Salary Incentives for Staff: How to Reward Your Team Without Creating Tax, Super or FBT Problems
Staff incentives can be a brilliant way to attract, retain and motivate great employees. But like any good gold strategy, the value is in the structure. A poorly planned incentive can quickly lose its shine through unexpected tax, super, payroll or Fringe Benefits Tax obligations.
Key Takeaways
Salary sacrifice and salary packaging are commonly used to help employees receive part of their remuneration as benefits instead of cash.
Bonuses, commissions, allowances, super contributions, gift cards, cars and private expense payments can all have different tax consequences.
From 1 July 2026, employers must factor in Payday Super when managing staff remuneration and incentive arrangements.
The super guarantee rate is 12% for 2026–27.
Salary sacrificed super counts toward an employee’s concessional contributions cap, which is $32,500 from 1 July 2026.
Non-cash benefits can trigger Fringe Benefits Tax, reportable fringe benefits and payroll tax implications.
Incentives must still comply with Fair Work rules, awards, agreements and minimum wage obligations.
The safest incentive plan is one that is documented, costed and reviewed before it is offered to staff.
Why Staff Incentives Matter
Good employees are worth their weight in gold.
For many small businesses, wages are one of the largest ongoing costs. So when you find reliable, skilled and motivated staff, it makes sense to think carefully about how to keep them engaged.
Salary incentives can help with:
attracting new employees
improving staff retention
rewarding performance
supporting career development
creating a more flexible remuneration package
helping employees see more value in their overall employment package
But incentives should not be rushed.
A bonus paid through payroll is very different from a salary sacrificed super contribution. A gift card is different from a work-related laptop. A novated lease is different from a cash allowance. Each option can create different obligations for PAYG withholding, super guarantee, Fringe Benefits Tax, payroll tax and employee reporting.
That is why staff incentives should be treated like a gold mine: valuable when managed properly, but risky if you start digging without a plan.
Salary Sacrifice and Salary Packaging: What Is the Difference?
The terms “salary sacrifice” and “salary packaging” are often used together.
The Australian Taxation Office says salary sacrificing is also known as “salary packaging” or “total remuneration packaging”. In simple terms, an employee agrees to receive less cash salary before tax, and the employer provides benefits of a similar value instead.
Common salary sacrifice or salary packaging options may include:
additional super contributions
a novated lease
a work-related laptop or phone
professional memberships
tools of trade
some work-related training
certain employer-provided benefits
However, salary packaging is not automatically tax-free or cost-neutral.
The ATO explains that salary sacrificing is a formal arrangement between an employer and employee. To be effective, it should generally be agreed before the employee earns the income being sacrificed.
The Golden Rule: Cost the Incentive Before You Offer It
One of the biggest mistakes employers make is assuming an incentive has no extra cost to the business.
That may be true in some simple arrangements, but not always.
A staff incentive may create extra costs through:
employer super guarantee
Fringe Benefits Tax
payroll tax
administration fees
payroll software setup
Single Touch Payroll reporting
record keeping
cash flow timing
award or agreement obligations
For example, paying an employee’s private mortgage, school fees, credit card bill or personal loan repayment may create an expense payment fringe benefit. The ATO’s employer FBT guidance specifically notes that fringe benefits in salary sacrifice arrangements often include car fringe benefits and expense payment fringe benefits, such as payment of an employee’s loan repayments, school fees, child care costs and home telephone costs.
Before agreeing to any incentive, employers should ask:
What exactly is being provided?
Is it cash, super, an allowance, a reimbursement or a benefit?
Does PAYG withholding apply?
Does super apply?
Is there an FBT issue?
Does it affect payroll tax?
Does it need to be reported through STP?
Does it comply with the employee’s award or agreement?
Has the arrangement been documented before the income is earned?
A shiny reward can quickly lose its polish if the hidden costs are not understood upfront.
Cash Bonuses, Commissions and Performance Payments
Cash bonuses are usually the easiest type of incentive for employees to understand.
They may include:
annual performance bonuses
sales commissions
productivity bonuses
retention payments
referral bonuses
Christmas or end-of-year bonuses
These payments usually need to be processed through payroll, with PAYG withholding applied. They may also attract super, depending on the nature of the payment.
The ATO provides guidance on payments that are considered ordinary time earnings or qualifying earnings for super purposes, including many bonuses and commissions.
For employers, the key point is this: do not treat a bonus as something separate from payroll unless you have confirmed the treatment.
A bonus can feel like a golden reward for employees. For the employer, it must still be reported, taxed and paid correctly.
Super Salary Sacrifice: Valuable, But Watch the Cap
Salary sacrificing into super can be an attractive option for some employees.
It allows the employee to redirect part of their pre-tax salary into super. This may reduce their taxable income and help grow their retirement savings.
However, it is not suitable for everyone.
Salary sacrificed super contributions count toward the employee’s concessional contributions cap. From 1 July 2026, the general concessional contributions cap is $32,500.
This cap includes:
employer super guarantee contributions
salary sacrificed super contributions
personal deductible super contributions
If an employee exceeds their cap, they may face extra tax consequences.
Employers also need to remember that salary sacrifice is separate from compulsory super guarantee. Employees cannot use salary sacrificed super to reduce the employer’s compulsory super obligations.
Payday Super: A Major 2026 Update for Employers
From 1 July 2026, Payday Super applies to employee earnings paid from that date.
The ATO says that, from 1 July 2026, employers must pay super guarantee for each payday. For most ordinary pay cycles, super must generally be received by the employee’s fund within 7 business days after payday.
This is a major change for employers who previously managed super on a quarterly cycle.
For 2026–27, the super guarantee rate is 12%.
This means incentive arrangements should be reviewed carefully. If you offer bonuses, commissions or additional super contributions, your payroll systems and cash flow need to keep up.
Payday Super makes timing more important than ever.
Think of it like refining gold: the value is not just in what you pay, but in when and how it is processed.
Fringe Benefits Tax: Where Incentives Can Become Expensive
Fringe Benefits Tax, or FBT, is one of the biggest traps in staff incentives.
FBT can apply when an employer provides a non-cash benefit to an employee or their associate because of their employment.
Examples may include:
cars
gym memberships
entertainment
private health costs
school fees
mortgage or loan repayments
private travel
gift cards
meal entertainment
housing costs
certain expense reimbursements
The ATO explains that employers pay FBT on certain benefits provided to employees, their family or other associates.
The FBT rate for the 2026–27 FBT year is 47%.
This does not mean every staff reward creates FBT. But it does mean every non-cash benefit should be checked before it is offered.
Minor Benefits: The Under-$300 Rule Is Not a Free Pass
This can be useful, but it is often misunderstood.
The ATO says a minor benefit may be exempt from FBT where it is both less than $300 in notional taxable value and unreasonable to treat it as a fringe benefit.
This means the benefit must generally be minor, infrequent and irregular.
A one-off small gift may qualify. A regular monthly gift card may not.
The gold nugget here is simple: “under $300” does not automatically mean “no FBT”.
Work-Related Items: Laptops, Phones and Tools
Some work-related items can be FBT exempt if they meet ATO conditions.
These may include:
portable electronic devices
computer software
protective clothing
briefcases
tools of trade
The ATO says work-related items can be exempt from FBT where they are mainly used for work purposes. However, there are limits, including rules around providing more than one substantially identical item in the same FBT year.
This can make work-related equipment a practical incentive, especially where it helps the employee perform their role better.
It is also usually easier to justify than paying private expenses.
Reportable Fringe Benefits and Employee Impacts
Some fringe benefits may also need to be reported on the employee’s income statement.
The ATO says that if an employee receives certain fringe benefits with a total taxable value of more than $2,000 in an FBT year, the employer reports the grossed-up amount.
Reportable fringe benefits do not increase the employee’s taxable income directly. However, they can affect income tests for things such as:
Medicare levy surcharge
private health insurance rebate
child support
Centrelink entitlements
HELP or study loan repayments
some tax offsets
This is why employees should understand the full effect of a salary package before agreeing to it.
Payroll Tax: Do Not Forget the State Rules
If your business is registered for payroll tax, or close to the payroll tax threshold, incentives may have state payroll tax consequences.
For Victorian employers, the State Revenue Office says certain fringe benefits must be included in wages declared for payroll tax. Common examples include cars, housing costs, school fees, meals and entertainment.
This is especially relevant for growing businesses.
A benefit that looks affordable from an income tax perspective may still affect payroll tax calculations.
Fair Work and Award Compliance Still Apply
Staff incentives should never be used to avoid minimum employment obligations.
Before introducing bonuses, commissions, annualised salaries or salary packaging, employers should check the applicable award, enterprise agreement or employment contract.
Fair Work guidance explains that some employees can be paid annualised wages or salaries, but awards and agreements may set rules around how these arrangements work.
The practical message is this: incentives should sit on top of a compliant wage structure.
They should not quietly replace overtime, penalty rates, allowances, leave loading or other entitlements unless the arrangement has been properly structured and documented.
Business.gov.au also notes that flexible working arrangements can support productivity, morale, job satisfaction, reduced stress, lower absenteeism, reduced staff turnover and attraction of new employees.
These incentives may not always deliver an immediate tax advantage, but they can be powerful retention tools.
Sometimes the best gold is not a bigger pay packet. It is a workplace where good people want to stay.
A Simple Incentive Checklist for Employers
Before offering a staff incentive, work through this checklist:
Identify the exact type of incentive.
Confirm whether it is cash, super, an allowance, a reimbursement or a benefit.
Check PAYG withholding.
Check super guarantee treatment.
Check FBT treatment.
Check reportable fringe benefit obligations.
Check payroll tax impact.
Check Fair Work, award and employment contract obligations.
Document the arrangement before it starts.
Review the arrangement each financial year.
This checklist can help protect your business from costly surprises.
It also helps employees understand what they are really receiving.
Gold Nugget: The Best Incentives Are Clear, Compliant and Valued
A good staff incentive should do three things:
It should be valuable to the employee.
It should be affordable for the employer.
It should be compliant from a tax, super and employment law perspective.
When those three pieces line up, staff incentives can become a golden tool for retention and performance.
When they do not, the business may end up with unexpected FBT, super, payroll tax or Fair Work issues.
Final Thoughts
Offering salary incentives to staff can be a smart way to reward performance and strengthen your team.
But the structure matters.
A bonus, salary sacrifice arrangement, novated lease, gift card, laptop, allowance or training package can each create different obligations. The right option depends on your business, your employees, your payroll system and your compliance position.
Before you offer a new staff incentive, take the time to check the tax and payroll impact first.
It is much easier to polish the plan before it is offered than to clean up the dust later.
Need Help Structuring Staff Incentives?
If you are thinking about offering bonuses, salary sacrifice, salary packaging or other staff benefits, we can help you understand the tax, super, FBT and payroll implications before you commit.
Contact DJ Grigg Financial to review your options and structure staff incentives with confidence.
Let’s help you reward your team without creating unnecessary compliance headaches.
Compliance: Setting Up the Right Foundations for Business Success
Starting a business is exciting.
There is the name, the idea, the dream, the customers and the big plans.
But before the gold rush begins, every business needs something less shiny but far more valuable: strong compliance foundations.
Compliance is not just paperwork. It is the framework that protects your business, keeps the ATO and other regulators satisfied, and helps you avoid expensive mistakes later.
Think of it like building a mine. Before you can extract the gold, you need the right supports in place. If the foundations are weak, the whole operation becomes risky.
For Australian business owners, this means choosing the right structure, registering correctly, keeping proper records, understanding tax obligations and staying on top of payroll, super and reporting responsibilities.
Key Takeaways
The main Australian business structures are sole trader, partnership, company and trust.
Every business needs the right tax registrations, including an ABN and TFN.
You may also need GST, PAYG withholding, FBT and other registrations.
If you are setting up a company, directors must apply for a director ID before appointment.
GST registration is generally required once turnover reaches $75,000.
From 1 July 2026, employers must pay super at the same time as wages under Payday Super.
Good bookkeeping and record keeping are essential for tax, BAS, payroll and business decisions.
Licences, permits and industry rules should be checked before trading.
Getting advice early can prevent small errors from becoming costly compliance problems.
Why Compliance Matters from Day One
Many business owners focus first on sales, branding and customers. That makes sense. Without customers, there is no business.
But compliance is the quiet engine underneath.
If it is set up properly, you can trade with confidence, understand your numbers and meet your obligations on time. If it is ignored, problems can quickly build up: unpaid GST, missed super, incorrect payroll, poor records, tax debt or the wrong business structure.
The Australian Taxation Office states: “When you start a business you need to get an Australian business number (ABN) and a tax file number (TFN).”
That is the starting line, not the finish line.
Depending on your business, you may also need to register for GST, PAYG withholding, fringe benefits tax, a business name, industry licences and payroll systems.
1. Choose the Right Business Structure
Your business structure affects tax, legal responsibility, asset protection, administration costs and how profits are distributed.
In Australia, the common structures are:
sole trader
partnership
company
trust
business.gov.au explains that a sole trader structure is simple and gives full control, while a company is more complex and is a separate legal entity. A trust involves a trustee being responsible for business operations.
The ATO also confirms that your structure affects who owns and operates the business, your tax and registration requirements, and your legal liabilities.
There is no one-size-fits-all answer.
A sole trader structure may be simple and cost-effective. A company may provide a clearer separation between the business and the owners. A trust may be useful in some family or asset protection situations. A partnership may suit two or more people operating together.
The right structure depends on your goals, risks, income expectations and future plans.
Gold Nugget: Do not choose a structure just because it is cheap today. Choose the structure that can support the business you are trying to build.
2. Register Your Business Correctly
Once you understand your structure, the next step is registration.
Most businesses will need an ABN. Partnerships, companies and trusts generally need their own TFN. Sole traders use their individual TFN. Depending on your activities, you may also need GST, PAYG withholding, FBT, fuel tax credits or other registrations.
The Australian Government Business Registration Service allows businesses to apply for an ABN, register a company or business name, and apply for tax registrations in one place.
You may need to register a business name if you trade under a name other than your own personal name. ASIC explains that the registers you need depend on your business structure and the names you use when doing business.
Getting this right early helps avoid confusion with invoices, contracts, bank accounts, tax reporting and legal responsibilities.
3. If You Set Up a Company, Do Not Forget the Director ID
If you are becoming a company director, you must apply for a director identification number before appointment.
ASIC states: “All company directors must have a director identification number, also called a director ID.”
A director ID is unique to the person and is kept forever. It helps prevent false or fraudulent director identities and assists with tracing director relationships over time.
This is an important compliance step for anyone setting up a company or becoming a director of an existing company.
Gold Nugget: A company can be a powerful business structure, but it comes with director responsibilities. Make sure the paperwork is solid before you start digging.
4. Understand GST and BAS Obligations
GST is one of the most common areas where small businesses get caught.
Generally, you must register for GST if your business has GST turnover of $75,000 or more. The threshold is $150,000 or more for non-profit organisations. Taxi, limousine and ride-sourcing drivers must register for GST regardless of turnover.
Once registered, you generally need to include GST on taxable sales, claim GST credits where allowed, and report through business activity statements.
The risk is that many new business owners treat GST as income.
It is not.
GST collected belongs to the tax system. If it is not set aside, BAS time can feel like finding fool’s gold: the bank balance looked good, but some of it was never really yours.
A practical habit is to set aside GST regularly, reconcile your accounts often and review your BAS before lodgement.
5. Know Your PAYG Withholding Responsibilities
If you employ staff, you will usually need to register for PAYG withholding.
PAYG withholding means you withhold tax from payments to employees and certain other payees, then send that tax to the ATO.
The Australian Business Register explains that you must register for PAYG withholding if you pay employees, contractors under voluntary agreements, or businesses that do not quote an ABN.
This is separate from PAYG instalments, which are prepayments of tax on business and investment income.
The similar names can be confusing, but they are not the same thing.
PAYG withholding relates to amounts withheld from payments you make. PAYG instalments relate to prepaying your own expected tax.
6. Understand Company Tax Rates
If you trade through a company, company tax may apply.
The ATO states that the full company tax rate is 30% for companies that are not eligible for the lower company tax rate. From the 2021–22 income year onwards, eligible base rate entities apply the 25% company tax rate.
This is why it is important to avoid generic statements such as “companies pay around a quarter of profits in tax.”
Some companies may pay 25%. Others may pay 30%.
The correct rate depends on the company’s circumstances, including whether it qualifies as a base rate entity.
Company tax is only one part of the picture. Directors and shareholders also need to consider wages, dividends, Division 7A, franking credits and personal tax outcomes.
This is where advice can be worth its weight in gold.
7. Open a Separate Business Bank Account
A separate business bank account makes bookkeeping cleaner and tax reporting easier.
For companies, trusts and partnerships, a dedicated business bank account is usually essential because the business is separate from the individuals involved.
For sole traders, a separate bank account is still strongly recommended.
Mixing personal and business transactions creates unnecessary confusion. It can make it harder to identify deductible expenses, reconcile income, prepare BAS and respond to ATO questions.
A clear bank account structure helps you see what is business income, what is private spending and what needs to be set aside for tax.
Gold Nugget: A clean business bank account is like a clear stream in a goldfield. You can see what is flowing in, what is flowing out and where the value is going.
8. Set Up Bookkeeping and Record Keeping Properly
Bookkeeping is not just data entry. It is the financial evidence trail for your business.
The ATO says businesses need records to meet tax, superannuation and registration obligations.
business.gov.au also provides guidance on which business records to keep, how to keep them and for how long.
Good records may include:
sales invoices
purchase receipts
bank statements
loan documents
asset purchase records
payroll records
superannuation records
BAS workings
contracts and agreements
stock records
motor vehicle records
home office records where relevant
Cloud accounting software can help, but software alone does not guarantee accuracy.
You still need correct coding, regular reconciliations, source documents and review processes.
Expert tip: The question is not just “Can I claim this?” The better question is “Do I have the records to support this claim?”
9. Prepare for Payroll, Super and Payday Super
Hiring staff brings extra obligations.
Before hiring, you need to understand wages, awards, agreements, leave, payslips, payroll tax where relevant, PAYG withholding, superannuation and Single Touch Payroll.
Fair Work explains that minimum employment terms and conditions come from awards, registered agreements, employment contracts and the National Employment Standards.
From 1 July 2026, Payday Super applies. Employers must pay superannuation contributions at the same time as wages. The super guarantee rate is 12% from 1 July 2025.
This change means employers need stronger payroll systems and cash flow planning. Super can no longer be treated as a quarterly catch-up.
Gold Nugget: Payday Super turns super from a quarterly boulder into a regular payroll nugget. Smaller, more frequent payments may be easier to manage if your systems are ready.
10. Check Licences, Permits and Industry Rules
Tax registrations are only part of compliance.
Your business may also need licences, permits, registrations or approvals from federal, state or local government.
business.gov.au recommends using the Australian Business Licence and Information Service to find licences and permits for your business type.
Business Victoria also directs business owners to ABLIS to find local, state and federal licences, registrations and permits.
This can be especially important for businesses in food, building, health, beauty, transport, accommodation, childcare, professional services and trades.
Do not assume that having an ABN means you are fully compliant.
An ABN lets you identify your business for tax and commercial purposes. It does not automatically cover council permits, industry approvals, professional registrations or workplace obligations.
11. Build a Compliance Calendar
A compliance calendar helps you stay ahead of important dates.
Depending on your business, your calendar may include:
BAS due dates
income tax lodgement dates
PAYG withholding payment dates
super payment dates
payroll reporting dates
ASIC annual review dates
workers compensation renewals
insurance renewals
licence and permit renewals
employee review dates
trust distribution resolution dates, where relevant
The goal is to move from reactive to prepared.
Instead of scrambling when something is due, you can plan ahead, protect cash flow and avoid penalties.
Compliance becomes much easier when it is built into your business rhythm.
12. Get Advice Before Small Problems Become Expensive
Many compliance mistakes start small.
A missing registration. A poorly chosen structure. A bank account used for everything. A payroll category set up incorrectly. GST not set aside. Super paid late. Records missing.
At first, these may not seem serious.
Over time, they can create tax debt, ATO attention, staff issues, director risk and unnecessary stress.
That is why it is worth getting advice early.
The right accountant can help you choose the right structure, understand your registrations, set up bookkeeping properly, plan for tax and avoid common compliance traps.
At DJ Grigg Financial, we help business owners build strong financial foundations, from startup registrations through to tax, bookkeeping, BAS, payroll and ongoing business compliance.
Because when the foundations are solid, your business has a better chance of finding real gold.
Final Word
Compliance may not be the glamorous part of business, but it is one of the most valuable.
Strong foundations help you protect your business, understand your numbers and make better decisions.
Whether you are starting a new business, restructuring an existing one or trying to clean up your records, now is the time to make sure your compliance systems are working properly.
Need help setting up your business the right way?
Contact DJ Grigg Financial today and let us help you build golden foundations for long-term business success.
Is Checking Your Supplier’s ABN Worth Its Weight in Gold?
FOCUS: Why checking supplier ABNs protects your GST credits, BAS accuracy and business cash flow
When you receive a supplier invoice, it is easy to focus on the amount owing and move straight to payment. But before that invoice is approved, there is one golden check every business should make: is the supplier’s ABN valid, and are they registered for GST?
A supplier ABN check may feel like a small bookkeeping step, but it can protect your business from incorrect GST claims, invalid tax invoices, PAYG withholding issues and avoidable BAS corrections. Think of it as panning for gold before you bank the claim: a few minutes of checking can help separate compliant invoices from costly surprises.
Key Takeaways
An ABN alone is not enough. To claim GST credits, the supplier generally needs to be registered for GST and you need a valid tax invoice.
If a supplier does not quote a valid ABN, you may need to withhold 47% from the payment and send it to the ATO.
For purchases over $82.50 including GST, you generally need a valid tax invoice before claiming a GST credit.
For tax invoices of $1,000 or more, the buyer’s identity or ABN must also be shown.
Overseas supplier invoices need extra care. GST rules differ for imported services, digital products and low-value imported goods.
ABN Lookup helps confirm ABN status, business type and GST registration, but it does not verify bank account ownership or protect you from invoice fraud.
Regular supplier checks are good business governance and can reduce BAS errors before they become bigger problems.
What is an ABN and why does it matter?
An Australian Business Number, or ABN, is a unique number used to identify a business when dealing with the ATO, other businesses and government agencies. ABN Lookup provides free access to public Australian Business Register information, including whether an ABN is active or cancelled, the business type, public ABR details and GST registration status.
That makes ABN Lookup a useful first stop before claiming GST or paying a new supplier.
However, an ABN is not the same as GST registration. A supplier may have an active ABN but not be registered for GST. If they are not registered, they generally cannot charge GST, and you generally cannot claim a GST credit on that purchase.
Why this matters for GST credits
GST is 10% on most goods and services sold or consumed in Australia. For GST-registered businesses, the GST included in business purchases may be claimable as a GST credit, provided the rules are met.
Business.gov.au explains GST as “a tax of 10% on most goods, services and other items sold or consumed in Australia.”
The ATO says you cannot claim GST credits for purchases from a supplier that is not registered, or required to be registered, for GST.
In plain English: if a supplier charges GST but is not registered for GST, the invoice may look polished, but the GST claim may be fool’s gold.
The golden rule: check both ABN and GST registration
Before claiming GST on a supplier invoice, check:
The ABN is valid and active.
The ABN belongs to the supplier named on the invoice.
The supplier was registered for GST at the time of the supply.
The invoice is a valid tax invoice.
The purchase was for your business.
The GST amount has been calculated correctly.
The ATO recommends checking contractor and supplier details, including ABN, name and GST registration, using ABN Lookup or the ATO app.
What makes a valid tax invoice?
A valid tax invoice is more than just an invoice with the words “Tax Invoice” at the top.
Taxable sales under $1,000, the ATO says a tax invoice must include enough information to clearly determine details such as the seller’s identity, the seller’s ABN, the date of issue, a description of what was sold, the GST amount or a statement that the price includes GST, and the extent to which each sale is taxable.
For sales of $1,000 or more, the tax invoice must also show the buyer’s identity or ABN.
For GST credit claims, the ATO says: “You must have a tax invoice to claim a GST credit for purchases that cost more than A$82.50.”
Business.gov.au also notes that if a GST-registered business makes a taxable sale of more than $82.50 including GST, or the customer asks for a tax invoice, the supplier has 28 days to provide one.
What if a supplier does not quote an ABN?
This is where many businesses get caught.
If a supplier does not quote an ABN, and the total payment for goods and services is more than $75 excluding GST, you generally need to withhold tax at the top rate and pay that amount to the ATO.
The current withholding rate is 47%.
Business.gov.au also states: “if you don’t have one, other businesses must withhold 47% tax from any payments they make to you.”
The ATO also warns that if the ABN quoted on the invoice is not valid or the details do not match the supplier, you must withhold from the payment at the top tax rate.
There are exceptions, including where the supplier provides a valid Statement by a supplier not quoting an ABN. If a statement is provided separately, keep it with the transaction records so you can show why you did not withhold.
Do you need to check every supplier every time?
For long-standing suppliers, checking every invoice may not be practical. But supplier details can change. ABNs can be cancelled, GST registrations can end, and business structures can change.
A practical approach is to check:
all new suppliers before the first payment
suppliers before claiming GST for the first time
high-value suppliers before payment
suppliers with changed bank details
suppliers with invoices showing GST for the first time
overseas or online platform suppliers
contractors included in Taxable Payments Annual Reporting
your supplier list before BAS lodgment or at least annually
ABN Lookup offers tools for multiple searches using ABNs, ACNs or names, which can be helpful for reviewing a larger supplier list.
Be careful with overseas supplier invoices
Overseas invoices can be tricky.
Australian GST may apply to imported services, digital products and low-value imported goods sold to customers in Australia. However, the rules differ depending on whether the customer is an Australian consumer or a GST-registered Australian business.
The ATO explains that simplified GST registration is available for non-resident businesses that do not need an ABN and sell imported services, digital products or low-value imported goods to Australian consumers.
This means you should not assume that GST shown on an overseas invoice automatically gives your business a GST credit. For GST-registered Australian businesses, it is important to provide your ABN where required and check whether the supply should have GST charged in the first place.
What if you find an error after lodging your BAS?
If you discover that GST was claimed incorrectly, do not simply ignore it and hope it washes through next quarter.
The ATO has rules for correcting GST errors. Some errors can be corrected on a later BAS, but only if the ATO’s conditions are met. The ATO also says you cannot correct an error to claim additional GST credits where the four-year credit time limit has expired.
A good supplier ABN review process helps you catch these issues before BAS lodgment, rather than digging through old transactions later.
Keep digital evidence of your checks
When you check a supplier’s ABN and GST registration, save evidence. This could include a dated PDF extract, screenshot, supplier onboarding checklist or system note attached to the supplier record.
Business.gov.au says businesses can keep digital or paper records, and that the ATO recommends digital record keeping where possible.
Business.gov.au also reminds businesses that records are generally kept for five years.
A dated digital trail is like a gold hallmark: it helps prove the quality of your process if a question is asked later.
ABN Lookup is useful, but it is not a fraud shield
ABN Lookup can help confirm public business details, ABN status, business type and GST registration status. But it does not verify that the bank account on an invoice belongs to that supplier.
Before paying a new supplier, or changing existing supplier bank details, confirm the details using a trusted contact method. Do not rely solely on the email requesting the change.
This is especially important for businesses with high invoice volumes or multiple staff approving supplier payments.
Suggested supplier ABN checklist
Use this checklist before paying a new supplier or claiming GST:
Search the supplier on ABN Lookup.
Confirm the ABN is active.
Confirm the entity name or business name matches the invoice.
Confirm GST registration applies at the time of supply.
Check the invoice is a valid tax invoice.
Check whether the invoice total is over $82.50 including GST.
For invoices of $1,000 or more, check your business name or ABN appears.
If no ABN is quoted, consider whether 47% withholding applies.
If the supplier provides a Statement by a supplier, save it with the transaction.
Save a dated copy of the ABN Lookup result.
Confirm supplier bank account changes through a trusted channel.
Why this should be part of your bookkeeping process
The ATO’s latest GST gap estimates show why good GST governance matters. The estimated net GST gap increased to $8.7 billion in 2023–24, or 9.4% of theoretical GST.
For small and medium businesses, this is a reminder that GST compliance is not just an end-of-quarter task. It starts when the invoice arrives.
A strong supplier checking process can help your business:
reduce incorrect GST claims
improve BAS accuracy
avoid no-ABN withholding mistakes
identify supplier record issues early
strengthen internal controls
reduce the risk of invoice fraud
keep cleaner records for tax time
Need help refining your supplier process?
Supplier ABN checks might not be glamorous, but they are golden when it comes to protecting your business.
At DJ Grigg Financial, we help business owners strengthen their bookkeeping, GST and BAS processes so they can make confident decisions and avoid costly compliance issues.
If you would like help reviewing your supplier list, checking your GST processes or improving your bookkeeping controls, contact DJ Grigg Financial today.
When Costs Rise, Protect Your Gold: What Inflation Means for Your Business
Inflation may have eased from its peak, but Australian businesses are still feeling the pressure. Higher wages, supplier costs, finance expenses, insurance premiums and tax obligations can quietly chip away at your margins if you are not watching the numbers closely.
For business owners, the goal is not simply to “raise prices”. The goal is to protect your margin, preserve cash flow and make informed decisions before rising costs turn into a profit leak.
Key Takeaways
Inflation is still affecting Australian businesses, with the ABS reporting annual CPI inflation of 4.2% in the 12 months to April 2026.
The biggest inflation contributors in April 2026 were housing, transport, and food and non-alcoholic beverages.
Business owners should review pricing using their own costs, margins and customer demand, not CPI alone.
Wage and superannuation obligations need to be built into your cash flow planning, especially with Fair Work wage increases from 1 July 2026 and super guarantee at 12%.
Overdue ATO debt is more costly than many business owners realise, with general interest charge and shortfall interest charge incurred from 1 July 2025 no longer deductible.
A 90-day cash flow forecast can help you spot pressure points early and make confident decisions.
Is Inflation Still a Problem for Australian Businesses?
Yes. Inflation is lower than the sharp increases many businesses experienced in 2022 and 2023, but it remains a real pressure point.
The Australian Bureau of Statistics reported that annual CPI inflation was 4.2% in the 12 months to April 2026, down from 4.6% in March 2026. The ABS also noted that the largest contributors to annual inflation were housing, transport, and food and non-alcoholic beverages.
For business owners, that matters because inflation is rarely felt evenly. Your business may not experience “average inflation”. A café may feel it through ingredients, wages and electricity. A trade business may feel it through fuel, insurance, materials and vehicle finance. A professional services firm may feel it through wages, software, rent and compliance costs.
In other words, CPI is the headline number. Your own profit and loss statement is the goldmine.
Why Inflation Can Quietly Erode Your Profit
Inflation does not always arrive as one big obvious cost increase. It often shows up as small increases across multiple areas:
supplier price rises
freight and fuel increases
higher rent or occupancy costs
rising insurance premiums
wage increases
superannuation obligations
loan and overdraft interest
software subscriptions
ATO payment pressure
reduced customer spending or delayed payments
A 3% or 5% increase in one cost category may be manageable. But when multiple costs rise at once, your margin can be shaved away like thin flakes of gold.
That is why business owners need to review profitability regularly, not just at tax time.
Do You Need to Raise Your Prices?
Possibly, but not automatically.
A price increase should be based on your actual costs, target gross margin, customer demand, competitor positioning and cash flow needs. Using CPI alone can be misleading because your cost structure may be very different from the general economy.
business.gov.au says businesses should consider production costs, customers, value and business goals when choosing a pricing strategy.
The Australian Competition and Consumer Commission (ACCC) also makes it clear that businesses can generally set their own prices, but they must not mislead customers about what they will be charged or why prices have changed.
A practical approach is to review your pricing in layers:
What does it actually cost to deliver your product or service?
What gross margin do you need to remain profitable?
Which products, packages or services are underpriced?
Can you increase prices without damaging demand?
Can you improve value perception before increasing prices?
Are your displayed prices clear, accurate and compliant?
For Australian businesses, price displays also need to be accurate and show the total price where required, including unavoidable fees, taxes, duties and charges.
The Golden Rule: Do Not Confuse Revenue With Profit
In an inflationary environment, revenue can rise while profit falls.
For example, your sales may increase by 8%, but if wages, supplier costs, rent, interest and insurance rise faster than your prices, your business could still be worse off.
This is where many businesses get caught. Turnover can look shiny on the surface, but profit is the real gold underneath.
Instead of asking, “Are sales up?”, ask:
Is gross profit improving?
Is net profit holding?
Are wages rising faster than revenue?
Are supplier increases being passed on?
Are customers taking longer to pay?
Are tax and super obligations being set aside?
Are loan repayments and interest costs squeezing cash flow?
Wage Costs Need Extra Attention in 2026
If you employ staff, wage increases must be factored into your pricing and cash flow planning.
Fair Work has announced that from 1 July 2026, the National Minimum Wage will increase to $1,004.90 per week or $26.44 per hour. Minimum award wages will also increase, with timing applying from the first full pay period on or after 1 July 2026.
This does not mean every employee is paid the same rate. Your obligations depend on the relevant award, enterprise agreement, classification, age, employment type and role.
Business owners should review payroll before 1 July each year and check:
award coverage
employee classifications
casual loading
penalty rates
overtime
allowances
superannuation
employment contracts
payroll system settings
Wage compliance is not an area to guess. A small payroll error can become a costly issue if repeated across multiple pay cycles.
Superannuation Is Now a Bigger Cash Flow Item
The super guarantee rate is 12% from 1 July 2025.
This means super is no longer a small add-on to wages. It is a major employment cost that needs to be built into your pricing, budgets and cash flow forecasts.
The ATO has also highlighted Payday Super, which is due to start from 1 July 2026. This will change the timing of super payments and may affect business cash flow.
If your business has historically relied on quarterly super payments, now is the time to prepare. Moving from quarterly super to payday-aligned super may require tighter cash flow discipline.
Debt Does Not Always Become “Cheaper” During Inflation
You may hear that inflation makes debt feel smaller over time. That can be true in some situations, especially for fixed-rate debt where income rises while repayments stay the same.
But it is not true for all debt.
Variable-rate loans, overdrafts, credit cards, supplier debt and overdue ATO debt can become more expensive and more stressful during periods of higher inflation and higher interest rates.
The cash rate can influence borrowing costs, including business loans, overdrafts and mortgage-linked business finance. If your repayments have increased, your pricing and cash flow forecasts need to reflect that.
ATO debt also deserves special attention. From 1 July 2025, general interest charge and shortfall interest charge incurred on or after that date are no longer deductible.
This is an important change. If your business has overdue tax debt, the after-tax cost of that debt may now be higher than it was before.
Build a 90-Day Cash Flow Forecast
When inflation is putting pressure on your business, your cash flow forecast becomes your early-warning system.
business.gov.au recommends improving cash flow by increasing cash coming in, reducing cash going out and adjusting timing so your business can stay resilient to change.
A useful 90-day cash flow forecast should include:
expected sales receipts
customer payment timing
supplier payments
wages
PAYG withholding
GST
superannuation
rent
insurance
loan repayments
tax instalments
equipment purchases
owner drawings
seasonal changes
Think of your cash flow forecast like a gold detector. It helps you find pressure points before they are buried too deep.
Practical Ways to Protect Your Business From Inflation
Here are practical steps you can take now.
1. Review Your Gross Margins
Look at your top-selling products or services and calculate the true cost of delivery. Include materials, labour, freight, merchant fees, packaging, software, subcontractors and other direct costs.
If your gross margin has slipped, you may need to adjust pricing, reduce costs or change your service mix.
2. Update Your Pricing Strategy
Do not wait until profit is already under pressure. Review your prices regularly and communicate clearly with customers.
If you increase prices, explain the value you provide rather than blaming inflation alone.
For example:
“Due to increased supplier, wage and operating costs, we have reviewed our pricing to ensure we can continue delivering the same level of service and quality.”
Keep your explanation accurate, simple and transparent.
3. Negotiate With Suppliers
Ask whether better terms, bulk purchasing, alternative products or early payment discounts are available. Even small improvements can protect your margin.
4. Improve Debtor Follow-Up
Late payments can be particularly damaging when costs are rising. Tighten your invoicing process, shorten payment terms where appropriate and follow up overdue accounts promptly.
5. Separate Tax and Super Money
Treat GST, PAYG withholding and superannuation as money held for future obligations, not spare cash. Setting aside these amounts regularly can prevent nasty surprises.
6. Review Finance Costs
If you have business loans, overdrafts, credit cards or equipment finance, review interest rates, repayment terms and cash flow impact.
7. Get Advice Before the Pressure Builds
The ATO encourages businesses experiencing cash flow pressure, rising costs or tax and super difficulty to reach out early, either directly or through a registered tax professional.
The earlier you act, the more options you usually have.
What Should Business Owners Do Now?
If inflation is affecting your business, start with these five questions:
Have your prices kept pace with your actual costs?
Are your wages, super and tax obligations built into your cash flow forecast?
Are any products or services now underpriced?
Are customers paying on time?
Do you know your break-even point for the next 90 days?
If you cannot answer those questions confidently, it may be time to review your numbers.
Final Thought: Protect the Gold Beneath the Surface
Inflation can make a business look busy while quietly reducing profitability. Rising sales are encouraging, but they do not automatically mean your business is stronger.
The real measure is whether your margins, cash flow and compliance obligations are under control.
At DJ Grigg Financial, we help business owners understand their numbers, strengthen cash flow, review pricing and plan ahead with confidence.
If rising costs are putting pressure on your business, contact DJ Grigg Financial today. We can help you find the gold in your numbers and make informed decisions before inflation eats into your profit.
Family Trust Distributions: How to Stay Golden Under the ATO’s Current Rules
Updated June 2026
Family trusts can be a powerful structure for asset protection, tax planning and family wealth management. But like gold, they need to be handled carefully. A well-managed trust can shine; a poorly documented or tax-driven arrangement can quickly lose its lustre under ATO scrutiny.
In recent years, the Australian Taxation Office has increased its focus on family trust distributions, particularly where income is allocated to adult children, companies, or other beneficiaries who do not actually receive or enjoy the economic benefit of that income.
This article explains the current position on section 100A reimbursement agreements, adult child trust distributions, corporate beneficiaries, unpaid present entitlements, and Division 7A.
Key Takeaways
Section 100A is not a new law. It is an anti-avoidance rule introduced in 1979, but the ATO finalised updated guidance in TR 2022/4 and PCG 2022/2.
The ATO is concerned when one beneficiary is made presently entitled to trust income, but someone else receives the real benefit.
Distributions to adult children are not automatically a problem, but they may attract attention where parents benefit from those entitlements.
Corporate beneficiary unpaid present entitlements need fresh review, especially following the High Court’s decision in Commissioner of Taxation v Bendel [2026] HCA 18.
Documentation is gold. Trust deeds, resolutions, payment records, beneficiary acknowledgements and commercial reasoning are critical.
The safest approach is proactive review before 30 June each year.
What Is a Family Trust?
A trust is a structure where a trustee holds assets or carries on business for the benefit of beneficiaries. As business.gov.au explains, “a trustee holds your business for the benefit of others.”
Family trusts are commonly used by Australian business owners, investors and farming families because they may offer flexibility in distributing income and managing family wealth. However, that flexibility comes with strict tax rules.
The trustee must act in accordance with the trust deed, make valid distribution resolutions, and ensure the tax outcome reflects the substance of what has actually happened.
What Is Section 100A?
Section 100A is an anti-avoidance rule in the Income Tax Assessment Act 1936. It can apply where a beneficiary is made presently entitled to trust income under an arrangement where:
another person receives a benefit;
there is a purpose of reducing tax; and
the arrangement is not an ordinary family or commercial dealing.
The ATO states that a reimbursement agreement can involve an arrangement where “a beneficiary is made presently entitled to trust income” and someone else receives a benefit in connection with the arrangement.
The key point is this: the ATO is not simply looking at who is named in the distribution resolution. It is looking at who actually receives the benefit of the trust income.
Why Has This Become Such a Big Issue?
Section 100A has existed since 1979, so the law itself is not new. What has changed is the ATO’s published guidance and compliance approach.
The ATO finalised its key guidance in:
TR 2022/4 – Income tax: section 100A reimbursement agreements
PCG 2022/2 – Section 100A reimbursement agreements: ATO compliance approach
TA 2022/1 – Parents benefitting from the trust entitlements of their children over 18 years of age
In simple terms, the ATO wants to distinguish between ordinary family or commercial arrangements and arrangements designed to place income in the hands of a lower-tax beneficiary while the real benefit flows elsewhere.
Adult Children and Trust Distributions: What Is the ATO Looking For?
Distributing trust income to adult children is not automatically wrong. Many family trusts legitimately distribute income to adult children who are genuine beneficiaries.
The risk increases when an adult child is made presently entitled to income, but:
the money is never actually paid to them;
the funds are used by the parents;
the child is expected to gift or return the money;
the entitlement is offset against family expenses without proper evidence;
the arrangement appears mainly designed to access the adult child’s lower marginal tax rate.
The ATO’s Taxpayer Alert TA 2022/1 specifically addresses arrangements where parents benefit from trust entitlements of children over 18.
Golden rule
If the trust resolution says the adult child received the income, your records should be able to show that the adult child genuinely received, used, controlled, or benefited from that income.
If the paperwork says one thing but the money trail says another, the arrangement may not glitter for long.
What Happens If Section 100A Applies?
If section 100A applies, the intended tax outcome may be unwound. The beneficiary may be treated as not being presently entitled to the relevant trust income, and the trustee may instead be assessed.
In many cases, this can result in tax being payable by the trustee at the top marginal rate.
That is why trust distribution planning should never be reduced to “who has the lowest tax rate this year?” The better question is:
Who is genuinely intended to receive and enjoy this income, and can we prove it?
The ATO’s Risk Zones: Green, Blue and Red
PCG 2022/2 sets out the ATO’s compliance approach to section 100A arrangements.
While every arrangement needs to be assessed on its own facts, the ATO broadly categorises arrangements by risk.
Green zone
These are generally lower-risk arrangements. For example, where beneficiaries receive and use their entitlement, or where the arrangement is consistent with ordinary family or commercial dealing.
Blue zone
These arrangements are not necessarily high risk, but they may require closer review and better documentation.
Red zone
These are higher-risk arrangements that are more likely to attract ATO attention. Red-zone arrangements may involve circular flows of funds, tax-preferred beneficiaries, unpaid entitlements, or arrangements where the economic benefit clearly lands with someone other than the beneficiary assessed.
The goal is not to “paint” an arrangement green after the fact. The goal is to ensure the actual arrangement has commercial or family substance and is properly recorded.
Corporate Beneficiaries, UPEs and Division 7A
Many family groups use a private company as a beneficiary of a family trust. This can be legitimate, but it requires careful management.
A common issue is an unpaid present entitlement, often called a UPE. The ATO explains that a UPE arises where a private company beneficiary is presently entitled to trust income but does not actually receive payment of that distribution.
For trust entitlements created on or after 1 July 2022, the ATO published TD 2022/11 on when an unpaid present entitlement or amount held on sub-trust may become the provision of financial accommodation.
However, this area now needs fresh attention because of the High Court’s decision in Commissioner of Taxation v Bendel [2026] HCA 18, delivered on 10 June 2026.
The High Court case considered whether unpaid present entitlements of a corporate beneficiary were loans for the purposes of section 109D of Division 7A.
This decision is highly relevant for trusts with corporate beneficiaries. However, it should not be treated as a free pass. Trust deed wording, distribution resolutions, whether separate trusts are created, whether a debtor-creditor relationship exists, and other Division 7A provisions may still matter.
At the time of this June 2026 update, trustees and advisers should review any further ATO response before changing their treatment of corporate beneficiary UPEs.
Record Keeping: The Golden Shield
Good records are often the difference between a defensible trust arrangement and a costly ATO dispute.
Trustees should keep:
signed trust distribution resolutions before 30 June;
the current trust deed and any amendments;
beneficiary account records;
payment records showing who received the funds;
loan agreements where relevant;
evidence of expenses paid on behalf of beneficiaries;
beneficiary acknowledgements where appropriate;
notes explaining the commercial or family reasons for the distribution.
Think of your records as the bullion vault. If the ATO asks questions later, your documentation is what protects the value of your position.
Practical Examples
Example 1: Adult child genuinely receives the income
A family trust distributes income to an adult child. The amount is paid to the child’s bank account. The child uses the money for university costs, rent and personal savings.
This is more likely to be defensible, assuming the trust deed and resolution are valid and the arrangement reflects ordinary family dealings.
Example 2: Adult child assessed, parents benefit
A family trust distributes income to an adult child on a lower tax rate. The amount is not paid to the child. Instead, the funds remain in the parents’ business or are used for the parents’ personal expenses.
This is more likely to attract ATO attention.
Example 3: Company beneficiary not paid
A family trust distributes income to a private company beneficiary, but the amount remains unpaid. This may raise Division 7A and UPE issues and should be reviewed carefully, especially in light of the Bendel decision and any updated ATO guidance.
What Should Trustees Do Before EOFY?
Before year-end, trustees should review:
Whether the trust deed allows the proposed distributions.
Whether distribution resolutions will be made validly and on time.
Whether beneficiaries will actually receive or benefit from the income.
Whether any adult-child distributions could be questioned under TA 2022/1.
Whether any company beneficiary UPEs create Division 7A issues.
Whether the arrangement falls within a lower-risk or higher-risk category under PCG 2022/2.
Whether records are strong enough to support the arrangement if reviewed later.
The best time to polish your trust structure is before 30 June, not after the ATO has started asking questions.
Final Word: Keep Your Trust Strategy Bright, Not Tarnished
Family trusts remain valuable structures for many Australian families and business owners. But the ATO’s current guidance makes one thing clear: trust distributions need substance, documentation and a genuine commercial or family basis.
A tax-effective outcome is not a problem by itself. The problem arises when the arrangement looks artificial, circular, undocumented, or designed so that one person is taxed while another person enjoys the benefit.
If your family trust distributes income to adult children, companies, related trusts, or other tax-preferred beneficiaries, now is the time to review your arrangements.
Need Help Reviewing Your Family Trust?
At DJ Grigg Financial, we can help you review your trust deed, distribution strategy, beneficiary entitlements, Division 7A exposure and year-end documentation.
Before 30 June, make sure your trust planning is as solid as gold.
