Structuring Considerations for the 2025-26 Financial Year

Overview

As the 2025-26 financial year begins, Australian businesses and individuals face a number of structural and compliance considerations that will affect how they manage their tax obligations. This article outlines the key areas where planning decisions should be reviewed and, where appropriate, adjusted for the year ahead.

Instant Asset Write-Off Threshold

The instant asset write-off threshold has been a central planning tool for small and medium businesses. For the 2025-26 financial year, the threshold applies to businesses with an aggregated turnover of less than $10 million, allowing an immediate deduction for eligible assets costing less than the prescribed threshold.

Businesses should confirm whether the threshold has been extended at its current level or reverted to the previous $1,000 limit, as this directly affects capital expenditure timing and depreciation schedules.

Stage 3 Tax Cuts — Second Year Impact

The revised Stage 3 tax cuts, which took effect from 1 July 2024, continue into their second year. The key rates for resident individuals remain:

• 0% on income up to $18,200
• 16% on income from $18,201 to $45,000
• 30% on income from $45,001 to $135,000
• 37% on income from $135,001 to $190,000
• 45% on income above $190,000

For business owners drawing salary and dividends, these rate changes affect the relative efficiency of different remuneration structures. Tax planning should account for the interplay between personal marginal rates, company tax rates, and franking credit outcomes.

Superannuation Guarantee Increase

The superannuation guarantee rate increased to 12% from 1 July 2025, completing the legislated schedule of incremental rises. Employers should ensure payroll systems are updated and that super obligations are met on time to avoid the superannuation guarantee charge (SGC).

For business owners who pay themselves through a company, the increase in compulsory super affects the total cost of employment and should be factored into salary packaging arrangements.

Division 7A Loan Agreements

Division 7A continues to require close attention from private company shareholders and associates who access company funds. Loan agreements must be in place by the lodgement date of the company's tax return, and minimum yearly repayments must be met to avoid the loan being treated as an unfranked dividend.

With the benchmark interest rate subject to annual update, businesses should review existing Division 7A agreements to ensure repayment schedules remain compliant.

Trust Distribution Resolutions

Discretionary trust distribution resolutions must be made by 30 June each year. Where a trust has income to distribute, the trustee should consider the tax position of each beneficiary, the availability of franking credits, and any capital gains that may need to be streamed to specific beneficiaries.

Failing to make a valid resolution by the deadline may result in the default beneficiary being assessed, or the trustee being taxed at the top marginal rate.

Record-Keeping and Digital Compliance

The ATO continues to expand its data-matching capabilities and digital reporting requirements. Businesses should ensure that their record-keeping systems meet the requirements for electronic lodgement and that transaction records are maintained for the requisite periods.

Single Touch Payroll (STP Phase 2) reporting is now fully operational for all employers, and any discrepancies between STP data and tax return positions will be subject to ATO review.