We’re starting to prepare the first of the tax returns for the 1 July 2025 to 30 June 2026 tax period! How exciting!
Below are some of the new areas to keep an eye out for in your 2026 financial year tax returns. We’ve also included a section about what areas the Australian Taxation Office (ATO) are focusing on this year.
GIC and SIC Not Claimable as a Deduction on or After 1 July 2025
General Interest Charge (GIC) and Shortfall Interest Charge (SIC) are interest charges imposed by the ATO on unpaid tax liabilities and tax shortfalls.
Historically, these charges were tax deductible. However, from 1 July 2025, taxpayers can no longer claim a deduction for any GIC or SIC incurred. This means that taxpayers with overdue tax debts or amended assessments may face a higher after-tax cost where interest charges arise.
To minimise additional costs, we encourage taxpayers to ensure their tax obligations are lodged and paid on time wherever possible.
Additional Trust Tax Return Labels relating to Distributions
The ATO has introduced additional reporting requirements in trust tax returns relating to distributions to beneficiaries at Item 58. These new labels require trustees to provide more detailed information regarding trust distributions, helping the ATO better trace amounts distributed through trust structures and ensure beneficiaries are correctly reporting those amounts in their own tax returns.
While many beneficiaries are unlikely to notice a direct impact on their individual tax return, trustees and beneficiaries may receive additional questions from their accountant when preparing year-end tax returns to ensure the required information is accurately reported.
HELP Debt Repayment Changes
From the 2025-26 income year, compulsory HELP repayments are calculated using a new marginal repayment system. Rather than applying a repayment rate to your entire income once a threshold is reached, repayments are now only calculated on income above the relevant threshold. This change is designed to reduce repayment obligations for many taxpayers with student loans and remove the “cliff effect” that existed under the previous system.
2025-26 HELP Repayment Thresholds:
Medicare Levy Threshold Increases
The Government has increased the Medicare levy low-income thresholds for the 2025-26 income year. As a result, more low-income individuals and families may qualify for a reduced Medicare levy or be exempt from paying the levy altogether.
*The family thresholds increase by $4,338 for each dependent child or student
ATO Areas of Focus
The ATO has indicated it will continue to focus on:
- Work-related expense claims
- Working from home deductions
- Rental property income and expenses, especially for “holiday homes” New guidance for rental property owners | Australian Taxation Office
- Capital gains tax events, including property, shares and cryptocurrency transactions
- Taxpayers should ensure they retain appropriate records to support all claims made in their tax return.