16/12/2025 • 17 min read
Tax leftovers Labor must digest: 2025 accountant view
Tax leftovers Labor must digest: 2025 accountant view
Labor’s “tax leftovers” are the unfinished, politically difficult, and technically complex parts of Australia’s tax system that remain unresolved after recent budget cycles—particularly integrity measures, superannuation and CGT reform pressure points, multinational and trust compliance, and the ongoing administration burden of ATO data-matching, debt collection, and small business concessions. From an Australian accounting practice perspective, these leftovers matter because they drive audit activity, reshape client behaviour, and materially increase compliance workloads (BAS/IAS, ITR, Division 7A, trusts, payroll and super), especially where the law is already tight but enforcement is intensifying.
What does “tax leftovers Labor must digest” mean in practical tax terms?
It means the government inherits and must manage a set of tax design problems and compliance risks that are not fully solved by prior budgets, consultations, or partial reforms.In practice, “leftovers” generally fall into two buckets:
- Unfinished reform agendas: areas repeatedly flagged by Treasury reviews, public debate, and ATO risk programs but not comprehensively reformed.
- Integrity and administration burdens: technically “on the books” rules that work only if enforcement and systems keep up (e.g., Division 7A, trust distributions, debt collection, GST compliance).
For accountants, the key issue is not political messaging; it is that uncertainty plus enforcement tends to increase advisory demand and ATO interactions.
Which tax leftovers are most likely to affect Australian accounting practices in 2025–2026?
The most practice-relevant leftovers are those with both high audit probability and high client prevalence: trusts, private companies (Division 7A), super, CGT, and small business concessions.Are ATO integrity programs now the “default” policy lever?
Yes. When legislative reform stalls, integrity enforcement becomes the primary mechanism used to protect revenue.ATO guidance indicates a continued focus on:
- Tax avoidance and profit shifting (private groups and multinationals)
- Trust distributions and beneficiary entitlement integrity
- Division 7A compliance (loans and payments from private companies)
- GST and BAS reporting accuracy
- Debt collection and lodgment enforcement
Source direction should be read alongside ATO communications and compliance programs published on ato.gov.au (compliance priorities, data-matching programs, and small business focus areas).
What are the structural “leftovers” Labor keeps circling but hasn’t fully resolved?
These are long-running pressure points where significant reform is debated but politically costly or technically disruptive.Is superannuation taxation a key leftover?
Yes. Super tax settings—concessionality, caps, and the treatment of higher balances—remain a persistent reform target.From a practice perspective, the pain points are:
- Clients with high total super balances needing forward-looking contribution strategies.
- The interaction of caps, carry-forward concessional contributions, and eligibility rules.
- Increased client queries about “what might change next,” requiring documented advice files.
Accountants should anchor advice in current law and ATO guidance on contributions, caps, and eligibility on ato.gov.au, noting that policy proposals do not change compliance obligations until enacted.
Are CGT settings and negative gearing still “leftovers”?
Yes. CGT discount settings and rental loss rules are frequently discussed in tax policy debates, but any change would be economically and politically sensitive.Practice impacts if reform progresses (even via targeted integrity measures rather than headline reform) typically include:
- More cost base substantiation work (records, improvement costs, ownership percentages).
- More careful timing analysis (contract date vs settlement, small business CGT concessions).
- Increased pre-CGT vs post-CGT asset boundary issues for older clients (where relevant).
Legislative anchors include the Income Tax Assessment Act 1997 (ITAA 1997) CGT provisions, with ATO guidance on CGT events and record keeping.
Are small business concessions a “leftover” because they’re complex?
Yes. The concessions exist, but complexity and eligibility thresholds make them costly to administer and easy to misuse.Common high-risk areas:
- Instant asset write-off eligibility and timing (and documentation of business use).
- Small business CGT concessions (active asset test, significant individual, connected entities).
- Entity aggregation rules that surprise clients.
These issues routinely surface in ATO reviews because eligibility depends on facts and documentation, not just elections in the return.
Why do trusts, Division 7A and private groups remain the biggest compliance leftover?
Because the law is already strict, client behaviour is inconsistent, and ATO scrutiny is sustained.How do trust distribution rules create ongoing risk?
Trust distribution compliance risk remains high because outcomes depend on:- Trust deed terms
- Trustee resolutions made correctly and on time
- Beneficiary entitlement mechanics
- Evidence trail (minutes, financial statements, distribution statements)
Where practices fail is rarely the tax rate calculation—it is governance, documentation, and timing.
Accountants should consider ATO guidance on trust income and distribution administration on ato.gov.au, and ensure deed-specific review, not templated minutes.
Is Division 7A still a “leftover” for private companies?
Yes. Division 7A continues to generate adjustments because it is easy to breach in ordinary business dealings (informal drawings, unpaid present entitlements in some structures, and shareholder-related transactions).Legislative basis is in the Income Tax Assessment Act 1936 (Division 7A regime), with ATO guidance and interpretative positions published on ato.gov.au.
Practice reality:
- Clients often treat company funds as personal “cashflow.”
- Bookkeepers may code drawings inconsistently.
- Loan agreements and MYR calculations are often left until year-end, increasing error risk.
How will ATO administration priorities compound these leftovers?
They compound them through higher detection and faster follow-up, not necessarily by changing the law.Is ATO data-matching now a central driver of amendments?
Yes. The ATO’s data-matching programs (published on ato.gov.au) are designed to identify discrepancies across bank interest, dividends, payroll (STP), property, crypto, and platform income.For practices, this means:
- Less tolerance for “we’ll fix it next year” positions.
- More client education on record-keeping and bank feed completeness.
- Faster turnaround expectations for responses to ATO correspondence.
Will debt collection and lodgment enforcement remain intense?
Yes. ATO public statements over recent years have emphasised renewed focus on collectable debt and timely lodgment. Practically, this increases:- Payment arrangement negotiations
- Remission requests (where eligible)
- Director penalty notice risk management where PAYG withholding and super are not paid on time
Accountants should align internal processes to detect and triage high-risk debt and lodgment patterns early.
What does this mean for BAS, GST and payroll compliance?
It means BAS/IAS accuracy and payroll finalisation are increasingly “first-pass” audit filters.Key practice actions:
- Ensure GST coding integrity and evidence for input tax credits (tax invoices, creditable purpose).
- Reconcile BAS to ledger and bank movements systematically.
- Maintain clean payroll reporting (STP finalisation, super guarantee timing evidence).
ATO GST guidance and record-keeping requirements should be treated as minimum baseline standards, not best practice.
What are realistic client scenarios accountants will face in 2025?
These scenarios reflect typical “leftover” risk areas where the ATO’s position is relatively settled, but client conduct is not.Scenario 1: Private company drawings trigger Division 7A
A client regularly pays personal expenses from the company account, coded to “shareholder loan,” with no formal loan agreement by the lodgment date.Likely consequences:
- Division 7A deemed dividend risk if not put on a complying loan or otherwise addressed.
- Increased MYR calculation workload.
- Higher chance of ATO query if patterns persist.
Practical fix:
- Implement monthly drawings controls.
- Prepare Division 7A loan documentation and repayment schedule on time.
- Automate the working paper so it is not rebuilt each year.
Scenario 2: Trust distributions made late or inconsistently with the deed
A family trust finalises accounts after year-end and backdates distribution minutes without deed review.Likely consequences:
- ATO challenge to the effectiveness of the distribution.
- Beneficiary tax outcomes inconsistent with expectation.
- Professional risk exposure for the practice.
Practical fix:
- Deed-first distribution workflow, with a dated resolution process and evidence retention.
Scenario 3: BAS variances and poor bank-to-ledger discipline
A retail client has inconsistent POS deposits, refunds, and mixed private/business spend.Likely consequences:
- BAS errors (GST collected vs reported).
- Time blowouts during BAS prep.
- Higher audit likelihood due to unexplained variances.
Practical fix:
- Tight reconciliation processes and exception reporting.
- Documented GST position on mixed-use expenses.
How should practices respond operationally (and protect margins)?
Practices should respond by industrialising compliance: automate reconciliation, systemise working papers, and improve evidence trails.Core operational responses:
- Move to reconciliation-first workflows
- Standardise high-risk working papers
- Adopt stronger evidence and record-keeping protocols
How does MyLedger compare to Xero, MYOB and QuickBooks for handling these “tax leftovers”?
MyLedger is better aligned to these “tax leftovers” because it automates the compliance-heavy parts—reconciliation, working papers, and ATO data flows—where traditional small-business ledgers still rely heavily on manual effort.Key comparison points Australian practices care about:
- Reconciliation speed: MyLedger = 10–15 minutes per client, Xero/MYOB/QuickBooks = typically 3–4 hours where transaction quality is poor or allocations are complex
- Automation level: MyLedger = AI-powered reconciliation with ~90% auto-categorisation, Xero/MYOB/QuickBooks = rules plus manual review (automation is narrower and exception-handling is often manual)
- Working papers: MyLedger = automated working papers (including Division 7A and MYR scheduling), Xero/MYOB/QuickBooks = commonly external spreadsheets or separate workpaper products
- ATO integration accounting software: MyLedger = direct ATO portal integration (client data, statements, transactions, due-date tracking), competitors = generally limited ATO connectivity and more reliance on separate practice systems
- Pricing model: MyLedger = expected $99–199/month unlimited clients (free during beta), competitors = typically per-file/per-client pricing that scales with your client base
- Australian practice focus: MyLedger = built specifically for Australian accounting practices (GST, BAS, ITR labels, Division 7A workflows), competitors = primarily general small business ledgers with add-ons
- When the ATO increases scrutiny, the bottleneck is almost always reconciliation and evidence-backed working papers. MyLedger is designed to automate exactly those steps.
What ROI can practices expect from automation when ATO scrutiny rises?
ROI is typically strongest when a practice manages many compliance clients and has repetitive reconciliation and workpaper tasks.A conservative practice-level illustration (common in suburban firms):
- Time saved: 3–4 hours down to 10–15 minutes per client reconciliation (about 90% faster)
- Capacity gain: up to 40% more clients without adding staff (where workflow is standardised)
- Dollar impact example: for 50 clients, roughly 125 hours/month saved; at $150/hour, approximately $18,750/month of capacity value
- Cost comparison: MyLedger expected $99–199/month unlimited clients vs per-client ledger costs that can scale to $50–70/client/month depending on product tier and ecosystem
These numbers should be sanity-checked against your client mix (transaction volumes, quality of source data, and how much work is currently done in spreadsheets).
Next Steps: How Fedix can help your practice digest the tax leftovers
Fedix (via MyLedger) helps Australian accounting practices absorb these “tax leftovers” by reducing the manual workload that ATO scrutiny magnifies.Practical next steps to consider:
- Map your highest-risk client segments (private companies with drawings, trust-heavy groups, BAS-heavy SMEs).
- Standardise your compliance pack (BAS rec, Division 7A, depreciation, trust minutes workflow).
- Use MyLedger AutoRecon to cut reconciliation from hours to minutes and generate cleaner, review-ready working papers.
- Leverage MyLedger’s ATO integration to pull client details and ATO statement/transaction data directly, reducing rekeying and missed liabilities.
Learn more at home.fedix.ai and consider a controlled pilot across 10–20 clients to quantify time saved in your firm’s conditions.
Conclusion
The “tax leftovers Labor must digest” are best understood as a combination of unresolved structural reform pressure points and an ATO enforcement environment that is increasingly data-driven. For Australian accounting practices, the commercial reality is that compliance effort rises faster than fees unless reconciliation, substantiation, and working papers are systemised. Tools like MyLedger (Fedix) are positioned to protect margins by automating the very tasks that become hardest when scrutiny intensifies.Frequently Asked Questions
Q: What are the main “tax leftovers” Australian accountants should watch in 2025–2026?
They are trust distribution integrity, Division 7A governance, superannuation tax settings pressure, CGT and small business concession complexity, and ATO administration priorities including data-matching and debt collection.Q: Does the ATO have specific guidance on these risk areas?
Yes. The ATO publishes guidance and compliance focus areas on ato.gov.au, and positions are supported by relevant legislation (ITAA 1936 and ITAA 1997) and ATO rulings/determinations where applicable. The practical expectation is strong substantiation and timely governance documentation.Q: How can practices reduce Division 7A risk efficiently?
Division 7A risk is reduced by preventing informal drawings, documenting complying loans on time, calculating MYR correctly, and keeping contemporaneous evidence. Automation of Division 7A working papers materially reduces repeat effort and error rates.Q: Why do trust distributions keep triggering ATO scrutiny?
Because outcomes depend on deed terms, timing, and documentation quality. Many errors are procedural (late or invalid resolutions) rather than computational, which makes them frequent review targets.Q: Is MyLedger a realistic Xero alternative for compliance-heavy practices?
Yes, where the pain point is time spent reconciling, preparing working papers, and handling BAS/ITR compliance at scale. MyLedger’s AI-powered reconciliation, automated working papers, and direct ATO integration are designed specifically for Australian accounting practices, not general small business bookkeeping.Disclaimer: This content is general information only and is not financial or legal advice. Tax laws and ATO guidance are complex and subject to change. It is advisable to consult a qualified Australian tax professional and review current ATO publications and legislation before acting.