Key Trust and Tax Information Every Seasoned Business Owner Should Know in 2025

Tax laws are constantly evolving — driven by High Court rulings, changes in ATO guidance, and updates in the Federal Budget. For business owners and small business operators, staying informed isn’t just smart — it’s essential. Every shift in legislation can impact your tax obligations, business structure, and financial strategy.

As we begin the 2025 financial year, now is the ideal time for small businesses to review what’s changed and how to adapt. From family trust distribution traps to Division 7A loan issues and superannuation compliance, this article highlights the critical updates every business owner needs to understand.

Getting on top of these developments early will not only ensure compliance for 2025FY but also help you proactively plan for the 2026 financial year — because when it comes to business tax planning, foresight always beats firefighting.

Family Trusts: Don’t Get Caught by the ATO’s New Focus

If you run your business through a family trust, or receive income from one, this update is especially important. The ATO has recently stepped up its focus on how family trusts are managed, particularly around something called a Family Trust Election (FTE). While these rules have technically been around since 1995, many small business owners and even some accountants have overlooked the risks.

Here’s the issue: If your trust makes a distribution to someone outside the defined family group and an FTE is in place, the ATO can hit the trust with a 47% Family Trust Distribution Tax (FTDT). That’s not a typo — 47%. And worse, the ATO has no discretion to waive it, and they can issue an assessment at any time, even years later.

This often catches people off guard because the definition of a “distribution” is broader than most realise — even a benefit given to someone who’s not a listed beneficiary can count. So, if your trust pays school fees, covers personal expenses, or supports someone not strictly in the family group, you could be at risk.

What should you do?

• If you’ve made a Family Trust Election, revisit who’s included in your family group.
• Review any Interposed Entity Elections (IEEs) linked to your trust.
• Be cautious about who receives money or benefits from the trust — even indirectly.

With the ATO now paying closer attention, a proactive review could save your business tens of thousands in unexpected tax bills.

Franking Credits and the 45-Day Rule for the Bucket Company 

If your business uses a family trust to distribute franked dividends to a company — a common strategy to reduce tax — there’s a technical rule that could quietly block you from claiming the franking credit. It’s called the 45-day holding period rule, and it’s something the ATO is watching more closely in 2024–25.

In simple terms, this rule says that to be eligible for a franking credit, the recipient (often a company acting as a beneficiary of a trust) must have held the shares “at risk” for at least 45 continuous days. That means no selling, hedging, or transferring during that period — and crucially, the clock starts before the shares go ex-dividend.

Why does this matter for small businesses?

Because many business owners set up new corporate beneficiaries during the year. If your company didn’t even exist on the day the dividend was declared, the ATO may argue it never held the shares long enough and deny the franking credit altogether.

Here’s what to check:

• If you’re planning to use a company as a beneficiary of franked dividends, make sure it was set up well before the dividend date.

• If your trust distributed franked income to a newly created company, speak to your accountant to check whether you meet the 45-day rule.

Missing this technical rule could cost your business valuable tax credits. As always, forward planning — and talking to a tax professional — can help you avoid an unexpected bill.

Division 7A: The Ongoing Uncertainty Around Unpaid Trust Distributions

Many small business owners operate through a family trust and a private company. It’s a common setup: the trust earns income and distributes it to the company — often referred to as a ‘bucket company’ — to cap tax at the corporate rate. But here’s the catch — if the company doesn’t physically receive the money, that unpaid amount is known as an Unpaid Present Entitlement (UPE). And that’s where Division 7A comes in.

Division 7A is a part of the tax law designed to stop private companies from making tax-free loans to shareholders or their associates. If the ATO thinks your company is just “holding” income for you without proper loan terms or repayments, they can treat it as a deemed dividend — which is fully taxable in your hands.

In early 2025, the Full Federal Court ruled in the Bendel case that certain UPEs were not loans, which gave hope to business owners who thought they could avoid Division 7A treatment. But the ATO didn’t agree — and has taken the case to the High Court. Until a final decision is made (expected later in 2025), we’re in a legal grey zone.

So, what should business owners do?

• The ATO is still applying its existing view: UPEs are loans unless properly managed.
• If you’ve got trust income sitting in your company’s books but not physically paid, it’s safest to treat it as a division 7A loan and either repay it or put it on a complying loan agreement.
• Missing the required repayments could lead to an unwanted tax bill and penalties.

In short, don’t assume that a court case will protect you just yet — the ATO is still enforcing its view, and until the High Court says otherwise, you should keep following the Division 7A rules carefully.

Instant Asset Write-Off: What Small Business Owners Need to Know for 2024–25

If you run a small business, the instant asset write-off can be a great way to reduce your tax bill — but only if you use it correctly and on time.

For the 2024–25 financial year, small businesses with an annual turnover of less than $10 million can immediately claim a full tax deduction for assets that cost less than $20,000 — as long as the asset is first used or installed ready for use by 30 June 2025.

That means if you buy new equipment, tools, technology, or office furniture under that $20,000 threshold and start using it before the end of the financial year, you can write off the entire cost in your 2025 tax return instead of depreciating it over several years.

It’s also worth noting:

• The government has announced it will extend this $20,000 write-off for another year (to 30 June 2026), but it hasn’t passed into law yet — so for now, plan around the 2025 deadline.
• You must have the asset ready for use by 30 June 2025 — simply buying it isn’t enough if it’s still in the box or waiting for installation.

For many businesses, this can be a valuable tool to lower taxable income and invest in growth — but timing is everything. Talk to your accountant to make sure your purchases qualify and you’re not leaving deductions on the table.

Let’s Make This Year Count

As a small business owner, navigating tax rules, ATO updates, and compliance obligations can feel like a full-time job on its own. But staying informed — and acting early — can be the difference between saving thousands in tax or getting caught off guard by unexpected liabilities.

The 2024–25 financial year brings a number of technical but important changes, and the smart move is to treat this July as the starting point for planning your 2025–26 strategy. Whether you need help reviewing your trust distributions, managing Division 7A loans, maximising super contributions, or claiming legitimate deductions — the team at Investax is here to guide you through it.

We offer a 15-minute free consultation to discuss your tax, property investment and business needs. Book your complimentary consultation now.

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