Key Highlights:

  • The AUD 2 minimum threshold for deductible gifts has been removed for eligible donations.
  • Updated guidance explains how rental property income and deductions should be reported.
  • General interest charge and shortfall interest charge incurred on or after 1 July 2025 are no longer deductible.
  • Several proposed tax changes do not apply to the 2025–26 tax return.

Before completing a 2025–26 tax return, individuals should be aware of several tax updates that may affect the way income, deductions and other tax information are reported. These changes cover areas including gifts and donations, rental properties, ATO interest charges, trust distributions and tax offsets. There are also several proposed measures that do not apply this tax time.

Gifts and donations

Tax law has changed to remove the AUD 2 minimum threshold for gifts made to eligible deductible gift recipients. This means eligible gifts can now be claimed as a tax deduction regardless of the amount donated.

However, the existing special rules continue to apply to:

  • political donations
  • some gifts of property
  • donations where a material benefit is received in return (a contribution).

Rental property income and expenses

New guidance has been issued covering when rental property amounts are assessable income and which expenses can and cannot be claimed by individuals who are not carrying on a rental property business.

The guidance applies to income earned from:

  • short-term rentals, including properties listed on online booking or sharing platforms
  • holiday homes
  • renting out a room or rooms in a home
  • long-term rental arrangements.

It also explains:

  • when rental income is assessable
  • when rental property expenses can be claimed as deductions
  • how deductions should be apportioned where a property has both income-producing and non-income-producing use
  • when certain deductions relating to holiday homes may be denied because the property is considered a leisure facility not mainly used to earn assessable rental income.

Additional compliance guidance explains that where a property is used partly to earn income and partly for another purpose, such as being the owner's residence, expenses must be apportioned on a fair and reasonable basis.

Separate guidance also explains the application of section 26-50 of the Income Tax Assessment Act 1997, which denies deductions for certain losses or outgoings relating to holiday homes unless an exception applies.

The Taxation Ruling and Practical Compliance Guidelines apply to income years commencing both before and after their issue date, subject to the transitional approach relating to section 26-50.

Deductions for ATO interest charges

General interest charge (GIC) and shortfall interest charge (SIC) incurred on or after 1 July 2025 can no longer be claimed as income tax deductions in 2025–26 or later tax returns.

GIC and SIC incurred before 1 July 2025 remain claimable in the 2024–25 and earlier income years.

Modernising trust administration systems

From 1 July 2026, trustees will provide additional information in distribution statements to help individuals prepare their tax returns and report income correctly.

Pre-fill services for trust distributions will also be available for individual taxpayers from 2026, with expansion to other entities from 2027.

Distribution statements will include three new labels:

  • B1 Non-primary production managed investment scheme amount
  • U2 Franked distribution related to investments amount
  • H1 Other assessable foreign source income from a financial investment amount.

This information is intended to help taxpayers accurately complete the income tests question at Net financial investment loss (IT5) in their tax return.

Junior Mineral Exploration Incentive

The Junior Mineral Exploration Incentive was extended to 30 June 2025 and has not been extended beyond that date.

From 1 July 2025, exploration credits cannot be received or claimed.

Zone or overseas forces tax offset

From Tax Time 2026, the zone or overseas forces tax offset calculator has been updated to make it easier to use and help reduce errors.

The updates include:

  • a location search that automatically identifies eligible locations and the correct zone
  • the option to enter either the dates spent in each location or the number of days
  • simpler adjusted taxable income (ATI) inputs for taxpayers with dependants.

Changes that do not apply this tax time

The following proposed changes do not apply to the 2025–26 tax return:

  • standard deduction for work-related expenses (also called the AUD 1,000 instant tax deduction)
  • Working Australians Tax Offset
  • changes to capital gains tax (CGT)
  • changes to negative gearing arrangements
  • changes to the private health insurance rebate for people aged 65 years and older.