January 2026 Round Up
A common thread running through this month’s updates is that intent now matters as much as action, and the ATO is paying closer attention to both. Whether it’s when super actually lands in an employee’s fund, how often a holiday home is genuinely available to rent, or the quality of evidence put forward in a tax dispute, assumptions and shortcuts are being challenged. Systems are tightening, scrutiny is increasing, and “close enough” is no longer a safe position. For businesses and investors alike, this month’s articles highlight why accuracy, timing and discipline now play an even bigger role in staying compliant and avoiding unnecessary risk.
1. Super guarantee payments due 28 January Read the full article
2. Holiday homes and rental deductions: what counts as genuine rental use Read the full article
3. AI-generated legal material under scrutiny in ATO tax dispute Read the full article
Super guarantee (SG) payments due 28 January
SG contributions are due to your eligible workers’ super funds by 28 January.
If you have eligible workers, make sure you pay their SG contributions in full, on time, and to the right fund by 28 January to avoid penalties and interest.
For this payment to be considered paid on time it needs to reach the super fund by the quarterly due date. To meet this deadline, you’ll need to make the payment early enough to allow for processing times.
SG contributions must be paid by each quarterly due date, but you can pay more frequently to help with your cashflow.
If you currently use the Small Business Super Clearing House (SBSCH), it will close permanently on 1 July 2026. Don’t wait until the last minute – transition to an alternative service now.
Reminder: Payday Super starts 1 July 2026. Now is the time to start getting ready to pay super at the same time as salary and wages. For more information and resources, go to ato.gov.au/paydaysuper.
Holiday homes and rental deductions: what counts as genuine rental use
The Australian Taxation Office (ATO) has released three draft documents that affect rental property owners, with a particular focus on holiday homes:
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Draft Tax Ruling (TR) 2025/D1 – Rental property income and deductions for individuals who are not in business
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Draft Practice Compliance Guideline (PCG) 2025/D6 – Apportionment of rental property deductions
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Draft PCG 2025/D7 – Application of section 26-50 for holiday homes that are also rented out
Together, these documents clarify when deductions may be reduced or denied, especially where properties are used for private purposes.
Below is what you need to know.
1. Personal use can change how the property is treated
If your holiday home is mostly used for family holidays, or is regularly blocked out during peak periods such as Christmas, Easter, or school holidays, the ATO may treat it as a private property.
If this occurs, the ATO may deny deductions for ownership costs, including:
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Interest
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Council rates
2. Advertising alone is not enough
Listing your property on Airbnb or other sharing-economy platforms does not automatically entitle you to rental deductions.
The ATO looks at actual rental activity and behaviour, not just whether the property is advertised.
Consistently blocking out peak holiday periods for personal use is likely to attract the ATO’s attention.
3. Section 26-50 and “leisure facilities”
PCG 2025/D7 explains that holiday homes mainly used for recreation may be treated as “leisure facilities.”
Where this applies:
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Deductions for ownership costs, including interest, are denied
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Unless the property is primarily used to earn rental income
4. ATO risk zones for holiday homes
The ATO has categorised holiday home arrangements into risk zones. Properties in the Amber or Red zones are more likely to attract scrutiny.
Green zone (Low risk):
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Mostly rented, with little private use
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High levels of income-producing occupancy, particularly during peak holiday periods
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Income generation is prioritised over other uses
Amber zone (Medium risk):
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Some private use during peak periods
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Increased personal use by the taxpayer and friends
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Income forgone so the property is available for personal use
Red zone (High risk):
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Mostly private use or largely unavailable for rent
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Personal use prioritised by blocking out time each year
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Advertising at unreasonably high rates that likely deter renters during high-demand periods
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Limited attempts to rent out the property
Can you still claim interest deductions?
Yes — but only if the property is genuinely income-producing.
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Fully rented holiday homes:
Interest is deductible as usual. -
Mixed-use holiday homes:
Interest can be claimed for the rental period, using ATO-approved apportionment methods. -
Mostly private use:
Interest deductions will generally be denied under section 26-50.
Key takeaway
The ATO is targeting properties that resemble private retreats rather than genuine rentals.
If your property has significant personal use or limited rental activity, it is more likely to come under scrutiny.
If you are unsure about your current arrangements, we recommend reviewing them and contacting us if you’re unsure of your current situation.
AI generated legal material under scrutiny in ATO tax disputes
The Administrative Review Tribunal has delivered a sharp rebuke to a self-represented taxpayer for citing non-existent cases, misrepresenting established legal authorities, and relying on irrelevant precedents in a dispute with the Australian Taxation Office (ATO).
The criticism arose from a decision handed down on 12 January, involving Alexander Smith, who challenged whether his French Bulldog breeding operation qualified as an enterprise for GST purposes under the A New Tax System (Goods and Services Tax) Act 1999.
Non-existent and incorrect case citations
One of the tribunal’s most serious findings was that several cases cited by Smith could not be found in any recognised law report or legal database.
Justice Dunne highlighted Smith’s reliance on Re Jowett v Commissioner of Taxation [2011] AATA 433, which Smith claimed supported his argument.
In reality:
The citation referred to a completely different case
That case said nothing about reconstructed records
Justice Dunne stated that the cited case did not exist at all, describing it as a complete “hallucination”
Misapplied and irrelevant legal authorities
Even where legitimate authorities were cited, the tribunal found that Smith’s references were:
Misapplied
Misunderstood
Entirely irrelevant to the arguments advanced
Smith also relied on two immigration law cases. Justice Dunne noted that these cases:
Did not stand for the propositions asserted
Were irrelevant to the issues before the tribunal
In his closing submissions, Smith attempted to rely on Land Tax v Jowett [1930] HCA 51. Justice Dunne rejected this reliance, stating that:
The case had nothing to do with the argument being made
It was entirely irrelevant to the matter at hand
Justice Dunne further suggested the case was cited “presumably on the basis the word ‘Jowett’ is in the title”, similar to the earlier fictitious citation.
Tribunal comments on AI-generated legal material
Justice Dunne observed a pattern of errors consistent with the uncritical use of AI-generated legal material and issued a clear warning about reliance on artificial intelligence as a research tool.
He emphasised that when AI is used:
Each case identified must be located on a public legal database, such as AustLII
Each case must be properly read
The authority must genuinely support the proposition for which it is cited
Justice Dunne warned that failing to do so wastes the tribunal’s time and scarce resources, particularly where the tribunal must search for cases that do not exist or review cases that have no relevance.
He noted that this problem arises “whether artificial intelligence was used or not.”
Outcome of the case
While the tribunal ultimately accepted key aspects of Smith’s position, the poor quality of his legal authorities:
Undermined his credibility
Led to the rejection of large portions of his input tax credit claims
Resulted in the upholding of findings of recklessness
Important: This is not advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. This article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval. Liability limited by a scheme approved under Professional Standards Legislation.