Over the past decade, the way tax is regulated and enforced has changed dramatically. Strategies that were once considered smart tax planning are now being closely scrutinised, and in many cases, penalised.
If your business or investment structure hasn’t been reviewed in years, there’s a real risk it may no longer be compliant or effective. What worked a decade ago could now expose you to unexpected tax liabilities. In this article, our Brisbane tax lawyers will take a look at some common outdated tax structures and explain why they’ve become a liability in 2026.
Why Tax Structures Are Being Scrutinised More Than Ever
Tax authorities, both in Australia and globally, have significantly increased their ability to detect and challenge aggressive tax planning.
A major driver of this shift is the Base Erosion and Profit Shifting (BEPS) framework. This global initiative aims to tax profits where economic activity actually occurs, rather than where tax rates are lowest. At the same time, the Australian Taxation Office (ATO) has upgraded its data matching and analytics tools. Information is pulled from banks, land registries, ASIC, and even overseas tax authorities, making it far harder to hide or justify artificial arrangements.
On top of this, the introduction of a global minimum corporate tax rate of 15% has reduced the benefits of shifting profits offshore. The result is a clear shift: tax planning is no longer about minimising tax at all costs, but about designing a structure that reflects genuine commercial activity.
5 Tax Structures That Are Now High-Risk
Stapled Structures and Artificial Fragmentation
In the past, some businesses used stapled structures to split income between different entities, often converting active business income into passive income taxed at lower rates. While effective at the time, these arrangements have been heavily targeted by legislation from both the ATO and international bodies. Changes introduced through the Stapled Structures Act now impose higher withholding taxes on certain types of income, removing much of the original benefit.
Today, these structures are closely monitored and can attract significant tax consequences if not properly structured.
Excessive Debt Funding (Thin Capitalisation)
Companies often loaded up subsidiaries in high-tax jurisdictions with debt from affiliates in low-tax jurisdictions. The interest payments reduced taxable profits locally, while shifting income to lower-tax jurisdictions.
New thin capitalisation rules have significantly tightened this approach. Interest deductions are now generally limited to a percentage of EBITDA, and additional rules deny deductions for certain related-party transactions.
If your structure relies heavily on internal debt, it may no longer deliver the intended tax outcome.
Shell Companies and Tax Havens
Previously, it was common to hold IP or financial assets in low-tax jurisdictions, even where there was little to no actual business activity. Under BEPS reforms, this is no longer viable. Tax authorities now require real economic activities where profits are reported. If companies don’t have employees or operations in the jurisdiction, their tax treaty benefits could be denied.
Family Trust Distribution Strategies
Family trusts have long been used to distribute income to family members with the lowest marginal tax rates, even if they had no real involvement with the business. While still valid in many cases, certain distribution practices are now under close review.
The ATO is actively pursuing arrangements where money is distributed to low-income earners but actually used by high-income earners. With increased enforcement and the end of transitional relief approaching, these arrangements can lead to significant tax liabilities if not handled correctly.
Division 7A and Private Company Asset Use
It has historically been common for business owners to access company funds or assets for personal use, often treating them as loans or business expenses.
Under Division 7A, these arrangements are now tightly regulated. If not properly documented and repaid, they can be treated as deemed dividends, resulting in additional tax. With improved data matching, the ATO is far more likely to detect these issues than in the past.
What Happens If You’re Still Using These Structures?
Continuing to rely on outdated tax structures can lead to serious consequences. You could find yourself hit with unexpected tax bills or penalties. In some cases, tax benefits can be reversed retrospectively, meaning you may need to repay tax for prior years.
You also have to consider the added impact of general interest charges on unpaid tax, which are no longer tax-deductible. Combined with the risk of audits and damage to your reputation, the cost of maintaining an outdated structure can quickly outweigh any previous benefits.
Warning Signs Your Tax Structure May Be Outdated
Not every structure is automatically a problem, but there are some clear signs that it might be time for a review:
- Your structure hasn’t been reviewed in several years
- You rely heavily on trusts or related-party loans
- You have offshore entities with limited real activity
- Income distributions don’t align with who actually controls or benefits from the business
- Your current advice hasn’t addressed recent tax law changes
When to Seek Legal Advice
While accountants play a critical role in managing your tax compliance, these kinds of structural issues often require legal input. A tax lawyer can help assess the legal risk of your current arrangements, interpret how recent law changes apply to your situation, and guide any necessary restructuring in a way that reduces your risk.
Future-Proof Your Tax Strategy
The tax environment has changed significantly over the past decade, and structures that once gave you an edge can now create real risks if left unchecked. Taking the time to review your setup now can help you avoid costly issues later and ensure your business is positioned for long-term success.
If you’re unsure whether your current structure is still fit for purpose, it might be time to seek advice from the experts. Our tax attorneys are ready to help, so get in touch today to book your obligation-free consultation.