If your business sits inside a group with related companies, trusts, or family entities, there's a fair chance you have agreements that have been running for years on a handshake. A recent Full Federal Court decision is a clear warning that the days of relying on informal arrangements are over.
The case: S.N.A Group
In Commissioner of Taxation v S.N.A Group Pty Ltd [2026] FCAFC 10, two related real estate companies claimed more than $19 million in deductions for service fees paid to related trusts. The written service agreements that originally underpinned those payments had expired in 2015. The companies kept paying on the basis of past practice and what the parties considered fair and reasonable.
The Full Federal Court overturned the first-instance decision and denied the deductions. The reasoning was simple. Under section 8-1 of the ITAA 1997, a deduction requires a presently existing legal liability when the expense is incurred. Without a current, binding agreement, there was no such liability.
Four lessons from the decision
- Conduct alone won't carry you. Courts will not infer a binding contract from a long, consistent history of payments. The taxpayer carries the burden of proving the obligation.
- Expired agreements are fatal. If a written agreement has lapsed, the deduction can lapse with it, even when nothing else has changed in the business.
- There's no SME tax shield. Family groups, closely held businesses, and SMEs are held to the same evidentiary standard as listed groups. A common directing mind doesn't change the rules.
- The ATO is paying close attention. Audit triggers include data mismatches, benchmark deviations, and significant year-on-year movements in intra-group charges.
What good documentation looks like
For every related-party arrangement, you should expect to find:
- A current, signed written agreement with clear commercial terms
- Board minutes approving the arrangement and linking it to the assessable income it supports
- Invoices that align with the contract, issued and paid on time
- Consistent accounting treatment across each entity in the group
- A renewal trigger built into your governance calendar so agreements don't lapse
Where to start
Run a quick stocktake of every arrangement between related parties, including:
- Loans
- Leases of property, equipment, or vehicles
- Service or management fees
- Rent
- Intellectual property licences
- Staff-sharing arrangements
For each one, confirm there's a current, signed agreement, that it reflects what's actually happening, and that the supporting paperwork lines up.
If anything looks light, it's far easier to refresh the documentation now than to defend it in an audit. We can review your group's arrangements with you and help tighten up anything that needs it.
