EOFY Practical considerations

With the re-election of the Labor Government and close of this financial year, there are a lot of practical matters to bear in mind – some administrative, some future planning, and some key taxation considerations beyond EOFY distributions.

🚩 Division 296 and the taxation of unrealised gains in SMSFs

It seems clear that the Labor Government will enact Division 296, effective from 1 July 2025 with the first taxing point at 30 June 2026. What remains unclear is precisely what will be legislated as the Prime Minister appeared to indicate last week that there may be room for discussion, and the Treasurer then stated there was not.

On the basis that the Division (in whatever form) will be effective from 1 July 2025, the value of an SMSFs capital assets at the close of this financial year will be relevant. This is particularly the case where any asset divested from the SMSF in the 2026 financial year will be added back into the calculation for Division 296 purposes.

There are no general comments that can be made to deal with this evolving area, except that advisers and trustees should:

review the capital assets of SMSFs,
obtain accurate and reliable valuations of assets, and
seek further advice for the fund if necessary.

We have further discussed Division 296 in our following articles with Hayley Mitchell, Partner, Estates:

🚩 GIC and SIC not deductible from 1 July 2025

Any General Interest Charge (GIC) or Shortfall Interest Charge (SIC) which accrues after 1 July 2025 will no longer be deductible to a taxpayer.

GIC is imposed on an outstanding tax liability at the Reserve Bank of Australia (RBA) rate plus 7%.

SIC accrues on a tax shortfall when tax is incorrectly assessed between the date of the original assessment and an amended assessment, at the RBA rate plus 3%.

Where substantial interest has accrued, a taxpayer can request a remission of the GIC or object to the SIC. Critically:

A taxpayer can only object to SIC if it equates to at least 20% of the primary tax shortfall. This means that taxpayers cannot challenge what are still substantial charges but fall short of the 20% mark, although on occasion the ATO will consider the matter in an objection to the principal liability.
In our experience, the approach to remission of GIC has been arbitrary – taxpayers with identical circumstances (under the same audit activity) receive different decisions on the remission of GIC. In these circumstances, the taxpayer cannot object to GIC or a decision not to remit GIC, and their only recourse is to go through the expensive and typically stressful process of judicial review.

The Inspector-General of Taxation and Taxation Ombudsman announced on Monday, 23 June 2025 that they will review the ATO’s approached to GIC. In particular, the IGTO will review whether the ATO’s process and stance on the remission of GIC is fair, reasonably and applied consistently in light of the ATO’s very public statement that it is tightening up its (arguably already rather snug) position on remission of GIC. This review will of course take time, and it not likely to assist taxpayers over the coming 12 to 18 months, if any changes are made after the report issues.

🚩 Critical company administration

In earlier decades, the interpretation of Australian tax law and the enforcement of administrative requirements was generally more relaxed than it is today. That era is long over. The ATO is now clearly focused on tightening compliance and is particularly concerned about informal practices and poor record keeping.

In respect of companies, and particularly family-owned companies, there are two key activities or misconceptions that seem to arise:

First, that if an individual borrows money or uses funds or assets of a company but returns those funds by 30 June, to be borrowed again after 1 July – Division 7A will not apply. This is not correct. Division 7A specifically targets this conduct, and the ATO have increasingly focused on the purported repayments to the company.
Second, that dividend statements or documentation can be completed and backdated to an earlier date. This is, of course, not correct. It may be that company directors have had a meeting and decided to declare a dividend without executing the relevant documentation at the time, and the documentation can subsequently confirm the earlier date of declaration. However, both the Corporations Act requirements, tax legislation requirements and general law requirements regarding the documentation of decisions must be complied with.

The general trend of the law and ATO compliance activity now is that everything should be documented perfectly at the time of an event, and cannot be subsequently accounted. This, of course, creates a substantial amount of work for accountants and has vastly changed the mode of work over the last decades.

The best practice is to take all reasonable steps and endeavour to comply with those requirements.

🚩 TPB and new Code obligations

From 1 July 2025, the Tax Agent Services (Code of Professional Conduct) Determination 2024 (Cth) will take effect for all practitioners registered under the Tax Agent Services Act 2009 (Cth).

Relevantly, the determination includes the new additions to the Code of Professional Conduct otherwise found in Division 30 of the TASA, including what have generally been referred to as the ‘dob-in’ provisions. The dob-in provisions relate to any service provided or statement made ‘on or after the day the second begins to apply to the registered tax agent or BAS agent’, the last day of which was 1 July 2025.

🚩 Lodgement dates and records

As the last formal filing date for income tax returns for the 2024 financial year passed on 5 June 2025, it is a good moment to take some administrative steps regarding that year.

What is perhaps one of the simplest steps is to download and keep a copy of the tax lodgement program for the 2024 financial year. The lodgement program is not a legislative instrument or the like which remains readily available or easy to find, and it is replaced with the next lodgement program. This makes it extremely difficult to find the program in later years if or when you need to confirm the required lodgement dates for prior years under the program.

With respect to the program, it is also important to note which dates act as a legal deferral of the lodgement due date beyond 31 October, and which do not. For example, the lodgement date of on or about 15 May each year is a legal deferral of the lodgement date under the Taxation Administration Act 1953. However, the lodgement and payment date of 5 June is not a legal deferral, and is only a concessionary extension so that the ATO does not exercise is enforcement powers. Consequently, even though a return is lodged by 5 June and the liability paid, within the income tax legislation the lodgement is technically late, which can have implications for interest in future years.

It may not seem like the most important matter as everyone heads into the end of financial year, but it is certainly useful in future to have a copy of the tax lodgement program (and any specific client deferrals) saved each year, and clear records of whether lodgements were made on time or not.

This article is part of our team’s key updates and insights to help ensure your EOFY is in order and that you’re well-prepared for the year ahead.

You can explore other related articles below.

30 June trust distributions: from Carter to Bendel, we’ll cover how recent cases and ATO guidance have reshaped how trust distributions should be approached, including the importance of documentation, the treatment of unpaid entitlements, and the use of corporate beneficiaries.
Professional profits: the implications of PCG 2021/4 on the allocation of professional profits, which is relevant to all entities now that the transition period has ended.
EOFY and checklist: covering the key items including Division 296, changes to deductibility of interest charges, company admin tasks, TPB obligations, and lodgement timelines