During July, we have seen Parliament resume and pass the student loan 20% debt reduction legislation, together wtih case decisions dealing with tax residency and the ultimate control over a discretionary trust. The ATO has also continued its rewrite and update of rulings.

LEGISLATION UPDATE

HELP debt reduction

Parliament resumed on 22 July 2025 for the first time since the federal election. Universities Accord (Cutting Student Debt by 20 Per Cent) Bill 2025 was passed, and includes the following measures:

• One-off 20% reduction to HELP debts and other student loans incurred on or before 1 June 2025.
• From the 2025-26 income year: Increase the minimum repayment threshold to $67,000, indexed annually to wage growth, and implement a marginal repayment system with compulsory repayments calculated only on income above the threshold. 

Once the Bill has received Assent, the ATO will commence retrospectively applying the 20% reduction to the balance of debt as at 1 June. Indexation that was applied will be adjusted to reflect the reduced debt amount.

CASE LAW UPDATE

Evans v FC of T—Individual tax residency

The taxpayer was an Australian citizen and FIFO worker in Botswana. Due to covid-19 restrictions, he was unable to return to Australia during his off-duty periods and was physically absent from Australia for 10 months. He rented accommodation in Botswana, had a local bank account and mobile phone, and had made social connections. However, he maintained substantial links to Australia, including his family home, with his family remaining in Australia. The taxpayer claimed he was a non-resident of Australia as his intentions had changed and he had decided to stay in Botswana as long as he needed to. He then returned to Australia as soon as his employment contract ended.

The ART held that his extended absence from Australia did not reflect an intention on his part to abandon his home in Australia. He continued maintaining strong ties to Australia and had a pattern of returning whenever he was allowed to do so. His presence in Botswana was found to be temporary and related solely to his employment.

Key point: Australian citizens who retain strong links to Australia, and are unable to evidence their long-term intention to remain in another country, will generally remain a tax resident of Australia.

Staley v Hill Family Holdings — Control of discretionary trust

This case arose from a family dispute where the trustee company director and appointor were different family members. The Qld Court of Appeal held that a trust deed variation made by the trustee was valid in removing and replacing the appointor. The power of variation was very broadly drafted and could therefore be distinguished from an earlier Qld decision where the variation power did not extend to amending the ‘powers’ or ‘provisions’ of the trusts and so the attempt to replace an appointor was outside its scope.

Key point: A broadly drafted variation clause may grant the trustee the power to amend how an appointor is replaced, or the identity of the appointor, unless the deed specifically provides otherwise. This may be counter to the intention where the appointor and trustee roles have  been separated. Consideration should therefore be given to reviewing the trust deed in these circumstances. 

Merchant & Anor v FCT

Both the taxpayers and the Commissioner have sought special leave to appeal to the High Court from the Full Federal Court decision in Merchant. The decision dealt with the sale of shares to a SMSF to trigger a capital loss, and debt forgiveness prior to the sale of another shareholding, and considered both Part IVA and dividend stripping provisions.

Bennett v FC of T—Timing of interest derivation

The taxpayer worked in the construction industry and was a beneficiary of a Long Service Leave Fund governed by Rules under a trust deed. The Fund provided for interest to accrue on contributions made. The taxpayer received an interest payment in July 2021 but did not include this amount in his 2022 return. At issue was whether the taxpayer derived the interest income when received by him, or in earlier years when credited or allocated under the Rules.

The ART held that the taxpayer did not derive the interest income until it was paid. Under the Rules, interest was calculated annually, but the taxpayer had no present entitlement until specific conditions were met, including a written request and a Trustee determination. There was no requirement for the Trustee to make an annual determination to apply income to beneficiaries and so the mere crediting of interest did not amount to making the taxpayer presently entitled to that income.

TAX RULINGS & DETERMINATIONS

Updates to GST Rulings

The Commissioner has updated or rewritten a number of GST rulings. These have not resulted in any change of view by the ATO.

• GSTR 2009/4 – New residential premises and adjustments for changes in extent of creditable purpose: The draft update confirms the view that marketing premises for sale is a ‘use’ of premises when determining entitlements to input tax credits for leased residential premises.
• GSTR 2003/3 – When is a sale of property new residential premises: The draft update considers the rule that premises used only for making input-taxed supplies for a continuous period of 5 years cease to be ‘new residential premises’. Marketing leased residential premises for sale will break a period of being used only for making input taxed supplies.
• GSTR 2025/1—Supplies of things made to non-residents but provided to another entity in Australia: The rewritten ruling looks at the scenarios where a supply of services etc to a non-resident is excluded from being a GST-free export due to being provided to another entity in Australia. A supply can still be GST-free in this case where, broadly, input tax credits would be available if GST was charged.
• GSTR 2025/2—Supplies of things where effective use or enjoyment of the supply takes place outside Australia: The rewritten ruling considers when the effective use or enjoyment of a supply takes place outside Australia. It is necessary to consider this issue when a supply is made to a recipient who is not in Australia when the thing supplied is done.

OTHER UPDATES

Division 7A Rate

The benchmark interest rate for the 2025–26 income year for Division 7A purposes is 8.37% pa. This is a decrease from 8.77%.

CONTACT US

For further information on any of these updates, or for general assistance, please contact our Directors, Jacci Mandersloot or Natalie Claughton.