TPB guidance on the use of AI
The Tax Practitioners Board (TPB) has released guidance to help tax practitioners understand their obligations under the TASA Code when using AI to provide tax agent services. The TPB recognises that, when used in the right way, AI can enhance productivity. However, practitioners remain responsible for the tax agent services they provide.
Key points include:
Competency
- Practitioners are responsible for the accuracy of all information and advice given to clients, whether or not AI is used.
- AI should support, not replace, professional judgement. Practitioners need to assess each client’s circumstances and ensure advice meets the required competency standards.
- AI can generate wrong or fabricated information, so its results must not replace the practitioner’s knowledge, expertise, and experience.
- AI-generated content must be checked at each stage. Practitioners must have documented processes to assess, validate, and where required, challenge AI-generated outputs.
Confidentiality
- Practitioners need to continue to meet their confidentiality obligations under Code item 6, which prohibits disclosing client information without permission unless required by law.
- Before entering client information into AI platforms or other third-party tools, practitioners should obtain informed consent where required. This includes explaining how the information will be used, who it may be disclosed to, where it will be stored, and whether AI will be used to process it.
Income tax return processing times
The ATO has reminded practitioners of its processing timeframes and reporting available for late electronic lodgment of income tax returns.
- Most tax returns lodged electronically are processed within 12 business days, while paper returns may take up to 50 days.
- For late electronic returns, practitioners will get a weekly tax return status report showing affected clients.
- Clients first appear on the report 26 days after lodgment and can remain for up to one year if processing is incomplete.
- A known system issue may delay the ‘lodged’ status in Online services for agents by up to 28 days, even where a valid Lodgment Reference Number (LRN) has been received. This may occur where:
- Certain clients, including high wealth individuals, partnerships, trusts and consolidated groups, have a substituted accounting period (SAP).
- Returns are lodged early using the previous year’s return.
- There are issues with the client’s account, role or client-to-agent link.
- Practitioners can check return progress in Online services for agents under Client summary > Lodgment > Income tax > History.
- The ‘Outcome’ only appears after the return has been processed and assessment amounts are disbursed. The ‘Status’ and ‘Outcome’ shown in Online services may differ from the information in the Tax Return Status report.
Beneficiary TFN reporting for closely held trusts
From 1 July 2026, trustees of closely held trusts are not required to file quarterly TFN reports for periods after 30 June 2026. Instead, beneficiary TFNs will be reported through the trust tax return. A closely held trust is a resident trust that is either:
- A discretionary trust; or
- Meets the 20/75 test, where 20 or fewer individuals, including certain related parties and nominees, directly or indirectly hold fixed entitlements to at least 75% of the trust’s income or capital.
Excluded trusts, such as complying superannuation funds, eligible deceased estates, certain fixed and listed unit trusts, discretionary mutual funds, employee share trusts and law practice trusts, are not closely held trusts.
From the 2027 tax return, trustees must report beneficiary TFNs in the statement of distribution. TFN withholding rules generally apply to beneficiaries whether they are individuals, companies, partnerships, trusts or super funds.
The rules do not apply to beneficiaries who are non-residents, exempt entities, or under a legal disability, such as minors.
There is no change to existing TFN withholding and reporting obligations where a beneficiary has not quoted their TFN before receiving a payment or becoming entitled to trust income.
Occupancy expenses while working from home
The ATO carefully reviews work-from-home claims, especially incorrect claims for occupancy expenses such as mortgage interest and rent. Employees cannot claim occupancy expenses because they choose to work from home, even if they live far from their employer’s workplace. To claim these expenses, taxpayers need to show that:
- They incurred the expense.
- The area used for work is a genuine place of business.
- They had to work from home because their employer didn’t offer an alternative workplace.
- Their income-earning activities require them to maintain a place of business.
The ATO considers whether the area:
- Is clearly identifiable as a place of business.
- Is not readily suitable for private or domestic use.
- Is used exclusively or almost exclusively for business.
- Is regularly used for client or customer visits.
Where the requirements are met, occupancy expenses such as rent or mortgage interest should be apportioned based on the floor area, period of work use, and the taxpayer’s ownership or rental interest in the property.
The ATO has also issued a Decision Impact Statement on the Hall decision, providing further guidance on the Commissioner’s view of occupancy expense claims.
Rental property schedules
The ATO is focusing on rental property deductions and reminds practitioners that property manager reports should be used only as a starting point, as their expense classifications may not match the correct tax treatment.
Common issues include:
- Claiming capital expenses, including initial repairs, as immediate deductions.
- Grouping expenses too broadly to determine the correct tax treatment.
- Differences between expenses recorded when incurred and when paid.
- Claiming private expenses, such as costs from the owner’s personal use of the property.
The ATO recommends that practitioners:
- Obtain invoices or work descriptions where an expense is unclear.
- Seek further evidence, including photos, where invoices do not clearly describe the work.
- Check that invoices and supporting documents relate to the rental property, not the client’s private residence or another property.
- Correctly identify and treat repairs, capital works and depreciating assets.
- Explain to clients why the tax treatment may differ from the property manager’s report.
This is particularly important where a property was recently acquired, or significant expenditure was incurred. These steps can improve the accuracy of rental property schedules, help clients understand the correct tax treatment and reduce the risk of an ATO review or audit due to incorrect or overstated deductions.
Payday Super
If any payments are rejected by the fund, employers should review the error, correct the details and resubmit. The Small Business Super Clearing House (SBSCH) closed permanently on 1 July 2026. Any payments to the SBSCH received on or after 1 July 2026 will be returned within 7 business days.
Division 296 changes for SMSFs
From 1 July 2026, Division 296 applies an additional 15% tax to the portion of earnings linked to an individual’s total super balance (TSB) above the large super balance threshold (LSBT) of $3 million for 2026–27.
Key points for SMSF trustees and practitioners:
- SMSF annual reporting: From 2026–27, SMSFs must report each affected member’s relevant super earnings in the SMSF Annual Return. A member may be affected if their interest in the fund exceeds the LSBT.
- CGT adjustment election: SMSFs can elect to apply the Division 296 CGT adjustment to all CGT assets held by the fund on 30 June 2026. The election applies to the whole fund, cannot be revoked and is available even if no member exceeds the LSBT. It must be made by the due date for the 2026–27 SMSF Annual Return.
- Assessments and payment: The ATO expects to issue Division 296 assessments for 2026–27 in the second half of the 2027–28 financial year. Individuals can choose to release money from their super fund to pay the liability.
- Further guidance: The ATO is developing Law Companion Rulings on how to calculate relevant super earnings for members covered by Division 296.
Claiming FRCGW credits
The ATO has updated its guidance on claiming foreign resident capital gains withholding credits. Before filing a client’s tax return, practitioners need to obtain the purchaser’s FRCGW payment confirmation as evidence of the amount withheld. If unavailable, the client should request it from the purchaser.
When preparing the return, practitioners should:
- Declare all assessable income, including any capital gain or loss from the property disposal, where applicable.
- Claim the FRCGW credit at the relevant withholding credit label. FRCGW amounts are not pre-filled.
The FRCGW amount will be refunded in full if the client has no outstanding tax debts and no CGT is payable on the disposal.
The credit applies in the income year the sale contract is signed. If the purchaser remits the withholding amount in the following income year, both the capital gain/loss and FRCGW credit must still be reported in the year the contract was executed.
If the credit was not correctly claimed, practitioners may need to lodge an amendment or objection.
Over-claiming expenses and GST credits
The ATO is focusing on businesses deliberately over-claiming expenses and GST credits, including those that:
- Over-claim deductions or GST credits.
- Claim private expenses as business costs.
- Make incorrect BAS or tax return claims, including GST credits where GST was not included in the price.
- Fail to keep adequate records or have missing records.
Where an expense is partly private, only the business portion can be claimed.
New TPAR pre-fill for 2026
The ATO has announced that taxable payments annual report (TPAR) amounts will now pre-fill in the tax return for tax time 2026. Most TPAR data will be available after 28 August each year, after payers lodge their reports. The ATO recommends lodging after 28 August 2026 to avoid missing data. As always, the pre-fill information should be checked and updated if required.