The 2025–26 Federal Budget presented by the Treasurer on 25 March 2025 introduced several measures affecting Australian businesses. While the Budget did not contain extensive new initiatives, it confirmed certain proposals, deferred others, and remained silent on several previously announced but unenacted measures. This article outlines the key tax implications for businesses arising from the Budget.
📤 Deferrals: Delayed Measures
The Budget announced the deferral of two previously proposed measures:
- Capital Gains Tax (CGT) Changes for Non-Residents: The proposed expansion of CGT rules concerning non-residents will now commence after the date of Royal Assent to the amendments, and no earlier than 1 October 2025. This measure was initially scheduled to apply to CGT events occurring on or after 1 July 2025.
- Expansion of Clean Building Managed Investment Trust (MIT) Regime: The proposal to include data centres and warehouses in the clean building MIT regime has been deferred. The measure will now start after Royal Assent to the amendments. The original announcement indicated applicability to buildings where construction commenced after 9 May 2023, with deductions available from income years starting on or after 1 July 2025.
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✅ Confirmations:Measures Moving Forward
The Budget confirmed the government’s intention to proceed with certain measures:
- Clarification on Single Widely-Held MIT Owners: Amendments will clarify that MITs with a single widely-held owner are acceptable. These changes will be backdated to 13 March 2025. Taxpayers can rely on the Australian Taxation Office’s (ATO) stated intention not to apply compliance resources to review structures existing as of the date of its Taxpayer Alert (7 March 2025).
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🏛️ ATO Resourcing and Compliance Initiatives
The Budget continues the trend of allocating additional resources to the ATO for compliance activities:
- Tax Avoidance Taskforce: The ATO will receive $700 million over four years to support the continued operation of the Tax Avoidance Taskforce, focusing on multinationals and other large taxpayers. The Taskforce is expected to generate $3 billion in additional revenue.
- Overall ATO Investment: The government is investing approximately $1 billion in the ATO to enhance its tax compliance capabilities.
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🤐 Unaddressed Measures: Budget Silence
The Budget did not address several previously announced but unenacted measures, including:
- Changes to Part IVA of the Income Tax Assessment Act 1936 to target schemes that achieve an Australian income tax benefit, even where the dominant purpose was to reduce foreign income tax (announced in May 2023).
- Changes to Part IVA to address schemes that reduce tax paid in Australia by accessing a lower withholding tax rate on income paid to foreign residents (announced in May 2023).
- A new penalty for significant global entities that have mischaracterised or undervalued royalty payments to which royalty withholding tax would otherwise apply (announced in May 2024).
- Ensuring tax scheme penalties apply where taxpayers are in a loss position (announced in December 2024).
- Penalising large taxpayers that mischaracterise or undervalue interest or dividend payments to which withholding tax would otherwise apply (announced in December 2024).
- Applying shortfall interest charge to repayments of overclaimed refundable offsets (announced in December 2024).
The absence of commentary on these measures suggests a delay in their implementation or a deprioritisation by the government.
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🌐 International Tax Considerations
The Budget did not address potential changes to Australia’s international tax settings in response to developments in the United States:
- The U.S. administration has expressed concerns over foreign tax rules perceived as extraterritorial or discriminatory towards American companies.
- The proposed Defending American Jobs and Investment Act 2025 (H.R. 591) aims to enforce remedies against such foreign tax measures.
- Australian measures attracting U.S. scrutiny include the GST, the Multinational Anti-Avoidance Law, the News Bargaining Incentive, and proposed CGT reforms.
The government’s silence on these issues indicates that planning for potential international tax disputes may be ongoing but not yet publicly disclosed.
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📜 Recent Legislative Developments
On 26 March 2025, Parliament enacted the Treasury Laws Amendment (Tax Incentives and Integrity) Bill 2025, which includes:
- $20,000 Instant Asset Write-Off: Small businesses can immediately deduct eligible assets costing less than $20,000 for the 2025 income year.
- Denial of Deductibility for Interest Charges: From 1 July 2025, general interest charge (GIC) and shortfall interest charge (SIC) will no longer be tax-deductible for assessments issued on or after this date.</ ::contentReference[oaicite:24]{index=24}Published: 8 April 2025
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Authors: Toby Eggleston, Ryan Leslie, Nick Heggart, James Pettigrew, Jay Prasad, Graeme Cooper – Herbert Smith Freehills