Practice Update September - 2026

Discretionary trusts and the proposed 30% minimum tax 

The Government has released exposure draft legislation introducing a 30% minimum tax at the trustee level for discretionary trusts, with public consultation open from 3 to 18 September 2026. Under the proposal, a discretionary trust net income would be taxed at a flat 30% at the trustee level, regardless of how it is distributed. Non-corporate beneficiaries who receive distributions would then be entitled to a non-refundable tax offset for the tax already paid by the trustee, reducing the risk of double taxation.  

The measure is proposed to apply from 1 July 2028. A temporary three-year restructure rollover will be available from 1 July 2027, allowing eligible trusts to transfer assets into other entity structures, such as companies, without triggering an immediate CGT liability. 

The measure is not yet law and remains subject to consultation. Trustees and beneficiaries, particularly those distributing to non-corporate beneficiaries, should start considering how the proposed regime may affect their structure. Lynden Group is monitoring this legislation and will update clients as it develops. 

Deductions for rental properties that double as a holiday home 

The ATO has issued updated guidance, effective from 1 July 2026, on deductions for rental properties also used privately as a holiday home. The key test is whether the property is used, or genuinely held for use, mainly to produce rental income. Where this threshold is not met, only expenses directly connected to the rental activity, such as advertising, cleaning between guests and booking platform fees, can be claimed.  

Where a property does satisfy the "mainly to produce income" test but is also used privately, for example by the owner over off-season weekends when it isn't listed, ownership expenses such as interest, council and water rates, body corporate fees, and repairs and maintenance remain deductible but must be apportioned to reflect the private-use period. 

The ATO's focus in this area has grown alongside short-term rental platforms, which make it easier to alternate between renting and personal use. Owners and advisers should keep clear records of actual rental and private-use periods, so claims are correctly apportioned and can withstand review. 

New ATO pre-fill data makes tax time easier for contractors 

From Tax Time 2026, the ATO is expanding pre-fill to include contractor payment data from the Taxable Payments Annual Report (TPAR), around $21 billion in payments, into eligible tax returns. This should benefit 700,000 sole traders across construction, courier, cleaning, IT and security. Contractors lodging after 28 August 2026, the TPAR deadline for payers, are most likely to see complete pre-fill data. Figures are a starting point, not a substitute for record-keeping: contractors must check amounts and declare income. 

Draft ruling for recipient created tax invoices 

The ATO has released draft GST ruling GSTR 2026/D2, setting out its view on when recipient created tax invoices (RCTIs) can validly be issued under the current RCTI determination. It addresses several practical issues, including the meaning of the requirement that the recipient, rather than the supplier, determines the value of the taxable supply, the registration requirements both parties must satisfy, and the need for a written RCTI agreement for an RCTI to qualify as a valid tax invoice. 

The draft also considers the consequences where an RCTI arrangement fails to meet requirements, how the rules apply in agent and set-off scenarios, and includes a compliance checklist in Appendix 1. Once finalised, the ruling is proposed to apply from 15 June 2023, replacing the long-withdrawn GSTR 2000/10. 

Public comments closed on 11 September 2026. Businesses relying on RCTI arrangements, common in agriculture, waste management and some supply chains, should review existing agreements against the draft guidance now, ahead of finalisation. 

$1,000 standard deduction for work expenses 

From the 2026-27 income year, eligible taxpayers can access a new standard deduction of up to $1,000 for work-related expenses, applied automatically where eligibility criteria are met, with no claim or substantiation required. To qualify, a taxpayer must be an Australian resident for tax purposes earning assessable labour income, such as salary and wages, director fees or parental leave pay. Taxpayers claiming actual expenses above $1,000 must still retain full records. Some items, such as union fees and professional association memberships, sit outside the standard deduction and can be claimed separately with appropriate records. 

ATO reveals tax time ‘dos’ and ‘don’ts’ as lodgments get underway 

As Tax Time 2026 gets underway, the ATO has flagged common errors alongside reminders for lodging correctly. On the "don't" side, it warns against overclaiming deductions, noting its data-matching can quickly flag claims that look inconsistent with a taxpayer's occupation or income; failing to declare income from side hustles, cash jobs, short-term rentals or online activities; copying last year's figures without updating them; relying on unverified advice from AI tools or social media; and claiming the new $1,000 standard deduction before it applies, since it isn't available until the 2026-27 income year. 

On the "do" side, the ATO encourages taxpayers to check personal, bank and superannuation details are current; refer to occupation-specific guides when claiming deductions; use the ATO app's myDeductions tool to keep records; stay alert to scams and rely only on verified ATO channels; and amend a return promptly if an error is found after lodgment. 

More than 100 million pieces of pre-fill data are available this year. The lodgment deadline for self-preparers is 31 October, and the standard processing time is around 12 business days. 

Need help navigating these changes? 

With a number of tax, superannuation and compliance changes taking effect this financial year, now is a good time to review how the latest developments may affect you or your business. If you have any questions about the updates covered in this newsletter or would like assistance with your tax and compliance obligations, contact the Lynden Group team. We're here to help you understand the changes, stay compliant, and plan with confidence. 

Email: info@lyndengroup.com.au