Practice Updates - July 2026

ATO updates non-individual tax returns for 2026 tax time 

The Australian Taxation Office (ATO) has released updates to several non-individual tax returns and schedules for the 2025–26 income year. One of the most significant changes is the introduction of the new Trust Income Schedule, which must generally be completed by entities receiving one or more trust distributions and lodged with their tax return. 

The ATO has also introduced additional reporting requirements for trust distributions and expanded the Reportable Tax Position (RTP) schedule for companies with new disclosure questions relating to targeted compliance approaches and Division 7A arrangements. While most company tax return labels remain unchanged, businesses, trusts and investment entities should review the updated forms and reporting obligations before lodging their 2026 tax returns. 

Key tax and business changes now in effect from 1 July 2026 

From 1 July 2026, several Federal Government measures have come into effect that may impact individuals and businesses. Key changes include a further round of personal income tax cuts, the permanent extension of the $20,000 Instant Asset Write-Off for eligible small businesses, and the introduction of Payday Super, requiring employers to pay employees' superannuation at the same time as their wages. These measures are designed to provide ongoing cost-of-living relief, support small businesses and strengthen Australia's superannuation system. 

Businesses should review their payroll processes to ensure they are prepared for the new superannuation requirements and consider whether the Instant Asset Write-Off can be utilised for eligible business purchases during the financial year. 

Tax reform – Boosting home ownership – Reforming negative gearing and capital gains tax 

As part of the 2026–27 Federal Budget, the Government announced it would reform negative gearing and capital gains tax (CGT) arrangements. 

These measures are now law. 

These changes, will apply from 1 July 2027: 

• Limit negative gearing for residential property investments to new builds 

• Replace the 50% CGT discount for individuals, trusts and partnerships with cost base indexation and a 30% minimum tax rate on capital gains. 

The impact of these changes on existing investments will be limited. Properties held at announcement (7:30pm AEST 12 May 2026) will be exempt from the negative gearing changes, while the CGT reforms will only apply to gains that accrue after 1 July 2027. 

Proposed $1,000 instant tax deduction released for consultation 

The Australian Government has released draft legislation proposing a new $1,000 instant tax deduction for Australian tax residents who earn employment income, commencing from 1 July 2026. Under the proposal, eligible employees could claim a standard deduction of up to $1,000 for work-related expenses without keeping receipts. Taxpayers with work-related expenses exceeding $1,000 would still be able to claim their actual deductible expenses under the existing rules. 

The proposal would not apply to taxpayers who earn only business or investment income, and certain deductions, including charitable donations, investment expenses, and union or professional association membership fees, could still be claimed in addition to the standard deduction. As this is currently drafting legislation, the measure is subject to consultation and has not yet become law. 

ATO releases new guidance on rental property income and deductions 

The ATO has released Taxation Ruling TR 2026/1 and two new Practical Compliance Guidelines, providing updated guidance on how individuals who are not carrying on a rental property business should report rental income and claim deductions. The guidance covers long-term rentals, short-term accommodation (including holiday homes and online booking platforms), renting part of a home, and how expenses should be apportioned where a property has both private and income-producing use. 

The ATO has also clarified the operation of the rules denying certain deductions for holiday homes that are not used primarily to earn rental income. Property owners should ensure they have appropriate records and apply a fair and reasonable method when apportioning expenses between private and rental use. 

Guidance on Payday Super obligations and exceptional circumstances concession 

The ATO has released draft Practice Statement PS LA 2026/D3, outlining how it will administer the exceptional circumstances concession under the new Payday Super framework. The draft guidance explains when employers may be granted additional time to meet their superannuation obligations if they are affected by events such as natural disasters or widespread communications technology outages. 

The ATO makes it clear that ordinary payroll issues or cash flow difficulties alone will not qualify for additional time. Employers seeking relief must demonstrate that the exceptional event directly affects their ability to process and transmit superannuation contributions. As the guidance is currently in draft form, employers should continue preparing to comply with the Payday Super requirements under the existing rules. 

Updated PAYG withholding schedules effective from 1 July 2026 

The ATO has issued the Taxation Administration (Withholding Schedules) Instrument 2026, updating all 15 PAYG withholding schedules from 1 July 2026. The revised schedules reflect the latest legislative changes, including the new personal income tax rates for the 2026–27 income year, increased Medicare levy low-income thresholds, and the annual indexation of repayment thresholds for study and training support loans. 

Employers should ensure their payroll systems are updated to apply the new withholding rates from 1 July 2026 to ensure PAYG withholding is calculated correctly for employees. Employers reporting through Single Touch Payroll (STP) should also note that STP finalisation declarations for the 2025–26 financial year are generally due by 14 July 2026, unless an approved extension applies. 

Luxury car tax thresholds for 2026–27 

The ATO has advised that the luxury car tax (LCT) thresholds for 2026–27 will increase from 1 July 2026, as follows: 

• Fuel-efficient vehicles: $91,661 (2025–26: $91,387)  

• Other vehicles: $80,809 (2025–26: $80,567) 

These thresholds determine when Luxury Car Tax applies to eligible vehicle purchases and are indexed annually. 

Reminder: Single Touch Payroll (STP) finalisation due by 14 July 

Employers reporting through Single Touch Payroll (STP) should ensure their 2025–26 STP finalisation declaration is lodged with the Australian Taxation Office (ATO) by 14 July 2026, unless they have been granted a deferred due date or qualify for an exemption. 

Finalising STP data enables employees to access their Income Statement through myGov and complete their individual income tax returns. Employers should review payroll records to ensure all year-end information is accurate before submitting their finalisation declaration. 

If you have any questions about these changes or need assistance updating your payroll processes or meeting your tax obligations, please contact the Lynden Group team. We are here to help you navigate the new requirements and ensure your business remains compliant.