Director Penalty Notices are among the most powerful tools in the ATO’s arsenal, and the number issued has increased significantly. If you are a director of any company, you need to understand this because it directly affects your personal financial position, not just your business.

Why Is the ATO Increasing Its Enforcement Activity?

During the COVID-19 pandemic and its aftermath, the ATO adopted a supportive stance toward businesses under financial pressure. Debts were allowed to accumulate, payment arrangements were extended, and formal enforcement action was largely put on hold. The result was a significant build-up of outstanding tax debt across thousands of Australian businesses.

That period is now firmly behind us. The ATO has publicly committed to returning to active debt collection, and its focus has sharpened considerably. It is now systematically working through that backlog (pursuing outstanding PAYG withholding, unpaid superannuation guarantee obligations, and overdue GST), and Director Penalty Notices are central to that strategy.

The ATO’s position is straightforward: by making directors personally liable for their company’s unpaid tax obligations, it creates an immediate and powerful incentive for action. And it is working. The volume of DPNs being issued has risen sharply, and the ATO has signalled it will continue to prioritise this area.

What Is a Director Penalty Notice?

A Director Penalty Notice (DPN) is a formal notice issued by the ATO to a company director, making them personally liable for certain unpaid company tax obligations. Once a DPN is issued, the ATO can recover the debt directly from the director, including by garnishing personal bank accounts or pursuing personal assets such as your home.

The company debts that can attract a DPN include:

• PAYG withholding: amounts withheld from employee wages that were not remitted to the ATO
• Superannuation Guarantee Charge (SGC): unpaid superannuation obligations, including the charge, interest, and penalties
• GST: in certain circumstances where the company has outstanding net GST liabilities

It is important to understand that the term “director” in this context is broad. It includes:

• Directors of your main operating company
• Directors of trustee companies for family trusts
• Directors of holding companies or investment entities
• Non-executive directors of other companies you may have joined
• Former directors: in certain circumstances, resigning does not remove your liability if a DPN has already been issued

If you hold directorships across multiple entities (which many of our clients do), each one carries its own potential DPN exposure. This is one of the most overlooked risks we see.

Two Types of DPN, and One Is Far More Serious

Not all DPNs are the same. Understanding the difference is critical.

Who Is Most at Risk?

You may be more exposed than you realise. The clients we are most concerned about are those where:

• PAYG withholding or superannuation obligations have been paid late or managed through informal instalment arrangements
• BAS, IAS or SGC statements are behind on lodgement, even by just one or two quarters
• The business has been going through a difficult period, and tax has been deprioritised in favour of keeping other creditors paid
• You are a director of a trustee company for a family trust that has its own tax or super obligations.
• You joined a company as a director without fully reviewing its compliance position at the time.
• You recently resigned as a director; resignation does not automatically remove liability if a DPN has already been issued or the relevant lodgements were already overdue

Personal Services Income

Alongside its increased DPN activity, the ATO has also flagged that it is increasing scrutiny of personal services income (PSI) arrangements, particularly where income earned by an individual through their personal efforts is being retained in a company or trust rather than flowing back to that individual.

With the release of PCG 2025/5 in late 2025, the ATO has given taxpayers until 30 June 2027 to review and adjust higher-risk PSI arrangements. This is relevant for clients who operate through a company or trust and have been retaining profits or splitting income with family members. If this sounds like your situation, please speak to us; there is still time to act.

Protecting Your Personal Assets: What You Should Do

The best form of asset protection is early, open communication. The ATO has far more flexibility to work with businesses before a DPN is issued than after one is issued. Once a lockdown DPN lands, options are limited and time is short. Here is what we recommend:

• Review your company’s lodgement position: ensure all BAS, IAS and SGC statements are up to date
• Check that superannuation guarantee obligations are being paid on time and in full. From 1 July 2026, Payday Super requires contributions to be received by the fund within 7 business days of each payday.
• Review all directorships you hold (not just your main business) and check each entity’s compliance status.
• If your company has outstanding tax debts, speak to us about a formal ATO payment arrangement before enforcement action begins.
• If you are considering resigning from a directorship, speak to us first: timing matters

We understand that businesses go through difficult periods. Tax debts can accumulate for reasons unrelated to bad intent, and the ATO’s increased enforcement activity does not reflect your character as a business owner. But it is real, it is happening now, and personal assets are genuinely at risk for directors who do not act early. If you have any queries or concerns, please get in touch with our team, and we will be happy to assist.

This position, first set out in TR 2010/3 and subsequently entrenched in Taxation Determination TD 2022/11, shaped trust distribution practices across Australia’s private group landscape for more than a decade and a half. The compliance cost of challenging it was beyond the means of most taxpayers. Most simply complied.

The High Court decision

On 10 June 2026, the High Court handed down its decision in Commissioner of Taxation v Bendel [2026] HCA 18, dismissing the Commissioner’s appeal by a 5–2 majority. The Court confirmed what every judicial authority that had examined the question had found: a UPE owed by a trust to a corporate beneficiary does not, of itself, constitute a loan under Division 7A.

The majority’s reasoning was grounded in the text of the legislation. Division 7A requires that the private company actively do something to transfer value. A company simply not calling for payment of its entitlement (doing nothing) does not satisfy the definition of ‘financial accommodation’ or constitute a ‘transaction’ that effects a loan. The Court also noted that Parliament had addressed the UPE question specifically in Subdivision EA of Division 7A, and the ATO’s use of the general loan provisions to capture the same arrangements was inconsistent with that legislative structure.

The position before and after Bendel

The ATO’s response: Decision Impact Statement

Following the decision, the ATO confirmed it is considering the implications and will update its guidance. The key points:

• TD 2022/11 will be withdrawn, and related guidance will be reviewed.
• The ATO has acknowledged a UPE is NOT a loan under section 109D where the company simply does nothing.
• ‘Financial accommodation’ requires active conduct, not mere inactivity.
• Subdivision EA and section 100A may still apply depending on the specific facts and arrangements. This is not a blanket free pass.
• Taxpayers previously assessed on the now-overturned basis may seek an amendment or lodge an objection.
• The ATO will consider the specific facts (trust deed, resolutions, accounting records and dealings) before accepting that an arrangement falls within the Bendel principle.

Important caveats: proceed carefully

Fact-specific

The decision turned on the particular terms of Mr Bendel’s trust deed, which had the effect of creating a separate trust upon distribution. Not every trust deed operates the same way; each deed must be reviewed before assuming Bendel applies.

Existing loan agreements remain operative

Taxpayers who converted UPEs into complying Division 7A loans over the past 16 years are bound by those arrangements. They do not unwind automatically, and altering or terminating them may itself have tax and legal consequences.

Other provisions remain live

Subdivision EA, section 100A and Part IVA are not eliminated by Bendel and may still apply in the right circumstances.

Legislative change is expected

There is broad consensus among practitioners that the Government will legislate to reverse Bendel, potentially retrospectively to 2009. The Budget’s broader attack on trust structures provides the political context. A retrospective fix would effectively mean 16 years of ‘compliant’ taxpayers were right all along for the wrong reasons.

The bigger picture: a Pyrrhic victory?

Bendel arrives at a complicated moment. The Federal Budget proposes a 30% minimum tax on discretionary trust income from 1 July 2028, with no credit available to corporate beneficiaries for tax paid at the trustee level. If that measure passes, distributing income from a trust to a company would result in effective double taxation, and corporate beneficiary structures would become largely unviable from that point forward.

The practical window in which Bendel can be useful (even assuming it is confirmed to apply broadly to different trust structures) may be as short as two or three income years (2026, 2027 and 2028). For many private groups, the headline win is real, but the practical impact is constrained.

The ban will commence 45 days after Royal Assent is granted. If Royal Assent is received in late June or early July 2026, this would place the operative start date around mid-August 2026. The change is inserted into the Superannuation Industry (Supervision) Act 1993 (SIS Act) as a new condition on permitted LRBAs under subsection 67A(2), effectively restricting borrowing to Business Real Property only.

Key dates

What is and is not affected

Grandparenting (previously called grandfathering): the key protection

Existing LRBAs in place at commencement are fully grandparented and will not be unwound. The critical protection for anyone mid-process is that acquisitions entered into (i.e. contracts exchanged) before the commencement date are protected, even if settlement occurs after the ban takes effect. If you are currently acquiring residential property via an SMSF LRBA and have not yet exchanged contracts, time is extremely short.

The unanswered question: what is “residential”?

The most important word in the entire announcement has not yet been defined in draft legislation, and the definition matters enormously in practice. The ban is framed around “residential property”, but in SMSF legislation that concept is not always determined by zoning or title.

Consider a property that is residentially zoned under local council zoning and titled as residential on a title search, but used in practice as a medical or professional premises: a GP clinic, a psychology practice, a physiotherapy studio, a small accounting office.

Under existing SMSF rules, many of these properties already qualify as Business Real Property (BRP) despite their title and zoning, because the operative test is whether the property is used wholly and exclusively in a business. If the ban is framed around BRP as the permitted carve-out (which the SIS Act amendments appear to confirm), what falls inside or outside the ban will be determined by the actual use and business connection of the property, not by zoning alone.

The political context

This measure was not the product of a housing policy review, a Treasury white paper, or any published evidence base. It was extracted by the Greens as the price of their Senate support for the Government’s broader budget package. The Treasurer acknowledged the fiscal yield is approximately $50 million over the forward estimates, a rounding error relative to the $1.06 trillion in SMSF assets. The measure is, by any objective measure, political symbolism rather than structural reform.

The argument that SMSFs using LRBAs are inflating residential property prices and crowding out first home buyers does not survive serious scrutiny. SMSFs account for less than 1% of total residential property borrowing in Australia. The change removes a low-risk, well-regulated form of leveraged investment from the retirement savings landscape while leaving higher-risk alternatives untouched. It also has no effect on property supply.

We are not suggesting clients panic. We are suggesting that the most important action right now is to understand where your SMSF arrangements sit, and to take advice before the ~10 August 2026 commencement date if you are considering any LRBA activity.

Our recommendation

• If you have an existing residential LRBA, no immediate action is required: your arrangement is grandparented.
• If you are mid-process on a residential LRBA and have not yet exchanged contracts, contact us immediately; the ban commences 45 days after Royal Assent, which is expected very soon.
• If your SMSF holds or is considering commercial property or Business Real Property, the ban does not affect you.
• If you have any questions about how your SMSF is structured in light of these changes, please call us before taking any action.

18 June 2026 announcements — mixed status

On 18 June 2026, the PM announced further modifications described as responding to post-Budget consultation. Their status differs:

Testamentary trusts — carve-out confirmed (policy only)

The proposed 30% minimum tax on discretionary trusts (proposed from 1 July 2028) will not apply to discretionary testamentary trusts established for genuine testamentary purposes. This is a meaningful concession for estate planning structures. However, the trust minimum tax itself has not yet been introduced as legislation — so neither the tax nor the carve-out is law yet. This remains a policy position only.

New CGT concession for innovative start-ups — consultation only

A proposed Innovative Business CGT Concession (IBCC) to provide a 50% discount to early-stage investors in innovative start-ups was flagged, with a consultation paper released on 18 June. It is not in any legislation and remains at an early design stage.

Still proposals only — not in any legislation

• 30% minimum tax on discretionary trust income from 1 July 2028 — no bill introduced.
• Testamentary trust exemption from the 30% trust tax — policy only (dependent on the trust tax bill).
• Start-up CGT concession (IBCC) — consultation paper only.
• Definitions of eligible ‘new builds’ and affordable housing exemptions for negative gearing — to come via legislative instrument following further consultation.

A word on housing policy and reality

It is our view that the Government is using the housing crisis as political cover for a raft of tax measures that go well beyond what is needed to address affordability. The real-world consequence of removing negative gearing and tightening CGT is not more housing supply — it is higher rents. Landlords who can no longer offset losses or realise gains on a tax-advantaged basis will do one of two things: exit the market entirely, or raise rents to restore their after-tax position. Australia risks following the path of much of Europe, where homeownership is the preserve of those who inherited wealth, and the rest are locked into an expensive, insecure rental market for life.

We have also heard from many clients that the intergenerational dimension of this is deeply concerning. Parents helping children into the property market — one of the last practical ways ordinary Australians can pass on what they have built — becomes more fraught when the tax system treats asset accumulation as a target. If the Government were a private business and made these kinds of representations about housing affordability while implementing policies that make it worse, it would arguably constitute misleading and deceptive conduct.

Please get in touch with the AAG team before making any decisions on your investments, property holdings, or trust structures.

The top 3 ATO Audits for last year were:

• Payroll Tax
• BAS
• Income Tax (Full/General/Combined

For more information on the ATO data-matching programs, please see this link:

https://www.ato.gov.au/General/Gen/Data-matching-protocols/

What is the AustAsia Group doing to assist?

As many clients are aware, AAG has engaged Audit Shield to provide insurance cover for professional fees, such as ours, in the event you are contacted by the ATO or another revenue-related government body for a review or audit.

Audit insurance will cover reviews for both current and prior year lodgements, including but not limited to income tax returns, activity statement audits, fringe benefits tax and payroll tax.

Please see our factsheet on the Audit Shield Service.

Email our Client Care Team for advice on this service if it is appropriate for you.

Should you have any questions on your obligations, don’t hesitate to get in touch with us.

With so many compliance dates to remember in the next quarter, we have prepared a summary for businesses to keep you on track of your business obligations in the lead up to the end of the financial year.

Click on these tabs to see the details of each entry.

If you have any questions or concerns on how these could impact you, please contact our Consulting Team on (08) 9227 6300 or via our Contact Us Page for more information.

• Must be located in Australia
• Must have been owned by you or your spouse for at least 10 years
• Must qualify for a full or partial CGT main residence exemption

You do not need to be living in the property at the time of sale, provided it has qualified as your main residence at some point during ownership.

Benefits of the contribution:

Contribute Outside Normal Caps

Downsizer contributions do not count towards concessional or non-concessional contribution caps.

No Work Test Required

There is no requirement to meet the work test.

Available Even With High Super Balances

Unlike other contribution types, downsizer contributions are not restricted by your total super balance.

Significant Contribution Potential

You can contribute up to $300,000 each (up to $600,000 per couple), limited to the gross sale proceeds.

Retirement Planning Flexibility

This strategy can assist with tax planning, wealth transfer, and the improvement of retirement income streams.

Key Eligibility Requirements

To qualify, you must:

• Be 55 years or older at the time of contribution
• Have owned the property (or your spouse has) for at least 10 years prior to sale
• Sell a property located in Australia
• Ensure the sale qualifies for at least a partial main residence CGT exemption
• Make the contribution within 90 days of receiving the sale proceeds
• Provide your super fund with the approved ATO Downsizer Contribution Form before or at the time of contribution
• Have not previously made a downsizer contribution

Common Misconceptions

Does the property need to be fully CGT exempt?
No. A full exemption is not required. A partial main residence exemption may still qualify.

Do I need to be living in the property at settlement?
No. The property does not need to be your principal residence at the time of sale.

Can only the owner contribute?
Not necessarily. A spouse who is not on title may still be eligible, provided all other conditions are satisfied.

Can I contribute more than the sale proceeds?
No. The contribution is capped at the lesser of $300,000 per person or the gross sale proceeds.

Can I contribute part now and top it up later?
No.
Downsizer contributions can be made only once per person and must generally be made within 90 days of receiving the sale proceeds.

If you choose to contribute less than your maximum eligible amount (for example, $100,000 instead of $300,000), you cannot later return and contribute the remaining amount once the time limit has passed.

You may split the contribution into multiple payments, but they must all be made within the allowed timeframe.

Because this is a once-in-a-lifetime opportunity, it is important to consider the full contribution amount before proceeding.

Important Considerations

• Downsizer contributions are not tax-deductible
• Once contributed, funds remain subject to super preservation rules
• Contributions may impact Age Pension eligibility
• Vacant land generally does not qualify
• Pre-CGT properties have specific eligibility considerations

Professional advice is strongly recommended before proceeding.

We’re Here to Help

Downsizer contributions can be a valuable retirement planning tool when structured correctly.

If you are considering selling your home and would like to explore whether a downsizer contribution suits your circumstances, please contact our team for tailored advice.

Some examples from the Australian Tax Office

(Assuming all other eligibility requirements are met — including age 55+, 10-year ownership and contribution within 90 days of settlement.)

For more information, visit the ATO’s website.

Please get in touch with us if you would like advice concerning the above or if you have any questions.

The ATO has recently signalled a much stronger focus on holiday homes and residential properties that are used partly for private holidays and partly for rental income. This change affects many people who own coastal homes, farm stays, Airbnb-style properties or seasonal rentals.

The ATO’s concern is simple. Many taxpayers claim significant deductions for a property that, in practice, is mainly used by the owner, family or friends for private enjoyment. As a result, the ATO has released new draft guidance to clarify how these properties will be treated from now on.

This includes:

• TR 2025/D1 – a draft taxation ruling setting out the general rules for rental property income and deductions
• PCG 2025/D6 – a practical compliance guideline explaining how owners must apportion expenses for properties with both private and income-producing use
• PCG 2025/D7 – a guideline explaining when a holiday home may be considered a “leisure facility” under section 26-50, which can deny major deductions

These drafts represent the ATO’s modern approach to holiday homes and signal how compliance activity will be targeted.

When Is a Property Treated as a Holiday Home?

A holiday home is generally a residential property that is sometimes rented out commercially, but is also used for private holidays. The ATO is particularly concerned where:

• The property is rarely genuinely available for rent
• it is listed at inflated prices that discourage bookings
• School holidays and peak seasons are blocked out for family use
• Family and friends stay free or at heavily discounted rates

In these situations, the ATO is likely to question whether the property is truly held for income-producing purposes.

Apportioning Deductions: New Expectations from TR 2025/D1 and PCG 2025/D6

Where a property has mixed use, income and expenses must be divided between private days and income-producing days. The draft guidance confirms:

• A time-based method is generally expected. Owners must calculate the number of days the property was genuinely available for commercial rent and the number of days it was actually rented to paying guests.
• If only part of the property is rented, the ATO expects both time and area apportionment.
• Owners can adopt a different approach, but they must demonstrate that their method is fair and reasonable.

This means deductions can no longer be claimed in full. They must accurately reflect the reality of how the property is used.

When a Holiday Home Becomes a “Leisure Facility”

The most significant change appears in PCG 2025/D7, which aligns with sections 26-50 of the tax law. The ATO may treat the property as a leisure facility if it is not mainly held or used to produce assessable income.

If that happens, many major deductions will no longer be allowed, such as:

• interest on loans
• council rates
• land tax
• repairs and maintenance
• insurance
• some utilities

Only expenses that directly relate to earning income, such as cleaning after guests or advertising fees, may still be deductible. This can drastically change the tax outcome for an owner.

The ATO’s Risk Zones: Green, Amber and Red

To help owners understand how their situation might be assessed, the ATO has introduced a traffic-light model.

Common behaviours the ATO is now watching for (red-zone indicators)

• Claiming 100 per cent of interest and holding costs despite long periods of private use
• Blocking out school holidays and peak seasons, but still treating the property as an investment.
• Listing the property at unrealistically high prices so that no one books
• Allowing friends or family to stay free or cheaply while still claiming all expenses
• Not keeping records of private stays and periods of genuine availability
• Setting unreasonable conditions, such as long minimum stays in off-peak periods

Transitional Relief

The ATO has acknowledged that its position on holiday homes has not previously been as clearly expressed. For that reason, it has indicated that it will not devote compliance resources to reviewing expenses incurred before 1 July 2026, provided:

• The property was acquired before 12 November 2025, and
• it is genuinely a rental property, even if privately used at times.

After this transition period, the new guidance will take full effect.

What This Means for Holiday Home Owners

For clients who own, or are thinking of buying, a holiday home, several practical implications arise:

• Actual use now determines the deductions. If the property is mostly for private enjoyment, the tax outcomes can change significantly.
• Record-keeping is more important than ever. Owners should maintain booking calendars, advertising records, market-rate evidence and full details of private stays.
• Occupancy, availability and pricing will be examined closely. Blocking out peak seasons or charging unrealistic rates may place the property in the red zone.
• Loan interest and major holding costs may be denied altogether if the property is treated as a leisure facility.
• Owners need to make deliberate choices about whether they want the property to operate as a genuine income-producing rental or remain primarily a private holiday home.

We are here to help.

If you own a holiday home or are considering investing in one, reach out to us. We can help you to navigate the tax implications.

The Australian Taxation Office (ATO) has a factsheet that explains what this would look like and the upcoming obligations on employers.

The purpose of this is to reduce the unpaid superannuation owed to employees.
A Treasury report on its impact estimates that a 25-year-old median-income earner who is currently paid superannuation quarterly and wages fortnightly could be around 1.5% better off at retirement if they switched to the earlier contribution and payment model.

The estimate is that this initiative could bring in up to $3.4 billion of unpaid super.

Under the proposal:

• Employers will be required to pay SG contributions so they are received by the employee’s superannuation fund within seven business days of payday, aligning contributions with each pay cycle rather than quarterly.
• A “payday” refers to when a qualifying earnings payment is made to an employee (updated wording to match legislative terminology)
• There are two key exceptions:
  1. For new employees and only for their first two weeks of employment
  2. For payments made outside a regular pay cycle (e.g., bonuses, commissions, correction runs), which may follow alternative timing rules defined by the ATO.

They envisage that when employers report via the Single Touch Payroll (STP) system, this will assist with some of the workload.

However, this will impact employers’ cash flow, as instead of paying the superannuation quarterly, they will need to have the funds available at each pay cycle to remit the contributions.

It is important to note that paying super late or submitting late returns can result in penalties.

Correct super guarantee (SG) payments involve four steps:

1. You must determine if a worker is “for super purposes” an Employer or a Contractor. This is a complex area.
2. You then apply the correct super guarantee percentage.
3. You have the correct earnings base. It has historically been calculated on Ordinary Time Earnings (OTE); however, draft legislation introduces the new concept of Qualifying Earnings (QE) to create consistency and reduce grey areas. This change should be incorporated into payroll systems as final definitions are confirmed.
4. The SG is paid on time within the statutory timeframe.

What happens if SG is paid late?