Newsletter – April 2026

This month we step through the newly enacted Division 296 superannuation tax, examine the Full Federal Court’s landmark SEPL decision on fringe benefits for family businesses, unpack what the Kilgour case means for CGT valuations in business sales, and flag the ATO’s escalating focus on work-vehicle FBT compliance.

What the New Division 296 Tax Means for Individuals with Large Super Balances

The Better Targeted Superannuation Concessions measure — known as the Division 296 tax — is now law and takes effect from 1 July 2026. If you hold a large superannuation balance, here is what you need to know.

The Purpose of the Tax

Division 296 is designed to make superannuation tax concessions fairer and more sustainable. Rather than changing how super is taxed for everyone, the law targets individuals with large balances, ensuring they pay more tax on the portion of investment earnings that relates to those balances.

Who It Applies To — Thresholds and Rates

From 1 July 2026 (the 2026–27 income year), the tax applies to individuals whose Total Superannuation Balance (TSB) exceeds the following thresholds (both will be indexed in future years):

• Large balance threshold: $3.0 million
• Very large threshold: $10.0 million

The overall tax on superannuation fund earnings under Division 296 will be as follows:

Certain individuals are excluded from the tax even if their TSB exceeds the threshold — including child recipients of death benefit pensions and individuals who have made structured settlement contributions for a personal injury compensation payment.

How the Tax Works

From an SMSF perspective, the fund calculates its Division 296 earnings based on taxable income, adjusted for assessable contributions, net exempt income attributable to pensions, non-arm’s length income (already taxed at 45%), and income from pooled superannuation trust investments. An actuary attributes the calculated earnings to members, and the ATO then assesses each member’s Division 296 tax liability.

Importantly, Division 296 tax is levied on the individual, not the fund. However, the individual can elect for the tax to be deducted from their nominated superannuation interest rather than paid personally.

Where a person dies, there can still be a Division 296 assessment for the financial year of death (other than the first year of operation, 2026–27), if their TSB exceeded $3 million at the start of that year. Since superannuation is not an estate asset, this scenario should be factored into your estate planning review.

Next Steps

If your total super balance is near — or already above — the thresholds, contact us to arrange tailored modelling and to discuss whether the small-fund CGT election is suitable for your situation. Early planning will help you manage cashflow, reporting, and actuarial requirements, and provide an opportunity to review whether holding investment capital inside superannuation remains the most appropriate structure.

A Wake-Up Call for Family Businesses on Fringe Benefits Tax — The SEPL Decision

As the FBT lodgement season approaches, a high-profile Full Federal Court decision offers important reassurance — and a timely reminder — for family businesses that provide vehicles or other perks to working directors and family members.

The Background

Three brothers operated a substantial business (petrol stations, convenience stores, fast food, and more) through a family discretionary trust. They served as shareholders, directors, and key decision-makers, working long hours in executive-style roles without drawing formal cash salaries. The business provided them with exclusive access to over 40 luxury and high-performance vehicles (including Bentleys and Ferraris) for both business and personal use. Personal use costs were debited against the matriarch’s beneficiary account and cleared by trust distributions.

The ATO assessed FBT on the private use component of these vehicles, arguing they were fringe benefits provided to the brothers as “employees” in respect of their employment.

What the Full Federal Court Decided

The case travelled through the Administrative Appeals Tribunal (AAT), Federal Court, and ultimately the Full Federal Court. On 27 March 2026, the Full Federal Court in SEPL Pty Ltd as trustee of the SFT Trust v Commissioner of Taxation [2026] FCAFC 36 unanimously allowed the taxpayer’s appeal — essentially restoring the AAT’s original decision in favour of the taxpayer.

The key findings were:

• Employee status: The AAT was entitled to find the brothers were not “employees” for FBT purposes. The common law concepts of employment — including the absence of employment contracts, no wages or leave entitlements, and the brothers’ control being referable to their proprietorial roles — supported this conclusion.
• “In respect of” employment: Even if the brothers were hypothetically employees, the AAT was correct to find there was no sufficient connection between the vehicle benefits and any employment relationship. The benefits arose primarily from family and trust relationships, not employment.

Why This Matters for Your Business

This decision provides important clarity on FBT and dual-capacity individuals (such as directors who are also beneficiaries and active workers in trust structures). The key takeaways are:

• Informal perks for working family members in discretionary trusts are not automatically subject to FBT.
• Substance and documentation matter: How benefits are provided, funded, and recorded (via trust distributions versus remuneration) is critical in determining the outcome.
• Common law employment concepts remain central to interpreting FBT definitions.
• Blending roles does not inevitably trigger FBT if the dominant characterisation is beneficiary-based.

However, the ATO is likely to continue scrutinising similar arrangements — particularly where benefits appear to substitute for remuneration or lack clear documentation.

Practical Steps to Protect Your Business

Don’t wait for an audit. Review your arrangements now:

• Document clearly: If a benefit is a trust distribution to a beneficiary, record it via trustee resolutions. If it’s tied to work duties, treat it as a fringe benefit and calculate FBT accordingly.
• Apply the correct FBT methods: Use the statutory formula or operating cost method for cars. Employee contributions (e.g. reimbursing personal use costs) can reduce or eliminate liability.
• Consider available exemptions: Minor benefits under $300 or salary packaging for electric vehicles may assist.
• Check for Division 7A issues: If benefits flow through private companies, deemed dividends or loan account issues may also arise.

Every arrangement turns on its specific facts. If your business provides vehicles, phones, travel, or other perks to family members actively involved in operations — especially without formal salaries — now is a good time to review. Our team can help analyse your structures, run FBT calculations or risk assessments, and implement practical fixes to protect profits while maintaining flexibility.

Key Lessons from the Kilgour Case: Smarter Valuations in Business Sale Transactions

When selling a business — or even a slice of one — how you value the assets involved can have a major impact on the tax outcome. The Full Federal Court’s decision in Kilgour v Commissioner of Taxation [2025] FCAFC 183 offers timely guidance on how “market value” is really determined for capital gains tax (CGT) purposes.

What Happened?

In 2016, three family trusts sold 100% of the shares in an online wagering business, Punters Paradise Pty Ltd, to News Corp for approximately $31 million. The ownership split was 60% (Pettett Trust), 20% (Kilgour Family Trust), and 20% (Reuhl Family Trust).

The 20% holders sought to access the small business CGT concessions, which required the seller’s net assets to be below $6 million. To achieve this, they argued their minority interests should be heavily discounted — because a small stake is usually worth less on a standalone basis.

The ATO disagreed, arguing each 20% parcel should simply be valued as 20% of the final $31 million deal price. The Court agreed with the ATO.

How the Court Approached Market Value

The Court applied the longstanding “willing buyer/willing seller” principles but reached two important practical conclusions:

1. Real-world expectations matter more than rigid valuation dates. Although the tax rules require looking at value “just before” signing the sale contract, the Court held that reasonably predictable outcomes cannot be ignored. Where the sale was essentially locked in through negotiations, the final agreed price was the best evidence of market value.

Practical takeaway: If a purchaser is clearly willing to pay a premium — for control, synergies, strategic value, or expansion opportunities — those factors will likely shape the tax valuation.

2. Actual deal terms beat theoretical discounts. The taxpayers argued for a typical minority discount. However, the Court found the real commercial context mattered more: all shareholders intended to sell together; the buyer wanted all the shares; and a coordinated 100% sale typically lifts the value of each parcel. A hypothetical buyer would not insist on a discount in those circumstances.

Practical takeaway: When shareholders act collectively, the tax valuation of each interest can increase — sometimes significantly.

What This Means for Business Owners

• Don’t undervalue your stake: If the buyer is pursuing synergies or control, your interest might be worth more than a textbook minority valuation suggests. Make sure your advisers consider the wider commercial picture.
• Evidence is everything: Keep thorough records — negotiations, emails, valuations, buyer motivations — to support your tax position and access to concessions.
• Plan CGT concession eligibility early: Test different deal scenarios before signing any contracts, including a heads of agreement. Sometimes restructuring ownership or staging a sale can make a material difference, but anti-avoidance rules must be considered carefully.
• Align shareholder expectations: In family groups and private companies, minority owners often assume their shares will be valued in isolation. Kilgour shows that courts look at the transaction as a whole — not each slice separately.

Kilgour reinforces that tax valuations work best when they reflect the real commercial world. Before you sell, restructure, or negotiate with a potential buyer, involve your accountant early. A well-supported valuation can mean the difference between accessing valuable CGT concessions — or missing out.

The ATO Targets FBT on Work Vehicles: Don’t Let Assumptions Cost You

The ATO is increasing its focus on employers who provide work vehicles for private use. Sophisticated data-matching means shortcuts and assumptions can quickly lead to audits, penalties, interest charges, and reputational damage.

If you provide vehicles to your team — whether to support fieldwork, boost morale, or offer a valuable perk — now is the time to ensure your FBT reporting is in order.

Don’t Assume Dual-Cab Utes Are Automatically Exempt

Dual-cab utes are popular in trades and construction, but they are not automatically FBT-free. Whether an exemption applies depends on the vehicle’s design and how it is actually used across the FBT year.

Even where a ute is designed to carry a load of at least one tonne, or is not designed mainly to carry passengers, FBT can still be triggered if there is any private use. The ATO has identified many cases where employers wrongly claimed full exemptions, resulting in back taxes plus interest.

The best protection is to have appropriate records already in place — similar to a logbook — that support the application of any exemption before the ATO comes asking.

Accurately Apportion Private vs Business Use

If a full exemption doesn’t apply, FBT is typically calculated on the private use component of work vehicle running costs — fuel, maintenance, depreciation. Ignoring this step can seem harmless but escalates quickly under audit. Thorough apportioning can reduce your FBT liability even where the vehicle is used mainly for business. Remember: if an FBT liability is triggered, it is the employer’s responsibility.

Lodge Your FBT Return

Even where you believe your FBT liability is small or nil, there may still be an obligation to lodge an FBT return. The ATO’s analytics automatically flag non-lodgers. Penalties can reach up to 200% of the tax owed, plus interest.

Key date: FBT returns are due 21 May each year. Timely filing keeps your business compliant and avoids cashflow surprises.

Keep Reliable Logbooks and Records

A valid logbook tracks odometer readings, trip purposes, and business-use percentages over a 12-week period (renewable every five years). While not every scenario specifically requires a logbook, failing to keep adequate records can result in significant avoidable FBT liabilities.

Efficiency tip: Digital logbook apps simplify tracking, save time, and reduce errors — and good records can also support deductions.

Why It Matters Commercially

Non-compliance isn’t just a numbers issue. ATO audits divert time and energy from running your business, and ATO attention can affect your standing with clients, partners, or lenders. Getting FBT right ensures you pay only what is required, protects cashflow, and may reveal tax efficiencies you hadn’t considered.

Review your vehicle policies, update your records, and reach out to us if you need help. We support businesses to manage FBT with confidence — making compliance straightforward and stress-free.

The information in this newsletter is general in nature and does not constitute legal, tax or financial advice. Please contact Jewell Moore on 07 3821 4401 or [email protected] to discuss your specific circumstances.