June 2026: the hardest advisory period in recent memory

This June is unlike most. The 2026 Budget has upended trust and company planning in ways that won't fully resolve until legislation is passed. AML/CTF obligations arrive on 1 July. The TPB has issued new guidance on AI. And the Bendel decision is still being worked through.

Jimmy McPhedran, co-founder of Elfworks and a tax professional with 26 years of experience, sat down with Accountants Daily this week to work through the specific questions practitioners are facing right now. Trust distributions, company beneficiaries, dividend access shares, duty on forced restructures, and how to use AI within the TPB's new framework.

Below is the article published in Accountants Daily.

As always, Jimmy is happy to take questions directly: james.mcphedran@elfworks.ai

The shaky ground of post-Budget 2026, pre-Legislation advisory work

Jimmy McPhedran, co-founder of AI accounting platform Elfworks, discusses the implications of the 2026 Budget announcements and their impact on June 2026 decision making and advisory work going forward.

Are company beneficiaries dead?

“Not yet, but they won’t be useful as a discretionary trust beneficiaries from 1 July 2028 if the Budget announcements become law. From 1 July 2028 the proposed discretionary trust trustee 30% tax will not offset tax payable on distributions to company beneficiaries. This will mean an effective tax rate on trust income of either 51% (assuming no gross-up of trust distributable income) or 60% (assuming gross-up of trust distributable income). The Budget paper didn’t make this clear. Either way, you’ll have a better result leaving the income undistributed (taxed in hands of trustee) or distributed to high income earners. Default beneficiary clauses in discretionary trusts will need to be reviewed to ensure undistributed income does not land with company beneficiaries from 1 July 2028. Company beneficiaries are still useful for 2026, 2027 and 2028 however consideration needs to be given to the shareholding of such company beneficiaries – if shares are owned by another discretionary trust, this could lead to tax-effective profit extraction issues in the future.”

Are discretionary trusts still useful?

“A discretionary trust still provides asset protection benefits over other entities. For the life of the discretionary trust, no-one has a fixed beneficial interest in the assets of a discretionary trust. Even if the discretionary trust has a company trustee and Mum and Dad hold the shares in the company trustee, these shares have negligible value from a creditor point of view and usually the Appointor power in the Deed allows for the trustee to be swapped-out. However as a trading entity outside of primary production businesses, these will have reduced appeal. Their tradition retention vehicle – the company beneficiary – won’t work from 1 July 2028 so if your trading profits are too high or too low (so beneficiaries cannot receive the full benefit of the non-refundable offset nature of the proposed 30% trustee tax) they are likely not as useful.

As the owner of the shares in a trading company, this structure should also be re-considered as the traditional retention vehicle off a trading company with discretionary trust as shareholder is a company beneficiary – this won’t work from 1 July 2028. The go-to structure may become a Trading Company – Holding Company – Discretionary Trust – this may be what people go for with new business set-ups, even though it does seem overly complex for small businesses. This structure has the added benefit of a 25% tax rate in the retention vehicle (the Holding Company) as opposed to 30% (typically) in the company beneficiary.”

Will dividend access shares and Class A, B, C, D, Z etc shares make a comeback?

“Potentially, although much will depend upon the ATO policing of such arrangements. Current published ATO positions such as Taxpayer Alert TA 2012/4 highlight ATO concerns where dividend access shares are issued in companies with existing retained profits (and franking credits). The post-profit issuing of such shares have raised concerns from a value shifting point of view as well as dividend stripping and general anti-avoidance concerns. What will the ATO say about new companies set-up with different shareholder classes before profits are made? We’ll have to wait and see however if such arrangements are permitted, this would allow for the flexible distribution of franked profits across member of a family. I suspect we will hear more from the ATO on this.”

Will there be duty exemptions for forced restructures due to the Budget announcements?

“I doubt it. Duty is payable in QLD and WA on business asset transfers (subject to some exemptions) and of course property transfers all around Australia. There could be a duty bonanza for State Revenue Offices as people move/dispose of assets in response to the 2026 Budget announcements. I would plan for no relief on the duty front.”

What about the AML rules from 1 July 2026?

“The AML rules add a further layer of complexity when accountants are providing designated services. When you set-up a company for a client this is a designated service, so many new business or investment structure set-ups from 1 July 2026 will be caught. Restructures are less clear as this may amount to the transfer of business assets and not the establishment of a new company. This may depend on the proposed rollovers mentioned in the 2026 Budget, whether a restructure can be achieved without the need to set-up a new company. We will have to wait and see the details of these rollovers.

How do we use AI to help with all of this?

“Accountants need to follow the guidance put out by the Tax Practitioners Board in TPB(I) D62/2026 – The use of Artificial Intelligence and the Code of Professional Conduct. You need to first understand what happens to the data when you use an AI solution as part of your workflow. Once the data security aspect is understood, you must obtain the required permissions from your clients if/when client information is processed by the AI solution. The biggest risk here is not obtaining client permission for the offshore processing of their information. So AI can help, however you first must understand what happens with the data and obtain the required permissions.”

 

The bottom line for Accountants

The 2026 Budget announcements, coming AML/CTF rules, warnings on AI use and the long-awaited Bendel High Court decision add up to a very challenging time for Australian accountants.

“Australian accountants are used to things being difficult. The main comfort you can take this June is your colleagues are finding things just as challenging” - says McPhedran.

A Local Answer to a Global Problem

Elfworks, the Brisbane-based, UniQuest Extension Fund-backed AI accounting platform now has over 500 firms on the platform — including 15 of Australia’s Top 50 accounting firms as paying customers — with strong growth continuing through word-of-mouth alone. While productivity and accuracy were the initial drawcard, the key point of difference for Elfworks is rapidly becoming the security of client information, underpinned by the platform’s three-tiered approach to data protection.

Elfworks has also released its first wave of AI agents, designed to help Australian accountants with year-end tax planning, setting-up new business and investment structures and client restructures post 2026 Budget.

Australian accounting firms can explore Elfworks at elfworks.ai or send an email to info@elfworks.ai for a free demo.

A note on data security at Elfworks....

Elfworks protects your client data through a combination of sovereign Australian-based LLMs, proprietary anonymisation, and encryption. Sensitive information is stripped of all identifying details before reaching any language model and accurately restored on return, meaning even in the event of a US CLOUD Act request, there is no identifiable client data to disclose. For tasks requiring the highest protection, processing occurs exclusively within Australian borders on sovereign infrastructure, entirely outside US jurisdiction. This is a level of data security no other AI platform currently achieves — including the world's leading frontier models.