July 2026 Round Up
There is a fair bit to be across this month. We look at what the ATO is focusing on in 2025-26 returns, including work-related deductions, undeclared income and the risks of taking tax advice from AI tools. We also cover a change that affects anyone carrying an ATO debt: interest charges are no longer deductible, which changes the maths on payment plans. And for employers, we have pulled together the payroll, super and parental leave changes that took effect on 1 July.
1. What the ATO Is Watching This Tax Time (and Why ChatGPT Isn’t Your Accountant) Read the full article
2. Carrying an ATO Debt Just Got a Lot More Expensive Read the full article
3. The New Financial Year Employer Checklist Read the full article
What the ATO Is Watching This Tax Time (and Why ChatGPT Isn’t Your Accountant)
Tax time is here, and the ATO has been unusually direct about where it is looking. If you are lodging your 2025-26 return, here is what is on their radar.
What the ATO is looking at in your 2025-26 return
Work-related deductions. The ATO’s three rules have not changed: you must have spent the money yourself without being reimbursed, it must directly relate to earning your income, and you need a record to back it up. Rough estimates and “same as last year” claims are what get flagged.
Income you forgot to mention. Side hustles, cash jobs, bank interest, dividends, rental income, crypto. The ATO’s data matching now reaches banks, share registries, crypto exchanges and gig platforms like Uber and Airbnb. If you earned it, they probably already have the data. There is no minimum threshold. A few hundred dollars from an Etsy store still needs to be declared.
How to claim working from home correctly under the fixed rate method
The fixed rate method lets you claim 70 cents per hour worked from home in 2025-26. It covers energy, internet, phone, stationery and consumables. A few things catch people out:
- You need a record of your actual hours for the whole year. A diary, timesheet or roster kept as you go. Estimates are not accepted.
- Keep at least one bill for each expense type you are claiming.
- You cannot claim internet or phone separately on top of the 70 cents. That is double dipping.
- You can still claim depreciation on your laptop, monitor or desk separately.
Why an AI chatbot cannot prepare your tax return
The ATO has specifically warned against relying on AI tools, finfluencers or well-meaning mates for tax advice. No matter where the advice came from, you are the one responsible for what is in your return. If an AI chatbot tells you something is deductible and it is not, the penalty lands on you.
General information is one thing. Your actual reported tax position is another. That’s what we are here for!
Carrying an ATO Debt Just Got a Lot More Expensive
Any General Interest Charge (GIC) or Shortfall Interest Charge (SIC) incurred on or after 1 July 2025 cannot be claimed as a deduction. The return you are lodging now, for 2025-26, is the first one where that interest simply drops out of your deductions.
It does not matter when the underlying debt arose. If you are still paying off a tax debt from three years ago, any interest accruing on it now is non-deductible.
Why the removal of the deduction changes the real cost of ATO debt
GIC currently sits at over 11% and compounds daily. That was already a high rate. When it was deductible, the after-tax cost was softened. Now you pay the full amount with no offset.
The maths on payment plans has changed too. Entering a plan does not pause the interest. GIC keeps running at the full rate for the life of the plan, so a 12-month plan costs you more than a 6-month one on the same debt.
How to reduce what an ATO debt costs you under the new rules
- If you can clear an ATO debt, clear it. It is now one of the most expensive debts you can hold.
- Review any existing payment plan. In some cases, refinancing through a bank or other lender works out cheaper, and commercial interest on business borrowings may still be deductible where ATO interest is not.
- Do not count on remission. The ATO can waive interest charges in some circumstances, but it has been knocking back remission requests far more often than it used to.
- Get ahead of it. Setting aside GST, PAYG withholding and super as you go means the money is there when the bill arrives.
If you are carrying an ATO debt or on a payment plan, get in touch with us to go over the numbers under the new rules.
The New Financial Year Employer Checklist
A lot changed for employers on 1 July. Before your next pay run, here is what needs attention.
1. Check every pay rate against the new award minimums
Award rates increased by 4.75% following the Fair Work Commission’s annual wage review. The National Minimum Wage is now $26.44 per hour, or $1,005 per week.
Check every employee’s rate, including juniors, apprentices and anyone on an annualised salary set close to the award. A salary that comfortably cleared the minimum last year can fall under it after an increase like this.
2. Confirm super is going out with every pay run
Payday Super is now in effect. Super must be paid at the same time as wages, and contributions must reach the employee’s fund within seven business days of payday. A payment counts when the fund receives it, not when you submit it.
Two things to action:
- The Small Business Super Clearing House closed permanently on 1 July. If you were using it, you need an alternative through your payroll software or a SuperStream-approved provider.
- Cash flow changes shape. Super that used to sit in your account until quarter end now leaves with every pay run. Adjust your buffer accordingly.
3. Update your parental leave settings to 26 weeks
Government-funded Parental Leave Pay increased to 26 weeks (130 days) for children born or adopted on or after 1 July, paid at $1,004.70 per week before tax. Twenty days are reserved for each partner on a use-it-or-lose-it basis.
Two things employers often get wrong:
- You administer the first block of leave through your normal payroll, funded in advance by Services Australia. It is their money, your pay run.
- You do not handle the super. The ATO pays a 12% contribution on Parental Leave Pay directly into the employee’s fund. Nothing to calculate, nothing to remit.
If someone on your team is expecting, 26 weeks is half a year of coverage to plan for. Start early.
4. ASIC fees and ATO interest: two more changes to note
- ASIC fees increased. Company registration is now $636 and the annual review fee for a proprietary company is $342. Business name registration is $47 for one year.
- ATO interest is no longer deductible. Covered in detail elsewhere in this newsletter, but it belongs on this list: carrying tax debt into the new year costs more than it used to.
Every item on this list is cheaper to fix in July than to find in an audit, a Fair Work claim or a super guarantee charge assessment later in the year. If you would like us to review your payroll setup, super arrangements or cash flow position, get in touch with us.
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.