Bumper part 2: what to look out for in 2026

Unpaid present entitlements: Bendel appeal

Those with corporate beneficiaries that have an unpaid present entitlement (UPE) to a share of income from an associated trust are closely watching the outcome of the Commissioner’s special leave application to appeal the Full Federal Court’s (FCAFC) decision in Commissioner of Taxation v Bendel [2025] FCAFC 15 (Bendel). In Bendel, the FCAFC dismissed the Commissioner’s appeal, finding that the UPE was not a loan under subsection 109D(3) of the Income Tax Assessment Act 1936. 

The ATO’s Interim DIS, issued on 19 March 2025, states that the ATO will continue to administer the law in accordance with its published views relating to private company entitlements to trust income, as set out in TD 2022/11. The ATO does not intend to revise its current views until the appeal process is finalised.

Further submissions have been filed by the parties, and hearings have been held in Canberra on 14 October 2025 and 3 December 2025. A decision is not expected until 2026.

Car parking fringe benefits: Toowoomba Regional Council appeal

The Federal Court confirmed in Toowoomba Regional Council v Commissioner of Taxation [2025] FCA 161 that a shopping centre car park was not a commercial parking station for the purposes of considering whether a car parking benefit was provided to employees.

The Commissioner has appealed the decision to the Full Federal Court and issued an interim decision impact statement (DIS). The DIS explains that, until the appeal process is finalised, the ATO does not intend to revise its current view relating to car parking fringe benefits and the meaning of commercial parking station, as set out in TR 2021/2.

Division 296: version 2

The government proposed to introduce a new tax from 1 July 2025, which would tax at 15 per cent those earnings attributable to the part of an individual’s total superannuation balance that exceeds $3 million (adjusted for withdrawals and contributions).

There was broad opposition to including unrealised gains in ‘taxable superannuation earnings’ and not indexing the $3 million threshold. On 13 October 2025, the government announced it would make sensible changes based on two years of feedback while upholding the policy’s main aims.

The changes will:

• Apply a total concessional tax rate of 30 per cent to earnings on balances between $3 million and $10 million.

• Apply a total concessional tax rate of 40 per cent to earnings on balances over $10 million.

• Index the $3 million and $10 million thresholds to maintain relativity with the transfer balance cap.

• Defer the start date by 12 months to 1 July 2026.

We are awaiting revised exposure draft legislation that will propose to introduce new Division 296 into the Income Tax Assessment Act 1997, and the introduction of enabling legislation before 30 June 2026 to give effect to this measure.

Parliamentary review of CGT discount

On 4 November 2025, the Senate resolved that the Select Committee on the Operation of the Capital Gains Tax Discount be established.

The select committee is to present a final report by 17 March 2026.

Terms of reference

The select committee will inquire into and report on:

• The contribution of the capital gains tax (CGT) discount to inequality in Australia, particularly in relation to housing.

• The role of the CGT discount in suppressing Australia’s productivity potential by funnelling investment into existing housing assets.

• How the CGT discount influences the types of assets purchased and whether these classes of investments are productive or speculative.

• The distributional effects of the CGT discount.

• The use of the CGT discount by trusts.

• Whether the CGT discount is fulfilling its original intended purpose.

• Whether the CGT discount has a role in Australia’s future tax mix.

• Any other related matters.

Generative AI: the new frontier

Generative AI has quickly become a transformative tool in the tax profession. Some firms are already using it to improve efficiency and produce creative content, while others remain cautious. Its adoption is expected to grow further during 2026.

Large language models (LLMs) have seen rapid advancement, with training on extensive datasets allowing them to identify patterns in language and complete complicated tasks much faster than humans. While these models can generate convincing responses, they lack true human reasoning abilities and may produce biased, incorrect, or nonsensical information, known as ‘hallucination’. The saying ‘garbage in, garbage out’ is especially relevant in this context, posing ethical challenges for those working with generative AI.

It’s important to remember that LLMs function as text generators rather than search engines. The TASA Code is relevant to the use of LLMs, so practitioners should approach AI-generated content with caution and interrogate the output before unquestioningly accepting its results. Issues around integrity, expertise, and confidentiality can arise – especially since client data should not be submitted to public AI systems without the client’s explicit consent.

Recently, both international and Australian cases have emerged where AI was used to draft court documents or supply evidence, resulting in non-existent case citations fabricated by the technology. Practitioners utilising AI in client services must recognise its limitations, consistently verify outputs, and rely on their professional judgment when assessing LLM-generated material.

Regulation and tax administration

It’s not getting any easier for practitioners

Tax practitioners face ongoing challenges from stricter regulations, including new code of professional conduct rules (see below), and upcoming anti-money laundering and counter-terrorism financing (AML/CTF) obligations for accountants starting 1 July 2026.

Late last year, the ATO signalled it would be toughening its stance on unpaid taxes and superannuation, increasing the number of director penalty notices and garnishees issued in 2025. Practitioners reported seeing a notable shift in the ATO’s approach to debt collection, requests for remission of the general interest charge (GIC), and debts on hold.

Firms are also dealing with staff shortages, heightened client expectations, and pressure to avoid fee increases while spending more time on non-billable administrative tasks.

New TASA obligations

New obligations under the Tax Agent Services (Code of Professional Conduct) Determination 2024 (Code Determination) began to apply to registered tax and BAS agents, requiring them to comply with additional obligations under the Code of Professional Conduct (Code) in the Tax Agent Services Act 2009 (Cth) (TASA). The new rules apply to large firms from 1 January 2025 and smaller firms from 1 July 2025.

The new notification obligation in section 15 of the Code Determination is particularly complex. It requires registered agents to notify the ATO that a false or misleading statement made by you for a client has not been corrected when all the conditions of section 15 have been satisfied. Importantly, reporting a client to the ATO is required only where the client’s conduct is most egregious; that is, where you believe the client’s actions have caused substantial harm to the interests of others.

Further legislative reforms to TASA

Exposure draft legislation to enhance the TPB’s sanctions regime and modernise the registrations framework will be released for consultation.

The timing of this consultation will be subject to government priorities.

TPB resources and data

Throughout the year, the Tax Practitioners Board conducted an extensive series of well-attended webinars that enabled practitioners to put their questions directly to the TPB. The TPB also published a comprehensive series of FAQs on the Code Determination.

The latest key data from the TPB shows that:

• There is currently limited compliance activity on the Code Determination, with the TPB’s focus on educating and assisting practitioners to understand these new obligations.

• As of August 2025, the TPB had received 111 breach reports from registered practitioners, indicating they were reporting a significant breach of the code. Of these, 86 were reports against another registered practitioner, and 25 were self-reported breaches.

• As of August 2025, the TPB had received 37 applications from registered practitioners seeking the TPB’s approval to engage a disqualified entity, of which seven applications were approved, four were rejected, 14 were invalid, and the remainder are currently under consideration.

• Of the approximately 11,000 complaints received by the TPB in the first 12 months of the new whistleblower protections commencing, only around 10 per cent were from eligible whistleblowers.

Cyber security and ATO app

Cyber security remains a major concern globally and for the tax system. The ATO encourages all individuals and registered practitioners to use a strong myID when accessing ATO online services.

The ATO introduced new features into the ATO app, including:

• Real-time messages to notify users when key changes are made to their ATO account.

• New functionality for users to lock and unlock their ATO account where they are concerned to prevent unauthorised access or fraudulent refunds.

Tax Ombudsman

Concerns around the ATO’s administration of the tax system have led to action from the Tax Ombudsman:

• July review into letters from the ATO.

• October review into the effectiveness of the ATO’s registered agent phone line.

• Current review into the ATO’s management of remission of the GIC (the final report is expected in early 2026).

• Own-motion review into systemic issues raised by a specific, long-running taxpayer complaint.

• Proposed review of ATO online services for agents.

• Proposed review of ATO’s engagement with First Nations taxpayers.

• Proposed review of the ATO’s use of Director Penalty Notices.

The proposed review of the ATO’s management of compromised accounts has been deferred.

The Tax Ombudsman’s refreshed 2026 work plan was released on 4 December 2025. Tax Ombudsman Ruth Owen said in a media release on 4 December 2025:

‘We know there are some topics missing from the list that people have asked us to look into. As always with our consultations, we received feedback and suggestions for far more topics than time and resources would allow us to undertake.

‘Two topics in particular, the ATO’s readiness for payday super and the administration of family trust elections, received strong feedback from professional bodies. There are already cross government reviews underway regarding readiness for payday super and, while we recognise family trust election concerns include administrative matters, they are largely about underlying policy issues. However, we will continue to engage with the profession and the ATO on the administrative aspects of both of these matters.’

Robyn Jacobson is a tax advocate and specialist with over 30 years in the tax profession.