The Australian Taxation Office (ATO) and recent tribunal decisions continue to shape the tax landscape for individuals, businesses, and trustees. For tax professionals and business owners, staying across these developments is critical — particularly with compliance season approaching.
At Boa & Co. Chartered Accountants, we’ve summarised the most significant updates you need to know:
1. Denying Deductions for ATO Interest
From 1 July 2025, general interest charge (GIC) and shortfall interest charge (SIC) will no longer be deductible to the extent they are incurred on or after this date.
Key points:
- GIC on unpaid income tax debts isn’t incurred until the ATO issues a notice of assessment and the due date passes.
- SIC is generally incurred on the day the notice of assessment is given, even though it is calculated for a past period.
- Interest on borrowings used to pay tax liabilities may still be deductible — but generally only if the taxpayer is carrying on a business and the liability relates to that business.
Action point: Clients should track when liabilities arise, especially with amended assessments, and plan for higher after-tax costs of ATO interest.
2. Apportioning Rental Interest Expenses
The ATO has released new guidance on when mortgage interest for rental properties must be apportioned.
Apportionment applies where:
- Properties are co-owned (unless a separate enforceable agreement allocates loan responsibility).
- Part of the loan is used for private purposes.
- Properties are used privately or only rented part-year.
- Properties are sold or repurposed mid-year.
Tip: Once a loan is tainted with private use, apportionment is required for its entire life — unless refinanced under very limited conditions.
3. Main Residence Exemption – ATO Tips
The ATO has flagged recurring errors in the reporting of capital gains and the use of the main residence exemption.
Highlights:
- The 6-year absence rule applies only if the property was first established as a main residence.
- Disposing of vacant land generally doesn’t qualify.
- Only one property can be treated as a main residence at a time (with a 6-month transition rule).
- Residency status changes can affect eligibility.
Reminder: Proper record-keeping and accurate elections in tax returns are essential.
4. Trust Resolutions – Tribunal Case Warning
In The Trustee for Goldenville Family Trust v Commissioner of Taxation [2025] ARTA 1355, the Administrative Review Tribunal held that certain trust distributions were invalid.
Key findings:
- Timing is critical: Trustee resolutions must be made before 30 June of the income year. Post-year-end backdating will not hold up.
- Characterisation matters: Income labelled as “interest” was not accepted as such without evidence. The ATO and courts will look at substance over form.
Lesson for trustees: Ensure contemporaneous documentation and robust evidence supports both the timing and characterisation of distributions.
How Boa & Co. Can Support You
At Boa & Co., we provide expert, practical support to help you stay compliant and make informed decisions. Our team can assist you in:
- Reviewing exposure to ATO interest charges and planning strategies for tax payments.
- Advising on rental property deductions, ensuring correct apportionment and maximising allowable claims.
- Applying the main residence exemption correctly and helping with CGT reporting.
- Drafting and reviewing trust resolutions to ensure validity and effectiveness before year-end.
With decades of combined expertise in Australian taxation and international compliance, Boa & Co. works alongside businesses, property investors, and trustees to provide confidence and clarity in an evolving tax environment.
The Bottom Line
From new restrictions on deductibility of ATO interest, to rental property deductions, to the correct application of the main residence exemption, and now tribunal warnings on trust resolutions — the ATO’s focus on compliance and accuracy is sharper than ever.
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