ATO Targets Property Development Tax Structures in 2026

Australian businesses, property developers, and tax professionals should pay close attention to two important tax developments recently released by the ATO and Treasury. These updates affect related-party property development structures and fuel excise rates across Australia.

The first update focuses on the ATO’s growing scrutiny of property development arrangements under Part IVA anti-avoidance rules, while the second introduces a temporary reduction in fuel excise to help ease cost pressures for businesses and consumers.

ATO Targets Related-Party Property Development Arrangements Under Part IVA

The ATO has released Draft Practical Compliance Guideline PCG 2026/D2, outlining how it intends to review property development arrangements involving related parties and long-term construction contracts.

The main concern is where groups split land ownership and development activities across multiple related entities in a way that delays taxable income recognition or creates tax losses that can offset other profits.

According to the ATO, some arrangements may technically involve separate entities, but commercially operate as one overall property development business.

Why the ATO Is Concerned

The ATO is specifically reviewing situations where:

• Land ownership is separated from development activities
• Developer entities claim deductions early
• Income is deferred until project completion
• Tax losses are used against other group income
• Structures are repeated across multiple developments

The ATO has made it clear that it will examine the commercial substance of these arrangements — not just the legal paperwork.

ATO Green Zone vs Red Zone Explained

The draft guideline introduces a two-zone compliance framework.

Green Zone Arrangements

The ATO is less likely to review arrangements where at least one of the following applies:

• The developer is paid progressively during the project
• Income is recognised over time under TR 2018/3
• Annual increases in land value are reported as taxable income
• The arrangement reflects genuine commercial dealings

These arrangements generally show that income is being recognised appropriately throughout the project lifecycle.

Red Zone Arrangements

The ATO sees higher audit risk where all of the following features exist:

• Related parties are not dealing at arm’s length
• A developer entity sits between the landowner and builder
• Construction deductions are claimed immediately
• Income is only recognised at project completion
• The landowner does not report annual land value increases
• Project losses offset other group income
• Similar structures are repeated across multiple projects

The ATO believes some groups may be using these structures to defer tax liabilities for extended periods.

What Property Developers Should Do Now

Businesses involved in related-party property development projects should urgently review their structures and tax treatment.

This is especially important where:

• Multiple entities are involved
• Development income is deferred
• Developer losses are being used elsewhere in the group
• Long-term contracts exist between related entities

The ATO has confirmed it will look beyond formal agreements to determine whether the arrangement reflects genuine economic activity.

Professional tax advice is strongly recommended before entering into new development structures.

Temporary Fuel Excise Reduction Extended

The Government has also introduced a further temporary reduction to fuel excise through LI 2026/5 – Excise Tariff (Fuel Duty Temporary Reduction) Determination 2026.

This change applies from:

1 April 2026 to 30 June 2026

How Much Is Fuel Excise Reduced?

The Treasurer has reduced the CPI-adjusted fuel excise rate to 39.1%, creating a total reduction of approximately 60.9% under current legislation.

This reduction applies in addition to the standard 50% fuel excise reduction already in place.

The temporary relief aims to help reduce operating costs for:

• Transport businesses
• Logistics companies
• Trades and construction businesses
• Agricultural operators
• Small businesses relying heavily on fuel

Why These Tax Updates Matter

These updates highlight two major themes in the current ATO compliance environment:

1 Increased Focus on Tax Structures

The ATO is actively reviewing arrangements that shift profits, defer income, or generate losses across related entities.

2 Cost-of-Living & Business Relief Measures

The temporary fuel excise reduction is designed to ease pressure on Australian businesses dealing with rising operating expenses.

Businesses should ensure they remain compliant while also taking advantage of legitimate tax relief opportunities available under the law.

How Supertax Can Help

At Supertax
we help Australian businesses manage complex tax structures, property development compliance, fuel tax matters, and ATO risk reviews.

Whether you are involved in property development, construction, transport, or small business operations, our team can help you:

• Review related-party arrangements
• Reduce ATO audit risks
• Ensure correct income recognition
• Manage tax planning legally and effectively
• Stay compliant with changing ATO guidance

Contact Supertax Today

(03) 7074 8818
info@supertax.com.au

Supertax

Suite 1, 7 Bridge St, Werribee VIC 3030

This article contains general information only and does not take your personal circumstances into account. Tax and superannuation rules change, and some measures discussed may be subject to legislation. Speak with a registered tax agent before acting.