Octopus Accounting & Tax Advisory

ATO warning on home occupancy expense claims
The ATO has identified that some taxpayers are incorrectly claiming rent, mortgage interest and other occupancy expenses as part of their work-from-home expenses.
To claim occupancy expenses, a taxpayer must be able to demonstrate that:
1. the area of their home they used for work purposes is a 'place of business';
2. if they are an employee, it was necessary for them to work from home because their employer did not provide an alternative 'place of business' to work from; and
3. the nature of their income-earning activities requires them to have a 'place of business'.
Factors that may indicate whether an area has the character of a 'place of business' include whether the area is:
1. clearly identifiable as a 'place of business';
2. not readily capable of private or domestic use;
3. exclusively or almost exclusively used for carrying on a business; and
4. used regularly for client or customer visits.
Taxpayers who are eligible to claim occupancy expenses can claim a portion of those expenses based on floor area, the period they worked from home, and their ownership of the property.

There has been another important update to the proposed 30% minimum tax on discretionary trusts.

The latest draft introduces a new option that may allow some existing family trusts to remain as trusts and avoid the 30% minimum tax, provided they effectively lock in fixed beneficiaries and fixed distribution percentages.

That is quite different from the original impression that many trust owners may need to either accept the 30% minimum tax or restructure into another entity.

Our view

Our view is that the Government started with a fairly hard position and is now adjusting the proposal through consultation.

That is exactly why I have been telling clients not to rush into restructuring.

The policy has already changed materially, and it may change again before legislation is passed.

Today we are discussing:

a 30% minimum trust tax;
restructuring concessions;
new fixed-distribution elections;
different treatment for bucket companies; and
various exclusions.

Six months from now, some of those rules may look different again.

What does this mean for trust owners?

The important message is:

Do not panic. Do not restructure just because of a headline. But do not ignore it either.

If you operate a business or hold significant investments through a family trust, you should understand how the proposal may affect you and keep your structure under review.

There may eventually be three broad choices:

1. Keep the discretionary trust and accept the new tax rules.
2. Keep the trust but elect into a more fixed distribution arrangement.
3. Restructure into another entity.

Which one is best will depend on your business, investments, beneficiaries, succession plans and long-term objectives.

Most importantly — it is still not law

This is still a proposal.

Nothing is legislated yet.

Tax policy can change significantly between announcement, consultation, draft legislation and the final law.

So at this stage, the best strategy is to stay informed, understand your options and avoid making irreversible decisions too early.

At Octopus Accounting & Tax Advisory, we will continue following the changes and updating clients whenever there is something meaningful to know.

The 30% trust tax story is not finished yet.

Send a message to learn more

The ATO is obtaining Australian electoral roll information from the Australian Electoral Commission as part of its ongoing data-matching program.
The information will be compared with the ATO’s existing records to identify non-compliance with tax and superannuation obligations.
The data collected may include registered voters’ names, residential addresses, s*x, dates of birth and occupations.
The ATO estimates it will receive records relating to approximately 18 million individuals each quarter.

The ATO has published a Division 7A benchmark interest rate of 8.77% for the income year ending 30 June 2027, up from 8.37% for the previous income year.

Government to re-introduce loss carry back for companies
The Government has recently introduced legislation to re-introduce the 'loss carry back' measure for companies from 1 July 2026.
If enacted, this will allow most companies to carry back a tax loss and apply it against tax paid in either, or both, of the previous two income years, basically giving rise to a tax refund for the loss year.

The Government has recently introduced legislation that would make the $20,000 instant asset write-off permanent for small businesses (as announced in the 2026 Federal Budget).
If enacted, the changes would:
1. permanently set the instant asset write-off threshold at $20,000 (instead of $1,000) for eligible depreciating assets first used, or installed ready for use, for a taxable purpose from 1 July 2026; and
2. permanently set the general small business pool threshold at $20,000 from 1 July 2026.
The changes would also further suspend the 'lock-out rule' until 30 June 2027.