Audit Lowe Down – Incorrect presentation of your liabilities could significantly affect your balance sheet
Lowe Lippmann Chartered Accountants
In a previous blog, we discussed the changes to the accounting standards relating to classification of current / non-current liabilities on the balance sheet.
We have been receiving a number of questions on this topic and have provided some practical scenarios below as well as some actions for you as we approach 30 June reporting dates.
| Scenario | Current / non-current | Actions for consideration |
|---|---|---|
| Borrowing facility is expiring within 12 months of the reporting date. | Current | Obtain written evidence from the bank prior to reporting date that the facility will be extended and the appropriate terms and conditions. |
| Breach of a bank covenant reported prior to year end but no response from financial institution at reporting date. | Current | Obtain written evidence from the bank prior to reporting date that the covenant breach is either subject to a period of grace of at least 12 months from the reporting date or is subject to a waiver. |
| Breach of a bank covenant as at reporting date reported to the financial institution after year end. | Current | No action possible if breach not reported until after reporting date since not possible to obtain waiver / period of grace prior to the reporting date. |
| Likely to breach a covenant after the year end. | n/a | Not assessed as part of current / non-current presentation but disclosure of existence of covenant and likely breach is required. Communicate with financial institution as soon as possible to include likely outcome (if waiver or period of grace) in the disclosure. |
Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.
Liability limited by a scheme approved under Professional Standards Legislation
High Court decision and ATO statement on Bendel’s Case The High Court recently handed down its decision in Bendel’s Case, confirming that an unpaid present entitlement (or UPE) between a discretionary trust and a beneficiary company does not fall within the extended definition of a “loan” for Division 7A purposes. The Australian Taxation Office released a Decision Impact Statement in response to the High Court findings, concluding the High Court's reasoning makes it clear that where a beneficiary company is entitled to a share of trust income that remains unpaid (a UPE) and the company takes no positive actions to call for payment of the entitlement, this will not fall within the expanded definition of a "loan" for Division 7A purposes. This is in contradiction to the ATO’s historical position that treated UPEs as "loans".
Government's tax reform package The Government has recently legislated several of the tax reform measures announced in the 2026 Federal Budget (and in later media releases). These include, among other things: Replacing the CGT discount with cost base indexation and a 30% minimum tax on gains accruing from 1 July 2027 (including gains on pre-CGT assets); Increasing the small business turnover threshold for the 50% active asset reduction from $2 million to $10 million; Limiting negative gearing for residential property to new residential dwellings from 1 July 2027 (subject to transitional rules); and Introducing the Working Australians Tax Offset from 1 July 2027, and the $1,000 instant tax deduction for work-related expenses from 1 July 2026. After a round of consultation, the Government has also announced further proposed measures, broadly including (among others): A new targeted CGT discount for investors in innovative start-ups; Barring SMSFs from utilising future limited recourse borrowing arrangements ( LRBAs ) to acquire residential property; and Exempting income of discretionary testamentary trusts from the minimum tax proposed for trusts. We recently released a Tax Alert considering the legislation restricting SMSFFs using residential property LRBAs – to read click here . For full details of each of the 2026 Federal Budget announcements, please see our Federal Budget Tax Alert – to read click here .
Tax Alert - Legislation restricting SMSFs using residential property LRBAs has now passed Parliament
Legislation restricting SMSFs using residential property LRBAs has now passed Parliament The Treasury Laws Amendment (Tax Reform No 1) Bill 2026 ( the Reform No 1 Bill ) was passed by Parliament on Thursday 25 June 2026. Schedule 5 of the Reform No 1 Bill amends section 67A of the Superannuation Industry (Supervision) Act 1993 to restrict future limited recourse borrowing arrangements ( LRBAs ) on real property to investments in “business real property” (as defined in section 66 of the SIS Act). Residential property of any kind is excluded from the definition of “business real property” in section 66 of the SIS Act. We note this also excludes newly constructed residential property, which is a distinction at odds with recent exemptions being given to new-builds with other Budget Night tax changes relating to negative gearing and restricting the CGT 50% discount. Super funds are not generally allowed to borrow for investments, but there has been a concession allowing a self-managed super fund ( SMSF ) to borrow money to buy single assets like property, if their loans were set up in line with particular requirements, known as LRBAs. This change means an SMSF will not be able to borrow to buy residential property after the start date of these changes.
