less than the average wage and 43% make no profit at all, despite working long hours with no leave entitlements and often no super. There is no magic wand. I hear you. I know that the strategies below are easier to write than they are to fulfil. Do what you can and I hope it helps. Let me know). Customer Service Outstanding customer service reaps rewards. Do not give customers a reason to look elsewhere. They might stay elsewhere. Convenience It is not only a material world, it is a convenience world. Barcaldine has thousands of products and services that you can access in a few minutes rather than waiting for the item to arrive from a distant city. Sometimes the shop assistant will say “We are out of stock but we can have it here next Wednesday”. In most cases, that is still far more convenient than ordering online. Consistency It is not an ideal world. If you break a leg, you might also have to break some promises. The goal is to get as close to reliability as possible. Nobody is perfect all the time. However, based on anecdotal evidence, consistency of opening hours, products and services seems to be the number one issue with consumers. A very common comment is “We don’t care what the opening hours are as long as they are consistent”. Courtesy A hairdresser once said to me “We have to be the world’s most hypocritical people because we agree with everyone”. She was on the money, but it is not limited to hairdressers. It applies to everyone. You do not have to betray your own beliefs to be a sympathetic listener. You do not have to curtsey to be courteous. I remember buying two flat pack-chairs from the old Meacham and Leyland. I could not work out how to screw them together so I went back to Chook to ask him. We knew each other well enough to have a go at each other so, in a spirit of playfulness, Chook called out to a shop full of customers “Look at this clown. He can’t even screw a chair together” All the customers chuckled a big haha and I said haha too but not quite so big. It turned out that I had bought the last of those flat-pack chairs so I drove home to get one of them. After some head-scratching, Chook said in a small voice “Oh we gave you the wrong screws”. At this stage I wanted to say “OH YOU GAVE ME THE WRONG SCREWS” but when I looked around, all the customers had gone. I was literally the only customer left in the shop. Theoretically, therefore, there could be people still living in Barcaldine and perhaps their descendants who are of the opinion that I cannot screw a chair together. That was sixty years and five months ago. It’s water off a duck’s back to me. I expect to shrug it off shortly. The point is, some take offence more easily than others. You can not only lose a sale if you offend a customer, in a small town you can lose a customer for life and in some cases, you can lose a whole family. “The customer is always right”. We all know that is a load of hogwash, but would you rather show him the error of his ways or take his money? Cooperation Do try to buy in town wherever you can. The seller might become your customer. What goes around comes around in different ways. If you shop out of town, take the freight into account. Sometimes single item freight is many times the freight if the item is on a pallet or one of a bulk delivery. Communication Communication = Sender – >Message –> Receiver. Be a sender and a receiver. As a sender, let people know your opening hours and your products and services in as much detail as possible. You cannot be too detailed. As a receiver, listen closely to what your customers want. Ask them. Do not limit your products to the ones you like. You can do that in a big city but not in a small town (unless you have a very special product). Cast your net Obviously, if you are in the food business you cannot sell Friday lunches to people in Brisbane, but if you work on a computer or sell special products or services, utilise the internet. If only one person in a million in Australia likes your offerings, you have 24 customers you would never have had otherwise. There are success stories. I wish success to you all. I’m not sure my wife thinks I can screw a chair together. By Lionel Walsh