PRIVATE WEALTH - FAMILY TRUSTS AND SUCCESSION PLANNING UNDER THE ATO MICROSCOPE IN FY26

Private Wealth - Family Trusts and Succession Planning under the ATO microscope in FY26

Trusts, succession planning, Division 7A, capital gains tax and self-managed super funds are some of the big-ticket items under the ATO’s microscope this financial year, which is of little surprise amidst the ongoing “great wealth transfer”.

We have summarised the key ATO focus areas taxpayers should be aware of.

📌Trusts: Higher-risk trust arrangements or distributions are in the spotlight, with the ATO drawing its attention to family trusts distributing outside the family group triggering family trust distribution tax (FTDT). FTDT can (and in our experience, quite often does) lead to significant tax liabilities due to its compounding nature. This is a complex area and one in which we commonly see issues arise in practice.

Additionally, the ATO is focusing on:

✔️Distributions to lower-taxed beneficiaries where the economic benefit flows elsewhere.

✔️Circular trust distributions where tax has not been paid on some or all of the distributions.

✔️Franked distributions where the 45-day holding rule has not been met and a beneficiary claims the franking credit tax offset.

📌Succession Planning: The ATO is focusing on tax risks arising from family-controlled businesses being sold, transferred or re-structured. Notably, the ATO is interested in the use of concessions, exemptions, and rollovers and how trusts are being used to transfer wealth.

📌Capital Gains Tax (CGT): The ATO’s attention will be on private groups incorrectly applying CGT concessions, exemptions and rollovers with a particular focus on taxpayers failing to consider eligibility requirements or re-structuring to gain access to the concessions.

The ATO's focus will be on:

✔️Inappropriate use of the CGT discount.

✔️Inappropriate claims regarding the small business CGT concessions.

✔️Misuse of the small business re-structure rollover.

✔️Misapplication of Division 855 by trusts regarding capital gains for foreign beneficiaries.

✔️Entities failing to review the pre-CGT status of assets.

📌Division 7A: The ATO is targeting poor record-keeping, unreported shareholder loans and non-complying loan agreements. The ATO will focus on arrangements where minimum yearly payments on existing Division 7A loans have either not been met or have been met by taking out another loan or re-borrowing from the same company.

📌Self-Managed Super Funds (SMSF): The ATO is focusing on inappropriate use of SMSFs to access concessional tax rates.

Smailes Krawitz routinely acts for taxpayers navigating complex trusts, tax, succession planning, and re-structuring matters. Seeking early advice on the application of any concession, exemption, rollover, re-structure or transfer of assets or wealth can save vast amounts of time and money down the road.

The material in this article is provided only for general information. It does not constitute legal or other advice.

Limited Liability by a scheme approved under Professional Standards Legislation.

Read the Smailes and Krawitz Disclaimer HERE.

Alan Krawitz26 September 2025