The latest practice update highlights ATO compliance activity, changes to salary sacrifice and FBT rules, permanent instant asset write-off measures, loss carry-back legislation and other important developments for businesses and individuals.
What’s in this article
The October 2026 Practice Update contains several important tax, superannuation and compliance developments that may affect businesses, employers and individual taxpayers. Key areas include increased ATO scrutiny of PAYG instalment variations, forthcoming Fringe Benefits Tax (FBT) changes, small business tax measures and ongoing ATO data-matching activities.
PAYG Instalments & General Interest Charge (GIC)
The ATO is reminding taxpayers who have repeatedly varied their PAYG instalments to nil that interest charges may apply where instalments have been significantly understated. Where varied instalments are less than 85% of the total tax ultimately payable, the ATO may impose General Interest Charge (GIC) and, in some circumstances, penalties. Taxpayers should ensure they retain appropriate records to support any variation decisions and review them regularly as circumstances change.
FBT Changes from 1 April 2027
Employers should also be aware of significant FBT changes commencing from 1 April 2027. The “otherwise deductible” rule will no longer reduce the taxable value of certain salary-sacrificed work-related expense payment fringe benefits that fall within the new $1,000 standard deduction framework. In addition, some work-related items, including electronic devices, software, protective clothing and tools of trade, may lose their FBT exemption when provided under salary sacrifice arrangements.
Motor Vehicle Deductions
The ATO has highlighted several common mistakes made when claiming motor vehicle deductions using the cents per kilometre method. Errors include claiming private travel between home and work, claiming the maximum kilometres without adequate records, and incorrectly claiming expenses for vehicles provided under novated lease arrangements. Taxpayers should ensure their claims are properly documented and meet ATO requirements.
Small Business $20,000 Instant Asset Write Off
There is welcome news for small businesses, with the $20,000 instant asset write-off becoming a permanent measure from 1 July 2026 for eligible businesses with aggregated turnover below $10 million. In addition, the reintroduced loss carry-back rules have now become law, allowing eligible companies to offset current-year tax losses against tax paid in one or both of the previous two income years, potentially generating tax refunds.
Data Matching Superannuation Downsizer Contributions
The update also notes continuing growth in the use of downsizer super contributions and advises that the ATO will continue major visa and passenger movement data-matching programs through to the 2029 income year. These programs reinforce the ATO’s ongoing focus on data analytics and compliance activities, making accurate record-keeping and reporting increasingly important for taxpayers.
These changes may affect taxpayers differently depending on their individual circumstances. If you are unsure how any of the measures outlined in the October Practice Update may apply to you or your business, please contact Herries Davidson & Co for professional advice.