Tax Bites: Insights on tax developments

Herbert Smith Freehills Kramer

We explore the latest tax developments. In this podcast series, our tax team delve into the latest developments that are likely to affect businesses functioning or actively trading.

  1. Tax Bites EP22: 2026 Federal Budget - CGT Discount Replaced, Negative Gearing Curtailed, and Discretionary Trusts Hit with Minimum Tax

    May 12

    Tax Bites EP22: 2026 Federal Budget - CGT Discount Replaced, Negative Gearing Curtailed, and Discretionary Trusts Hit with Minimum Tax

    Late on Budget night Toby Eggleston, Ryan Leslie and Nick Heggart discuss Treasurer Chalmers’ budget, focused on reshaping personal tax, especially capital gains and discretionary trusts, under “intergenerational equity.”  Corporate measures are smaller, including re-announced non-resident CGT changes with intended retrospectivity to 2006 and limited transitional relief for renewables to 30 June 2030, expanded VCLP/ESVCLP investment caps, and R&D offset tweaks forecast to reduce tax by $1.5b. Small business changes include making the instant asset write-off permanent, a refundable loss offset for startups from 1 July 2028, and a permanent loss carry-back for companies under $1b turnover.  Major personal reforms include phasing out the 50% CGT discount from 1 July 2027 (replaced by cost-base indexation and a 30% minimum CGT tax), taxing pre-CGT assets, limiting negative gearing for post-budget residential purchases (except new builds), and imposing a 30% minimum tax on discretionary trusts from 1 July 2028 with complex impacts, especially for “bucket companies,” plus proposed restructuring rollovers amid stamp duty issues. 00:10 Budget Night Kick-off 00:41 Corporate Tax Overview 01:53 Non-Resident CGT Reboot 03:14 Venture Capital and R&D 05:16 Small Business Reliefs 06:20 Loss Carry-back Returns 08:44 Big Shift to Personal Tax 08:47 CGT Discount Ends 10:52 Tech and Startup Fallout 15:01 Negative Gearing Overhaul 16:51 Discretionary Trusts Seismic 21:37 Late Night Wrap Up

    23 min
  2. Tax Bites EP21: Exposure Draft Shock: Expanded Non Resident CGT on Land-Connected Assets and Treaty Override

    Apr 20

    Tax Bites EP21: Exposure Draft Shock: Expanded Non Resident CGT on Land-Connected Assets and Treaty Override

    Partners Toby Eggleston, Nick Heggart and Ryan Leslie discuss Treasury’s 10 April 2026 exposure draft legislation implementing and expanding the 2024 budget proposals on when non-residents pay Australian CGT. The draft materially broadens “taxable Australian real property” beyond general law real property (post the YTL and Newmont decisions) to include rights over land, contractual rights, and fixed or installed assets expected to be on land for most of their useful life (e.g., wind/solar assets, pipelines, mining equipment, tenant fixtures), plus water entitlements, with some elements proposed to apply retrospectively to 12 December 2006. It also includes a treaty-override via the International Tax Agreements Act, changes the principal asset test to a 365-day lookback, introduces a limited 50% CGT discount for certain renewable generation disposals to 1 July 2030, and tightens the non-resident CGT withholding/declaration and clearance certificate processes, all amid a 14-day consultation period. Want to go deeper? Read our briefing note here 00:10 Welcome and agenda 00:32 Budget shock announcement 02:34 Overview of reforms 02:57 Expanded real property definition 06:25 Assets newly in scope 09:07 Uncertainty and edge cases 11:25 Retrospective start dates 14:39 Treaty override explained 23:26 Indirect interest test changes 27:54 Renewables CGT discount 31:14 Withholding and notifications 34:18 Consultation and wrap up

    35 min
  3. Tax Bites EP20: Taxation of Earnouts and Contingent Consideration in M&A: TOFA, Look-Through Earnout Rules and Key Traps

    Mar 30

    Tax Bites EP20: Taxation of Earnouts and Contingent Consideration in M&A: TOFA, Look-Through Earnout Rules and Key Traps

    Toby Eggleston and Naison Seery discuss Australian tax treatment of earnouts and contingent consideration in M&A, noting increased use to bridge valuation gaps and that outcomes depend on TOFA, deal terms, metrics and payment timing, with ATO views still being tested. They outline the ATO’s shifting historical positions on whether earnout rights are separate CGT assets, buyer cost base treatment, and potential CGT event D1 exposure. TOFA is a key starting point for large taxpayers and can apply to contingent rights as financial arrangements, with timing and character mismatch implications; a business sale exception may exclude earnouts contingent on economic performance (not solely turnover/receipts), with uncertainty illustrated by the Merchant case. Outside TOFA, CGT applies and the look-through earnout rules may allow proceeds/cost base to reflect actual payments if strict conditions are met, including active asset and a hard five-year payment window. 00:09 Welcome 00:25 Why Earnouts Matter 01:26 ATO Views Over Time 05:44 TOFA as the starting point 07:27 TOFA Mechanics and Timing 09:27 Business Sale Exception Tests 10:53 Structuring Contingencies 13:26 In or Out of TOFA 17:37 Outside TOFA and Look Through Earn out rights 18:46 Look Through Requirements 20:12 Five Year Rule Pitfalls 23:39 Wrap Up and Key Takeaways

    25 min
  4. Tax Bites EP19: ATO focus on s128F, CGT rollovers, thin cap review and FIRB tax conditions

    Feb 17

    Tax Bites EP19: ATO focus on s128F, CGT rollovers, thin cap review and FIRB tax conditions

    Toby Eggleston, Ryan Leslie and Jay Prasad discuss recent Australian tax developments: the ATO’s targeted consultation and planned updated guidance on the s128F public offer interest withholding tax exemption; anticipated ATO guidance (now indicated for early 2026) on back-to-back CGT rollovers and potential Part IVA risk; the Treasurer’s request for a Board of Tax review of thin capitalisation reforms; and evolving FIRB tax conditions. 00:10 Welcome to Tax Bites & today’s agenda 00:32 ATO consultation: Section 128F public offer IWT exemption (what’s changing) 02:06 128F in practice: private credit complexity & evidence you’ll need 03:53 Key takeaway: get 128F advice early before lender discussions 04:30 Back-to-back CGT rollovers: why the ATO is preparing guidance 05:04 Top-hat restructures, Bailador example & Part IVA risk focus 07:38 AusNet fallout, policy debate & Board of Tax review on rollovers 09:41 Board of Tax review: Thin cap reforms - scope, pain points, what may change 13:42 FIRB tax conditions: new tailored approach & the ATO tax questionnaire 16:30 Wrap-up: what we’re watching for in tax in 2026

    18 min
  5. Tax Bites EP18: Dissecting the Full Federal Court's Decision in Commissioner of Taxation and Hicks

    12/29/2025

    Tax Bites EP18: Dissecting the Full Federal Court's Decision in Commissioner of Taxation and Hicks

    In this episode of the Herbert Smith Freehills Kramer Tax Podcast, Tax Bites, partner Toby Eggleston, Associate Dan Beratis, and Ryan Leslie delve into the Full Federal Court's decision in the Commissioner of Taxation v Hicks case.  They discuss the background, facts, and history of the case, which involved a fashion retail business named City Beach, its restructure, and the tax implications under Section 45B and Part IVA of the 1936 Act. The episode covers the court's reasoning, the taxpayer's and commissioner's arguments, and key takeaways from the case, including the interpretation of Section 45B, the role of purpose in tax legislation, and the application of anti-avoidance rules. Additionally, insights from the recent PepsiCo decision and the potential impacts on future tax cases are explored.  00:10 Introduction and welcome  00:29 Case background and facts  02:53 Restructure details  04:40 Commissioner's response  06:35 Full Federal Court's reasoning  07:51 Section 45B analysis  17:41 Part IVA analysis  24:10 Conclusion and final thoughts

    26 min
  6. Tax Bites EP17: High Court Validates Foreign Surcharge Land Taxes: Implications and Analysis

    11/17/2025

    Tax Bites EP17: High Court Validates Foreign Surcharge Land Taxes: Implications and Analysis

    In this episode of the Herbert Smith Freehills Kramer Tax Bites podcast, Isaac Morgan, Mark Peters and Toby Eggleston discuss the recent Australian High Court decision in G Global against the Commissioner of State Revenue. The conversation delves into the background, statutory setup, and arguments presented in the case, exploring the implications for foreign investors and potential future legal challenges. The episode also examines retrospective tax amendments and their broader impacts on taxation law. 00:10 Introduction 01:06 Background Facts and Statutory Setup 04:19 High Court's Consideration of the Arguments 08:56 Implications of the Decision 19:48 Options for Foreign Investors 22:07 Closing Thoughts and Conclusion Read more on our HSF Kramer tax note.

    24 min
  7. Tax Bites EP16: Thin capitalisation update: The Third Party Debt Test and Recent ATO Draft Guidance PCG 2025/D2

    06/27/2025

    Tax Bites EP16: Thin capitalisation update: The Third Party Debt Test and Recent ATO Draft Guidance PCG 2025/D2

    In this episode of the Herbert Smith Freehills Kramer 'Tax Bites' podcast, host Toby Eggleston alongside Professor Graeme Cooper and fellow partner Ryan Leslie, explore the complexities of the third party debt test as it relates to Australia's thin capitalisation rules.  Key discussions include the overview and operational intricacies of the third party debt test introduced to replace the arm's length debt test, the guidance and issues arising from the ATO, and the impact of these changes on the infrastructure and property sectors. Special segments also cover the ATO's draft practical compliance guidelines on related party financing and the tax risk associated with the quantum of debt. In addition, the episode highlights updates on Section 899, U.S. tax policy interactions, and a farewell to fan favourite, Graeme Cooper after his substantial contributions to the firm. 00:10 Introduction and Welcome 00:54 Overview of Thin Capitalisation Rules 02:56 Third Party Debt Test Explained 06:11 Emerging Issues with Third Party Debt Test 12:34 Practical Challenges and Industry Reactions 20:14 Conduit Financing and Swap Costs 28:04 Draft Practical Compliance Guide (PCG) PCG 2025/D2 44:01 Closing Remarks and Farewell

    48 min
  8. Tax Bites EP15: Understanding Section 899: US retaliatory tax measures and the impact on Australian taxpayers

    06/16/2025

    Tax Bites EP15: Understanding Section 899: US retaliatory tax measures and the impact on Australian taxpayers

    In this episode of the Herbert Smith Freehills Kramer Tax Bites podcast, hosts Toby Eggleston and Professor Graham Cooper discuss the significant implications of the proposed Section 899 under President Trump's 'One Big, Beautiful Bill' Act. They delve into how these retaliatory taxes imposed by the US aim to counteract what are perceived to be unfair or discriminatory foreign taxes, particularly affecting Australian companies. The discussion covers the legislative background, specific unfair taxes such as undertaxed profits rules, digital services taxes, and diverted profits taxes. They also explore the potential consequences for Australian taxpayers, the Australian government's actions, and the broader impact on the international tax regime.  00:10 Introduction and Greetings 00:31 Overview of Section 899 and Its Implications 00:56 Background and Legislative Process 01:52 Impact on Australian Firms and Government 05:26 Unfair Foreign Taxes Defined 10:29 Potential Triggers and Affected Taxes 11:53 Impact on Australian Taxpayers and Government 16:52 Modifications to BEAT Rules 20:50 Treaty Interactions and Future Implications 23:23 Conclusion and Final Thoughts

    33 min
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We explore the latest tax developments. In this podcast series, our tax team delve into the latest developments that are likely to affect businesses functioning or actively trading.

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