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Leaving debts outstanding with the ATO is now more expensive for many taxpayers. As we explained in the July edition of our newsletter, general interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: · GST · PAYG instalments · PAYG withholding for employees · FBT However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction. Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible. However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible. Companies and trusts If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business. However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them. Partnerships The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts. However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity. Practical takeaway Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible. Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates. The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction. If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

A recent decision of the Administrative Review Tribunal (Goldenville Family Trust v Commissioner of Taxation [2025]) highlights the importance of documentation and evidence when it comes to tax planning and the consequences of not getting this right. The case involved a family trust which generated significant amounts of income. For the 2015, 2016 and 2017 income years, the trustee attempted to distribute most of the income to a non-resident beneficiary. As the trustee believed the income was classified as interest (this was challenged successfully by the ATO), the trustee assumed that the income would be subject to a final Australian tax at 10%, under the non-resident withholding rules. This was clearly more favourable than having the income taxed in the hands of Australian resident beneficiaries at higher marginal rates. However, the ATO argued that the distribution resolutions were invalid and the Tribunal agreed. Why? The main reason was a lack of evidence to prove that the distribution decisions were made before the end of the relevant financial years. While there were some documents that were purportedly dated and signed “30 June”, the Tribunal wasn’t convinced that the decisions were actually made before year-end and it was more likely that these documents were prepared on a retrospective basis. The evidence suggested the decisions were probably made many months after year-end, once the accountant had finalised the financial statements. The outcome was that default beneficiaries (all Australian residents) were taxed on the income at higher rates. Timing of trust resolution decisions is critical For a trust distribution to be effective for tax purposes, trustees must reach a decision on how income will be allocated by 30 June each year (or sometimes earlier, depending on the trust deed). It might be OK to prepare the formal paperwork later, but those documents must reflect a genuine decision made before year-end. For example, let’s say a trust has a corporate trustee with multiple directors. The directors meet at a particular location on 29 June and make formal decisions about how the income of the trust will be appointed to beneficiaries for that year. Someone keeps handwritten notes of the meeting and the decisions that are made. On 5 July the minutes are typed up and signed. The ATO indicates that this will normally be acceptable, but subject to any specific requirements in the trust deed. If the ATO believes the decision was made after 30 June (or documents were backdated), the resolution can be declared invalid. In that case, you might find that one or more default beneficiaries are taxed on the taxable income of the trust or the trustee is taxed at penalty rates. This could be an unexpected and costly tax outcome and could also lead to other problems in terms of who is really entitled to the cash. Broader lessons – it’s not just about trust distributions The timing issue is not confined just to trust distribution situations. Other areas of the tax system also turn on when a decision or agreement is actually made, not just when it is eventually recorded. For example, if a private company makes a loan to a shareholder in a given year, that loan must be repaid in full or placed under a complying Division 7A loan agreement by the earlier of the due date or lodgement date of the company’s tax return for the year of the loan. If not, a deemed unfranked dividend can be triggered for tax purposes. If a complying loan agreement is put in place then minimum annual repayments normally need to be made to avoid deemed dividends being recognised for tax purposes A common way to deal with loan repayments is by using a set-off arrangement involving dividends that have been declared by the company. However, in order for the set-off arrangement to be valid there are a number of steps that need to be followed before the relevant deadline. The ATO will typically want to see evidence which proves: · When the dividend was declared; and · When the parties agreed to set-off the dividend against the loan balance. If there isn’t sufficient evidence to prove that these steps were taken by the relevant deadline then you might find that there is a taxable unfranked deemed dividend that needs to be recognised by the borrower in their tax return. Documenting decisions before year-end The key lesson from cases like Goldenville is that documentation shouldn’t be an afterthought — lack of contemporaneous documentation can fundamentally change the tax outcome. What normally matters most is when the relevant decision is actually made, not when the paperwork is drafted. In practice, this often means: · Check relevant deadlines and what needs to occur before that deadline. · If a decision needs to be made before the deadline, ensure that a formal process is followed to do this. For example, determine whether certain individuals need to hold a meeting or whether a circular resolution could be used. · Produce contemporaneous evidence of the fact that the decision has been made. You might consider sending a brief email to your accountant or lawyer explaining the decision that has been made before the relevant deadline , basically providing a time-stamped record of the decision. · Finalise paperwork: formal minutes of meetings can sometimes be prepared after year-end, but they must accurately reflect the earlier decision. Thinking carefully about timing — and building a habit of producing clear evidence of decisions as they are made — is often the difference between a tax planning strategy working as intended and an expensive dispute with the ATO.

Start the New Financial Year with Clarity and Focus: Why Your Business Needs a Budget That Goes Beyond the Numbers As we are underway in the new financial year, now is the ideal time to take stock and set clear direction for your business. One of the most critical tools to support sustainable business performance and growth is a strategic budget — one that does more than just estimate income and expenses. A successful budget incorporates financial targets, key performance indicators (KPIs), and capacity planning to ensure your business is well-positioned to meet its cash commitments and long-term goals. Why Budgeting Matters Now More Than Ever Budgeting isn’t just about increasing last year’s revenue number, it’s about clarity, control, and confidence. When done well, budgeting allows you to: Set measurable targets that align with your strategic goals Track your performance against KPIs to spot opportunities and weaknesses early Ensure cash flow stability , helping you meet your obligations and commitments Plan your resource allocation, from staffing and production to capital investments Anticipate bottlenecks that may limit your growth potential Integrating Capacity Planning for Growth The best business budgets map your available capacity and operational constraints. This goes beyond simply projecting revenue. It considers: What maximum level can be achieved with the current level of resources Where are our constraints are, whether time, staffing, cashflow, infrastructure etc What our current level of utilisation is running at These insights help transform your budget from a passive forecast into a proactive decision-making tool. It can help you to better understand where to allocate your resources and where to focus operational improvements to boost profitability. The Outcome Businesses that budget effectively: Make informed decisions Can adapt more quickly to unforeseen changes Can grow with greater predictability on results and cashflow Enjoy greater peace of mind knowing the impact of their decisions and their likely position at the end of the year If you would like support building a budget that integrates cash flow, KPIs, and capacity planning, our team can guide you through the process. Please call our office on 02 60241655 or email advisory@st-m.com.au

Xero Ignite: Current $35/month | Price from 1 July $35/month (no change) Grow: Current $70/month | Price from 1 July $75/month (increase $5) Comprehensive: Current $90/month | Price from 1 July $100/month (increase $10)) Ultimate 10: Current $115/month Price from 1 July $130/month (increase $15) Ultimate 20: Current $145/month Price from 1 July $162/month (increase $17) Ultimate 50: Current $200/month Price from 1 July $222/month (increase $22) Ultimate 100: Current $245/month | Price from 1 July $272/month (increase $27)  MYOB Business Price effective as at 1 July 2025 What’s changing: Payroll will no longer be included in the subscription price for MYOB Business Lite and Business Pro and will be an additional $2 per month per employee. MYOB Business Lite: Price from 1 July $34/month MYOB Business Pro: Price from 1 July $63/month MYOB Business AccountRight Plus: Price from 1 July $150/month QuickBooks Online Price effective as at 1 July 2025 Simple Start: Price as at 1 July $29/month Essentials: Price as at 1 July $45/month Plus: Price as at 1 July $60/month Advanced: Price as at 1 July $110/month What Should You Do? - Review your current usage. Are you using all the features of your plan? You might be able to downgrade—or need to upgrade. - Speak to us. We can help you evaluate the right accounting software and ensure it's set up correctly for your business and compliance needs. Please call Perrie on 02 6024 1655 or email bookkeeping@st-m.com.au .

The Victorian Government has established the Farm Drought Support Grants program to assist primary production businesses to implement on-farm infrastructure improvements & undertake essential business activities that help in the management of current drought conditions and enhance the preparedness and long-term viability of their business in a changing climate. This program is available to eligible primary production businesses in all Local Government Area’s (LGAs) of Victoria and the unincorporated area of French Island. Eligible primary production businesses are required to provide dollar for dollar matching funding co-contribution. A grant of up to $5,000 (excluding GST) per eligible primary production business is available statewide. Grants will be available from the date the program opens until program funds are fully allocated or 30 June 2026, whichever occurs first. Eligible activities include: Items to construct a new, or upgrade an existing, stock containment area (SCA) – such as fencing, gates, troughs, piping, tanks & pumps Reticulated water systems using pumps, piping, tanks & troughs for livestock Irrigation system upgrades (e.g. automated systems) Purchase or repair of fixed infrastructure (e.g. irrigation pumps, repairing piping, replace troughs, upgrade tanks) Improved on-farm water infrastructure for stock management (e.g. consolidating/enlarging/desilting farm dams) Technologies to improve drought management efficiencies to farm production systems (e.g. soil moisture monitoring, weather stations, telemetry sensor equipment) Grain & fodder storage (e.g. silos, silage bunkers, hay sheds) Internal fencing to better match property layout with land capability or improve management Fencing for the exclusion of wildlife to protect and manage crops & pastures Addition of shelter belts for shade, wind brakes and erosion control Drilling of new stock water bores and associated power supply such as generators Improving waste water and effluent management systems Upgrading of areas (e.g. laneway upgrades, repairs or expansion) to deliver lasting benefits directly linked to productivity and profitability Feeding system upgrades (e.g. feed pads or feed troughs) Pasture/crop restoration (e.g. associated seed and fertilizer costs, contractor costs such has cultivation and sowing, direct drilling, smudging or harrowing, rolling etc) Water carting for livestock & essential business activities (e.g. dairy washdown) Testing (such as soil, water or feed testing) to support drought management decisions Professional advice to support business planning & drought management decisions, including for animal welfare Who can apply? The grant of up to $5,000 (excluding GST) is available per eligible primary production business with an additional $5,0000 (excluding GST) for those in eligible LGA’s is south west Victoria. Eligible applications must meet the following requirements: Own, share or lease a primary production business in Victoria Hold a current Australian Business Number (ABN) and have held that ABN at the time of the program announcement (30 September 2024) Devote part of their labour to the primary production business Derive more than 50% of gross income from the primary production business in an average year OR generate more than $75,000 gross income from the primary production business in an average year

The Australian Government’s long-planned increase to the Superannuation Guarantee (SG) rate is set to reach its final legislated milestone on 1 July 2025 , when the rate will rise from 11.5% to 12% of an employee’s ordinary time earnings. This change represents the final step in a series of incremental increases outlined in the Superannuation Guarantee (Administration) Act 1992, aimed at improving retirement outcomes for Australian workers. What Is the Superannuation Guarantee? The Superannuation Guarantee is a compulsory system in Australia where employers must contribute a set percentage of an employee’s earnings into a complying superannuation fund. This system is designed to help Australians save for retirement over the course of their working life. What This Means for Employers From 1 July 2025 , employers will need to contribute 12% of eligible employees’ ordinary time earnings to their superannuation fund. This change applies to all employees eligible for SG contributions under Australian law, including casual, part-time, and full-time workers. Key considerations for employers: Payroll systems will need to be updated to reflect the 12% contribution rate from the first pay cycle in July 2025. Employment contracts that include a “total remuneration” or “salary package” approach may require adjustment, as the super increase could impact the breakdown between take-home pay and super contributions. Cash flow planning should take into account the higher SG obligation, particularly for small to medium enterprises. What This Means for Employees For employees, the SG increase is a significant step towards a more secure retirement. An increase in super contributions—even by 0.5%—can have a substantial impact over the course of a career, thanks to the power of compounding interest. Planning Ahead The upcoming change presents an opportunity for both employers and employees to review their superannuation arrangements and ensure compliance and understanding. Employers should: Communicate clearly with employees about how the SG increase may affect them. Ensure HR and finance teams are ready for the change. Consult with payroll providers or advisors if needed. Employees should: Review their superannuation statements. Consider seeking financial advice to understand how this increase can support their retirement goals. Final Thoughts The increase of the Superannuation Guarantee rate to 12% is a significant milestone in Australia’s long-term retirement strategy. While it may present short-term adjustments for some businesses and workers, it ultimately aims to build stronger financial security for Australians in their retirement years. If you require any additional information, or assistance with these changes, call our office on 02 6024 1655 or email advisory@st-m.com.au

Managing employee absences can be a challenge for any business. Here we explore a key foundational element in managing employee absences: a clear and effective personal leave policy . Understanding Personal/Carer’s Leave Personal/carer’s leave—commonly known as sick leave—is an entitlement under the National Employment Standards (NES) for all employees except casuals. Under the NES, full-time employees are entitled to 10 days of paid leave per year, with part-time employees receiving a pro-rata amount. This leave can be used when an employee is unwell, injured, or needs to care for an immediate family or household member dealing with illness, injury or an emergency. Yet many businesses face recurring questions: Do employees and managers fully understand how personal leave works? Are there ongoing issues with absenteeism? Are expectations clear across your organisation? That’s where a solid policy comes in. What Is a Personal Leave Policy? A personal leave policy outlines the procedures, expectations, and documentation required when an employee accesses personal leave. It ensures all staff are aware of their rights and responsibilities, and helps managers handle leave requests fairly and consistently. We’ll delve into exactly what should be included in a personal leave policy in next week’s edition—but first, here’s why you need one. Why Every Business Should Have a Personal Leave Policy A well-structured personal leave policy supports your business in multiple ways: 1. Supporting Employee Wellbeing Employees should feel comfortable taking time off for health or family needs without fear of consequences. A clear policy demonstrates your commitment to staff welfare and helps reduce stress, burnout, and long-term absenteeism. 2. Ensuring Legal Compliance Leave entitlements are legally mandated. Having a documented policy helps ensure your business complies with the NES and other employment obligations, reducing the risk of legal issues or Fair Work penalties. 3. Improving Productivity and Engagement When employees feel supported, they’re more likely to stay engaged, motivated, and productive. A transparent policy can increase trust and alignment between staff and management. 4. Providing Clarity and Consistency A personal leave policy eliminates guesswork by setting out clear steps for: Notifying managers of an absence Providing evidence, if required Applying for leave—whether in advance or after the absence Consistency in how leave is handled reduces friction and builds a culture of fairness. Can a Personal Leave Policy Help Prevent Absenteeism? Yes—when implemented properly, a leave policy can actually reduce absenteeism. By outlining clear processes and expectations, employees are less likely to take unauthorised time off or feel unsure about what’s allowed. It also encourages employees to use leave responsibly, take the time they need when they need it, and return to work feeling supported and refreshed. Final Thoughts  Establishing a personal leave policy isn’t just about compliance—it’s about creating a healthy, respectful, and efficient workplace. When employees know where they stand, everyone benefits. If you need assistance developing or reviewing your workplace policies, our team at Stewart, Tracy & Mylon is here to help. Email advisory@st-m.com.au or phone us on 02 6024 1655 to discuss your personal circumstances. Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

In the 2025-26 Federal Budget the Government announced a ban on non-compete clauses and “no poach” agreements. In the 2025-26 Federal Budget, the Government announced its intention to ban non-compete clauses for low and middle-income employees and consult on the use of non-compete clauses for those on high incomes (under the Fair Work Act the high income threshold is currently $175,000). The reason? A recent Australian Bureau of Statistics (ABS) report found that 46.9% of businesses surveyed used some kind of restraint clause, including for workers in non-executive roles. The survey also found 20.8% of businesses use non-compete clauses for at least some of their staff and 68.2% for more than three-quarters of their employees. From an economic perspective, declining job mobility impacts wage growth and innovation as restraints prevent access to skilled workers within the economy. Productivity is a key concern as Australia’s productivity has declined in the last 20 years. Treasury’s consultation paper Non-compete clauses and other restraints states that, “the direct consequence of a non-compete clause is that it hinders competition among businesses: it disincentivises workers from leaving their current job, creating a barrier to the entry of new businesses and the expansion of existing businesses.” A Productivity Commission report estimates the effect of limiting the use of unreasonable restraint of trade clauses will be increased wages for workers - by up to up to 2.4% in industries with high use of non-compete clauses and up to 1.4% in others. Non-competes: the state of play Non-compete clauses in Australia are generally enforced under common law. For all regions except New South Wales, restraints are generally presumed to be against the public interest and therefore void and unenforceable except where they are deemed to be reasonably necessary to protect the legitimate interest of the employer [1] . In NSW, a restraint of trade is valid to the extent to which it is not against public policy. When non-competes are contested, the courts consider the nature and extent of the business interest to be protected (e.g., confidential client information) and whether the scope of restriction the business wants imposed is reasonable including its geographic area, time period and activities which the restraint seeks to control. Interests considered ‘legitimate’ by courts include the protection of trade secrets or other confidential information; protection against solicitation of clients with whom the former worker had a personal connection; and protection against key staff being recruited by a former colleague. An employer is not entitled to protect themselves against mere competition by a former worker . What now The ban on non-compete clauses was announced in the 2025-26 Federal Budget. The Government has stated that it intends to consult on policy details, including exemptions, penalties, and transition arrangements. Following consultation and the passage of legislation, the reforms are anticipated to take effect from 2027, operating prospectively. There is a lot of uncertainty at this stage about this measure, despite the enthusiasm of the Treasury economists, not least of which is the impending election. We’ll bring you more as further information is available.  Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.