Federal Budget | Business and investment

Key takeaways

Amendments will be made to the managed investment trust provisions to ensure legitimate foreign investors continue to access the concessional withholding tax rates.
Start date of previously announced clean building managed investment trust withholding tax concessions deferred.
No changes to private company deemed dividend rules.
No changes to small business tax concessions.

MIT concessions

In the lead up to the 2025-26 Federal Budget, on 13 March 2025 the Government announced that it plans to amend the income tax laws to ensure that genuine widely held foreign based investors (such as foreign pension funds) can continue to access concessional withholding tax rates in Australia on eligible distributions, while simultaneously strengthening safeguards against potential misuse. This has been reiterated in the 2025-26 Federal Budget.

Specifically, the Government intends to amend the existing managed investment trust (MIT) provisions to remove ambiguity around the use of MITs while maintaining the current industry practice and understanding of the operation of the MIT pooling requirements. Importantly, the changes will explicitly allow trusts ultimately owned by a single widely-held investor, such as a foreign pension fund, to access MIT concessions (a so-called ‘captive MIT’). It is stated that the measure applies to fund payments from 13 March 2025.

This announcement complements the Australian Taxation Office's (ATO) recent Taxpayer Alert (TA 2025/1) in which the ATO indicated that it has a focus on non-commercial restructures designed to inappropriately access MIT withholding tax benefits. It is worth noting that the Government’s intended amendments will not affect the ATO's ability to apply the existing general anti-avoidance rules where necessary to ‘captive MITs’ that involve restructures set in TA 2025/1. However, TA 2025/1 notes that the ATO will not apply compliance resources to MIT structures that were established prior to the publication of TA 2025/1 unless there is material new investment or ownership change.

Deferral of start date for the clean building MIT withholding tax concession

The Government has also announced in this year’s Federal Budget that the start date of previously announced (but yet to be enacted) 2023-24 Federal Budget proposal to extend the existing clean building MIT withholding tax concession to data centres and warehouses that meet energy efficiency standards will be deferred to the first 1 January, 1 April, 1 July or 1 October after the amending Act receives Royal Assent. Accordingly, once enacted, the clean building MIT withholding tax concession (currently 10%) should apply from the relevant start date to eligible fund payments attributed to income from eligible data centres and warehouses that meet energy efficiency standards and where their construction started any time from 7:30pm AEST on 9 May 2023.

No changes to private company deemed dividend rules

The deemed dividend tax rules which apply to private companies has certainly been a hot topic in recent weeks following the Full Federal Court’s decision in the Bendel case. In spite of this, there has been no announcement in this 2025-26 Federal Budget to either clarify or amend the existing Division 7A law in relation to the treatment of an unpaid present entitlement between a trust and a private company. In fact there were no announcements in relation to the general application of the Division 7A rules which are complex and often tricky to navigate.

By way of background, in the Bendel case the Court dismissed the ATO long-held position that an unpaid present entitlement between a trust and a private company is a loan for the purposes of the Division 7A deemed dividend rules. The Court’s decision may not be the end of the matter as the ATO has since lodged an application to seek special leave to appeal to the High Court. In addition, the ATO has issued an interim decision impact statement in which it indicates that until the appeal process is finalised it does not intend to revise its current view that it regards private company entitlements to trust income as potentially giving rise to a Division 7A loan. Furthermore, it has also put affected groups on notice that there still may be implications under other taxation laws, such as ‘section 100A’ (reimbursement agreements).

Regardless, affected private groups should continue to closely consider their options in relation to any trust distributions that were previously made or expected to be made to a private company beneficiary.

Changes to superannuation guarantee entitlements

All employees will receive the benefit of the last of the already-legislated increases in the minimum superannuation guarantee (SG) entitlement. Specifically, the minimum SG rate will increase from 11.5% to 12% from 1 July 2025.

Payday superannuation is coming

Although not a specific feature in this year’s Federal Budget, businesses will be pleased to have the opportunity to have seen the first draft of the proposed law released by the Treasury on 14 March 2025 to give effect to the Government’s Payday super initiative that was announced in the 2023-24 Budget.

Not only does the draft law (which is open for comment until 11 April 2025) set out the new framework for requiring superannuation contributions to be received by an employee’s superannuation fund within seven calendar days from the time that the applicable salary/wages is paid, it also makes some important changes to how the SG charge (SGC) applies. Although there is a penalty regime for late or non-payment of a SGC liability, under the new framework, late contributions and the SGC will be tax deductible. However, there will be no tax deduction allowed for any applicable general interest charge or late payment penalty related to the SGC.

The proposed start date for Payday super remains at 1 July 2026. Although this is a little over 15 months away, it is recommended that employers should start to understand the varied requirements under Payday super and how it could be implemented. Read more in our Alert dated 21 March 2025.

Excise and WET relief for alcohol and wine producers

The Government has announced that it will increase the cap on the excise remission scheme for manufacturers of alcoholic beverages from $350,000 to $400,000. Similarly, the Wine Equalisation Tax (WET) producer rebate will also increase from $350,000 to $400,000 per financial year.

Both increases will take effect for financial years from 1 July 2026.

These measures, which were previously announced on 22 February 2025, are intended to provide support for hospitality venues, brewers, distillers and wine producers.