BDO’s quarterly tax bulletin - Latest developments from the quarter ending 30 September 2026

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Our latest quarterly tax bulletin brings together the key Australian tax developments from the first quarter of the 2026–27 financial year.

This edition examines reforms to the foreign resident capital gains tax regime, the ATO’s final position on software royalties, the Federal Court’s decision in the Hilton hotel-sale dispute and Treasury’s proposed minimum tax on discretionary trusts. It also covers R&D and government incentive developments, including new exclusions for gambling and tobacco activities, proposed changes to the R&D Tax Incentive and the reopening of Queensland’s manufacturing grants program.

For start-ups and growing businesses, the bulletin considers what the draft Innovative Business CGT Concession may mean for employee share schemes. It also summarises BDO’s recent submissions on discretionary trust taxation, capital gains tax reforms for innovative businesses and proposed changes to the R&D Tax Incentive.

Each section provides practical insights into the potential implications for compliance, planning and risk management, together with links to further guidance from our tax experts.

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Key highlights

Download the bulletin and explore our insights as we summarise and highlight developments covering:

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Foreign resident capital gains tax reforms

The Government has introduced legislation to strengthen Australia’s foreign resident CGT regime and amend the proposed renewable energy CGT discount. The Bill removes the retrospective application of the new real property definition, retains a 365-day Principal Asset Test with new Ministerial discretion and reduces the renewable energy asset threshold from 90 per cent to 75 per cent for the proposed transitional discount.

Foreign investors should consider the potential effect on Australian asset classifications, transaction-readiness processes, purchaser due diligence and renewable energy investment strategies.

Software royalties and cross-border arrangements

The ATO’s finalised software royalty ruling, TR 2026/2, and draft PCG 2026/D4 confirm that cross-border software and IP payments remain an important compliance area.

Taxpayers with offshore IP ownership structures, software distribution models or SaaS arrangements should examine whether payments may contain a royalty component, reassess withholding tax exposure and ensure their documentation supports the position adopted.

Part IVA and pre-sale restructures

The Federal Court’s decision in Hilton International Australia Pty Ltd v Commissioner of Taxation (No 2) highlights the tax risks associated with complex pre-sale restructures.

The decision reinforces the importance of establishing and contemporaneously documenting a robust commercial rationale, particularly where additional restructuring steps or intra-group debt produce a favourable tax outcome.

Minimum tax on discretionary trusts

Treasury’s exposure draft legislation provides further detail about the proposed 30 per cent minimum tax on certain discretionary trusts from 1 July 2028.

The draft introduces a broader fixed trust definition, an excluded election trust regime and transitional roll-over relief. Family-owned businesses and investment groups that use discretionary trusts, corporate beneficiaries or loss entities should assess the potential commercial, tax and governance implications.

R&D Tax Incentive developments

This edition examines new exclusions for gambling and tobacco-related R&D activities, as well as exposure draft legislation proposing broader reforms to the R&D Tax Incentive from 1 July 2028.

The proposed reforms include an enterprise-age test for refundability, a therapeutic-goods-specific extension process and the removal of supporting R&D activities. Businesses should consider how these proposals may affect eligibility, cash-flow planning, documentation and future investment decisions.

Queensland manufacturing grants

Round 2 of the Transforming Queensland Manufacturing Program offers eligible Queensland manufacturers matched funding of between $100,000 and $1.5 million.

Funding is available for eligible projects that support export opportunities, reshore or onshore manufacturing, improve productivity and competitiveness, or stimulate private investment and employment. Applications close at 1 pm on 25 November 2026.

Innovative Business CGT Concession and employee share schemes

The draft Innovative Business CGT Concession provides greater clarity on how qualifying innovative Australian start-ups may be treated under the broader CGT reforms.

For businesses operating employee share schemes, the concession may preserve access to a 50 per cent CGT discount on qualifying gains. However, eligibility is expected to be closely connected to the Early Stage Innovation Company framework, meaning not every start-up or growth business will qualify.

BDO tax policy submissions

The bulletin also summarises BDO’s recent submissions on:

Across these submissions, BDO recommends clearer, fairer and more workable rules that provide greater certainty while reducing the risk of double taxation and unintended consequences for businesses, investors and family groups.

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The bulletin provides an outline to help understand and manage compulsory tax compliance and liabilities, but please note this is not comprehensive. 

Before acting on the information provided, you should consider your individual circumstances and consult your BDO tax adviser to receive tailored advice or discuss our available tax services.

How BDO can help

If you have questions about any of the topics covered in the bulletin or would like tailored advice, BDO’s Tax team is here to support you.

With deep expertise across corporate and international tax, indirect tax (including international trade and customs), R&D and government incentives, global expatriate tax, employment tax, and transfer pricing, our specialists can help your organisation navigate the complexities of Australia’s tax environment.

We work closely with clients to ensure they remain compliant, manage risk effectively, and are well-prepared for future developments. Contact our tax experts today.

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