Income Tax Cases Update – First Half of 2025

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The first half of 2025 has been a busy period in Australian tax law, with several significant cases before the Federal Court, Full Federal Court and AAT. Many of these are now subject to appeal, meaning the year ahead could reshape how businesses and individuals approach compliance and planning.

Key Federal Court & Full Court Decisions

  • Bendel (Division 7A – Unpaid Present Entitlements)
    The Court held that unpaid trust entitlements to a corporate beneficiary were not loans under Division 7A. This ruling directly challenges the ATO’s current position in TD 2022/11. The Commissioner has appealed to the High Court, so businesses should watch this space closely.
  • Merchant (Part IVA & Dividend Stripping)
    A complex case involving share sales and capital losses, where the Court confirmed anti-avoidance and dividend stripping provisions applied. Both parties have sought High Court review.
  • AusNet (Division 615 Rollover Relief)
    The Court confirmed the restructure of a stapled group qualified as a Division 615 reorganisation but rejected a cost base uplift. High Court leave to appeal was refused.

Other Important Cases

  • Tabcorp – No “financial arrangement” under TOFA rules when a gaming licence expired.
  • Baya Casal – A termination payment was classified as a genuine redundancy rather than a standard ETP.
  • Aitken – Forestry scheme participant assessed on two separate CGT events in one transaction.
  • Morton – Sale of subdivided farmland treated as a capital gain on a pre-CGT asset.
  • Charles Apartments – Guarantee payments on a loan were non-deductible, being capital in nature.
  • SNA Group – $19m of intra-group service fees were allowed as deductible.

Tribunal Highlights (on Appeal)

  • Shaw – Substantiation relaxed for truck driver meal claims where work connection was clear.
  • Hall – COVID-era deductions for home rent and car expenses allowed.
  • Quy – Taxpayer held to be a resident under the domicile test, despite living overseas.

What This Means for You

2025 is already shaping up as a “year of appeals.” With multiple High Court decisions pending, taxpayers and advisers need to pay close attention to evolving positions on:

  • Division 7A treatment of trust entitlements
  • Anti-avoidance and dividend stripping provisions
  • Redundancy vs. ETP classification
  • Residency rules under the domicile test

These outcomes could have far-reaching impacts on compliance obligations, structuring choices, and strategic tax planning.

At Richard A Bobb Chartered Accountants, we closely track these cases and provide proactive advice to ensure our clients stay compliant and positioned for future changes.

👉 Contact us today to discuss how these developments could affect your business or investments.

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