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The decision reinforces the principle that related-party loans will be scrutinised for their practical substance rather than their legal form alone.

The recent decision in Ostwald v Commissioner of Taxation [2026] FCA 868 highlights the challenges company directors can have in mounting a defence against a director penalty notice.

Jesse has been promoted to Senior Associate at Smailes Krawitz.

Jesse has consistently delivered high-quality work, demonstrated strong leadership, and made a meaningful impact on our team and clients. This promotion reflects his dedication, growth, and commitment to excellence.

Congratulations, Jesse — well deserved!

In late 2024, we summarised the Federal Court’s decision in Cheung v Commissioner of Taxation [2024] FCA 1370, where the taxpayer succeeded in challenging assessments on nearly $33 million said to be income from Vanuatu-sourced deposits over 11 years.

The taxpayer’s case was that the deposits were capital gifts from his sister, who was involved in the family’s Vanuatu supermarket business.

That outcome has now been emphatically reversed by the Full Federal Court.

Smailes Krawitz is seeing an uptick in criminal prosecutions brought by the ATO. This includes targeting company directors for criminal liability when the company or trustee taxpayer entity has failed to lodge.

Tucked away in the Budget papers under the heading ‘Protecting the tax system against fraud’, the Government has announced that the ATO’s existing garnishee powers ‘will also be expanded to include jointly held assets in circumstances where such arrangements are being used to frustrate recovery actions.’

The proposed tax changes outlined in Labor Government’s 2026-27 Budget might mean that it is time to change the way that private groups think about structuring. The headline grabbing items have been the minimum tax payable by trustees on distributions of income from discretionary trusts (of 30%) and the watering down of the CGT discount (with a minimum 30% rate applying to net capital gains).

The tax office is targeting the lucrative self-managed superannuation sector and its trustees.

In a recent AFR article (link below), the ATO’s focus on SMSF non-compliance was highlighted. The key issue described is the non-lodgment of income tax returns, which provides the ATO with key data and information relating to the fund which, in addition to its data matching technology and powers, allows the ATO to identify, review and audit key risks relating to the SMSF sector.

In last month’s decision of RRKC and Commissioner of Taxation, a taxpayer’s purpose and intention in entering property transactions were key to determining whether he had understated his GST and income tax liabilities arising from those sales. Despite the qualitative nature of those determining factors, the taxpayer’s assertions to the ATO at audit and the Administrative Review Tribunal (Tribunal), were inconsistent and described as “strange and unnecessary contortionism”.

The Tax Practitioner’s Board (𝗧𝗣𝗕) has clarified its position on registered tax practitioners’ breach reporting requirements in relation to the Code of Professional Conduct (𝗖𝗼𝗱𝗲).

Initially set out under the 𝘛𝘢𝘹 𝘈𝘨𝘦𝘯𝘵 𝘚𝘦𝘳𝘷𝘪𝘤𝘦𝘴 𝘈𝘤𝘵 2009 (Cth) (𝗧𝗔𝗦𝗔), the Code was later supplemented under the 𝘛𝘢𝘹 𝘈𝘨𝘦𝘯𝘵 𝘚𝘦𝘳𝘷𝘪𝘤𝘦𝘴 (𝘊𝘰𝘥𝘦 𝘰𝘧 𝘗𝘳𝘰𝘧𝘦𝘴𝘴𝘪𝘰𝘯𝘢𝘭 𝘊𝘰𝘯𝘥𝘶𝘤𝘵) 𝘋𝘦𝘵𝘦𝘳𝘮𝘪𝘯𝘢𝘵𝘪𝘰𝘯 2024 (Cth), to strengthen the integrity of the tax system.

However, the breach reporting requirements have been subject to considerable criticism from the industry especially in relation to the subjective nature of the requirements.

In response, the TPB updated its policy guidance to clarify a tax practitioner’s obligations and when, and what kinds of breaches, should be reported.

The ATO-led Serious Financial Crime Taskforce (SFCT) has outlined its priorities for 2026.

The SFCT is a joint agency taskforce which seeks to identify and address financial crime in Australia. Given the pervasive manner in which financial crime can play out, it is unsurprising that various Australian agencies such as the Australian Border Force, AUSTRAC and the AFP work collaboratively with other agencies on this initiative.

In a recent media release, the ATO has outlined that they will be actively using DPOs as part of their tax enforcement program.

If a DPO is issued to a taxpayer by the ATO, that taxpayer will be prevented from leaving Australia. The use of a DPO is typically where that taxpayer has significant tax debts and may be perceived as a ‘flight risk’, although there could be other reasons which make up the grounds as to why the ATO would issue such an order. There are legal avenues to dispute DPOs or seek respite from the order to leave Australia temporarily under certain conditions.