Part IVA on property development arrangements with long-term contracts
The ATO has released draft PCG 2026/D2. It explains how the ATO will approach compliance where Part IVA may apply to property development arrangements between related parties, especially those involving long-term construction contracts.
The ATO is worried about arrangements where related entities separate land ownership from development activities to delay recognition of income and to use tax losses. In reality, these arrangements may represent one single property development activity, but are split across different entities to get a tax benefit. However, simply using a PDA structure or having related parties does not automatically create an issue. Genuine arm’s length or one-off arrangements that do not take advantage of losses are unlikely to attract attention. The guideline uses a two-zone system: green and red. Arrangements come under the green zone where at least one of the following applies:
- The PDA is set up so the landowner pays the developer in stages, and the developer recognises income during the project.
- Even if payment is only made at the end, the developer still recognises income over time in line with Taxation Ruling TR 2018/3.
- The yearly increase in land value from development is reported as taxable income by the landowner, or jointly by the landowner and developer if they are in a partnership.
Arrangements come under the red zone, where all of the following features are present:
- The landowner and developer are not dealing at arm’s length.
- A developer entity is placed between the landowner and the builder.
- The developer claims construction costs as they arise, but only declares income at completion, creating ongoing losses.
- The landowner does not report annual increases in land value as taxable income.
- The losses from the project are used to offset other income within the wider group.
The ATO is concerned that this structure is used repeatedly across multiple projects within the same group, allowing tax to be deferred over a long period.
Practitioners with clients involved in related-party property development projects must review existing and proposed arrangements against the green and red zone criteria as a matter of priority. Arrangements with red zone features, where the developer losses are being offset against other group income, are at risk of ATO audit and potential Part IVA challenge. It has been made clear by the ATO that it will look beyond formal structure to check whether the developer has genuine commercial substance and whether the arrangement reflects the true economic activity of the group.
Temporary reduction in fuel excise
The ATO has released a legislative instrument, LI 2026/5 – Excise Tariff (Fuel Duty Temporary Reduction) Determination 2026. It introduces a further temporary cut to fuel excise and equivalent customs duties, on top of the usual 50% reduction that applies from 1 April 2026 to 30 June 2026.
The Treasurer has set the reduced rate at 39.1%. This means the CPI-adjusted fuel excise rate is lowered to 39.1%, resulting in a total reduction of 60.9% in fuel excise under the law.
The instrument took effect from 1 April 2026.