ATO Areas of Focus 2025–26: What Perth Builders, Developers and Trades Need to Know

Every year the ATO publishes where it intends to point its compliance resources. It is one of the few genuinely useful documents the ATO produces, because it tells you — in advance — which parts of your tax return are most likely to be looked at, and which arrangements are most likely to be challenged.

For the 2025–26 year, property and construction is named explicitly. So is GST. So is Division 7A. If you are a Perth builder, developer, or trade contractor operating through a company or a family trust, almost every item on the ATO's list touches your business somewhere.

This article works through the focus areas that actually matter for our industry, explains what the ATO is looking for, and gives you a way to check your own position before your return is lodged. It is not a scare piece. The businesses that get into trouble are almost never the ones that read this sort of thing — they are the ones who find out in March that something has been wrong for three years.

Why the ATO's Focus Areas Matter More in Construction

The ATO has been consistent about the root causes of the problems it finds in privately owned and wealthy groups. It comes down to three things: weak tax governance, poor record keeping, and not getting specialist advice at the point a transaction is being structured rather than after it has happened.

Construction and property businesses are unusually exposed to all three, for structural reasons rather than any failure of character:

• Cash flow is lumpy and project-based. Money moves in large, irregular amounts. Loan accounts drift. Reconciliations fall behind during a busy build.
• Structures grow faster than the bookkeeping. A trading company, a family trust, a property holding entity, sometimes an SMSF. Each new entity multiplies the number of transactions that need to be documented properly.
• The personal-business line is genuinely blurry. The ute, the tools, the trailer, the site shed. All of them cross between company use and private use in ways that a consultant's laptop never does.
• Transactions are large and infrequent. One subdivision, one site sale, one restructure. Get the GST treatment wrong on a single settlement and the exposure is six figures.

None of that makes you non-compliant. It does mean the cost of being casual is higher in this industry than in most.

Property and Construction: A Named Focus Area

The ATO has specifically identified property and construction as a sector under review. Within it, several activities are drawing attention.

Property "flipping" and isolated profit-making ventures

Buying, improving and reselling property is one of the most commonly misreported transactions in Australian tax. The instinct is to treat the gain as a capital gain, apply the 50% CGT discount if the asset was held over twelve months, and move on. That is frequently wrong.

Where a property is acquired with the intention of resale at a profit, or as part of a business or commercial dealing, the profit is generally ordinary income, not a capital gain. No CGT discount. The distinction turns on intention at acquisition, the scale and repetition of the activity, and how the project was financed and marketed.

Subdivisions

Subdividing a block sounds like a simple land transaction. It rarely is. Depending on the facts, a subdivision can change the character of the profit from capital to revenue, trigger a GST liability where none existed before, require GST registration, and bring the whole project within the withholding rules on residential sales. The tax outcome of the same physical subdivision can differ by hundreds of thousands of dollars depending on how it was set up.

The margin scheme and going concern

These are two of the most valuable GST concessions available in property, and two of the most frequently misapplied. The margin scheme lets you calculate GST on the margin rather than the full sale price, but eligibility depends on how and when the property was acquired, and the choice must be agreed in writing with the purchaser before settlement. The going concern exemption requires that everything necessary for continued operation is supplied and that the enterprise is carried on until the day of supply.

Both are all-or-nothing. If eligibility fails, the full GST becomes payable, usually after the sale proceeds have been distributed.

Division 7A: Still the Biggest Single Exposure

Division 7A remains at the top of the ATO's list for privately owned groups, and it is the provision that catches more Perth builders than any other. The pattern is always the same: money comes out of the company during the year for personal purposes, the loan account drifts into debit, and nobody documents it properly before the company's lodgement day.

The ATO is specifically targeting unreported shareholder loans, loan agreements that do not meet the requirements of Section 109N, and — increasingly — "repayments" that are funded by a fresh drawing from the same company. Paying $20,000 back on 29 June and taking $20,000 out on 2 July does not count as a repayment.

The benchmark interest rate for the income year ending 30 June 2027 is 8.77%, up from 8.37% for the 2026 year. Maximum term is seven years unsecured, or twenty-five years where the loan is secured by a registered mortgage over real property worth at least 110% of the loan.

We have covered this in depth, with worked numbers, in Division 7A for Perth Builders. If you have a company and you take drawings, read it.

Trusts and Trust Distributions — and What Changed in June 2026

If your building business runs through a family or discretionary trust, distributions are a standing ATO priority. The focus is on distributions to lower-taxed beneficiaries where the economic benefit actually flows somewhere else (Section 100A reimbursement arrangements), circular distributions between entities, and family trusts distributing outside the family group, which triggers family trust distribution tax at the top marginal rate plus Medicare.

The significant development this year is the High Court's decision in Commissioner of Taxation v Bendel, handed down on 10 June 2026. By a 5–2 majority the Court held that a trust's unpaid present entitlement to a corporate beneficiary is not a "loan" for Division 7A purposes, rejecting the ATO's long-standing position. The ATO has issued a decision impact statement accepting the reasoning and is withdrawing the ruling that said otherwise.

If you have been operating on the pre-Bendel understanding, this is the year to have the position reviewed properly rather than assuming either the old or the new rules solve it for you.

GST: Where Construction Businesses Actually Lose Money

GST features across several named industries, and construction is one of the most exposed because of the size of individual transactions.

• Reporting errors from systems that outgrew the business. The ATO explicitly notes errors arising during periods of growth or restructuring. A bookkeeping setup that worked at $800,000 turnover routinely breaks at $5 million.
• Margin scheme and going concern misapplication on property settlements, as above.
• Overclaimed GST credits on acquisitions that were partly or wholly private, or where no valid tax invoice exists.
• GST refund fraud involving artificial transactions between related entities — under active surveillance, and treated far more seriously than an error.

Fuel tax credits deserve a specific mention for this industry. They are a legitimate and valuable claim for off-road plant and equipment, but the ATO is targeting overclaims. The rate differs between on-road and off-road use, and you need records that substantiate the split. Estimating it is not enough.

If your activity statements are being prepared from a bank feed with no reconciliation behind them, that is the single cheapest thing to fix on this entire list.

Contractors, TPAR and the Classification Question

Building and construction services businesses must lodge a Taxable Payments Annual Report by 28 August each year, reporting payments made to contractors. The ATO uses TPAR data for exactly what you would expect: matching what you say you paid against what the contractor declared.

Two things follow from that. First, the report itself needs to be accurate and lodged on time — failure to lodge is a focus area in its own right. Second, and more importantly, TPAR data feeds the ATO's view of whether your "contractors" are actually employees.

Worker classification is not a matter of what the contract says or whether the person has an ABN. It turns on the substance of the relationship. Get it wrong and the exposure is superannuation guarantee charge (which is not deductible), PAYG withholding, penalties and interest, potentially across several years. In an industry built on subcontracting, this is a live risk for most builders of any scale.

Small Business CGT Concessions

The small business CGT concessions can eliminate tax on a business sale entirely. They are also tightly conditioned, and the ATO is focused on taxpayers who claim them without satisfying the eligibility tests. It is also scrutinising the small business restructure rollover, and restructures undertaken specifically to access concessions the business would not otherwise qualify for.

For builders and developers the common failure points are the $6 million maximum net asset value test (easy to breach once you hold property), the active asset test where a property has been leased out, and the connected-entity and affiliate rules that pull in assets you did not think were counted.

Test eligibility before you rely on it in a return, and document the working. Reconstructing the position two years later during a review is considerably harder.

The Rest of the List

Beyond the core issues, several other areas are named for 2025–26 that are worth knowing about:

• Core compliance basics — correct registrations (GST, PAYG withholding), the right accounting basis, and on-time lodgement of returns, activity statements, FBT returns and TPAR. Paying on time, or engaging early if you cannot, counts in your favour.
• Incorrectly claimed base rate entity status — applying the 25% company rate when the passive income or aggregated turnover tests are not met.
• R&D tax incentive claims without adequate contemporaneous records. Construction methodology claims attract attention.
• Lifestyle assets — boats, aircraft, high-value vehicles held in a business entity where the private use is not properly accounted for. The ATO receives insurance data on these.
• Crypto assets and cross-border transactions — both increasingly common in property groups.
• Misuse of concessionally taxed entities such as SMSFs and not-for-profits, including SMSF property arrangements that do not meet the sole purpose test.

Succession Planning: The Quiet One

A large number of family-owned construction businesses are changing hands as the founding generation steps back. The ATO has flagged succession as a growing focus, and for good reason: almost every step in a succession plan is a taxable event unless it is structured deliberately.

Moving assets around a group, restructuring family interests, settling Division 7A loans before a handover, and confirming the pre-CGT status of assets acquired before 20 September 1985 all carry consequences that are easy to overlook when the conversation is framed as a family matter rather than a transaction. Pre-CGT status in particular is fragile — a change in the majority underlying interests in an entity can destroy it without anyone noticing.

Your Practical Checklist

If you do nothing else this year, work through this:

• Reconcile the director's loan account for the last three years, not just the current one
• Locate the signed Division 7A loan agreement. If you cannot find it in ten minutes, assume it does not exist
• Diarise the minimum yearly repayment for 30 June — and calculate it in May, so the cash is there
• Review trust distribution resolutions: signed before 30 June, commercially defensible, and revisited in light of Bendel
• Confirm the GST treatment of every property transaction before contracts are exchanged, not after settlement
• Check TPAR is complete and lodged by 28 August
• Review your contractor arrangements against the actual substance of the relationship
• Substantiate the on-road/off-road split behind your fuel tax credit claims
• Test small business CGT concession eligibility before relying on it
• Make sure private use of company vehicles and plant is either FBT-reported or Division 7A-assessed

Frequently Asked Questions

Does being on the ATO's focus list mean I'm going to be audited?

No. The focus areas describe where compliance resources are being directed across the whole population, not a list of businesses being reviewed. What it does mean is that if there is an error in one of these areas, the probability of it being detected is materially higher than it was, because the ATO is running data-matching and analytics specifically aimed at them.

I flipped one property personally, not through the company. Is that really a problem?

It depends on the facts, but be careful about assuming the entity determines the answer. The ATO looks at intention at the time of acquisition, the scale and repetition of similar activity, how the project was financed, and whether you used trade resources. A licensed builder who buys, renovates and sells has a considerably harder argument that the profit is capital than someone with no connection to the industry. Get the characterisation confirmed before you lodge, not after.

After Bendel, can I stop worrying about unpaid present entitlements?

Not entirely. The High Court removed the automatic Division 7A "loan" characterisation, which is a real and helpful change. But Subdivision EA can still apply where the trust lends to or pays amounts for a shareholder of the corporate beneficiary, and Section 100A and Part IVA are unaffected. The practical answer is that the analysis has become more fact-dependent, not simpler.

My bookkeeper handles the BAS. Am I still responsible?

Yes. The taxpayer is responsible for what is lodged, regardless of who prepared it. Engaging a registered agent affects the penalty position where you took reasonable care and relied on them in good faith, but it does not transfer the primary liability. It is worth understanding what is actually being reconciled before each lodgement.

What is the single highest-value thing to fix first?

For most Perth builders operating through a company: the director's loan account. It is the largest, most common, and most expensive exposure, the deadline for fixing it is fixed and unforgiving, and it is entirely within your control. Start there, then move to the GST treatment of any property transaction currently in progress.

The Bottom Line

The ATO's focus areas are not a threat so much as a published exam syllabus. Nearly all of the risk in this industry sits in a small number of places: the loan account, the trust resolutions, the GST treatment of property transactions, and how contractors are classified. Those four things account for the overwhelming majority of the problems we see.

Reviewing them takes a few hours a year. Unwinding them after a review takes months and costs a great deal more. If any of the above sounds like your business, deal with it before your return is lodged — because for several of these issues, lodgement day is the point at which your best options stop being available.

Disclaimer: This article is general information only and does not take into account your objectives, financial situation or needs. It is not tax, legal or financial advice. Rates, thresholds and administrative positions are current as at July 2026 and are subject to change. Always consult a registered tax agent before acting. Liability limited by a scheme approved under Professional Standards Legislation.