Budget 2026: “Please sir, I want some more… enforcement powers”

Boards and management will face an increasingly muscular tax compliance and enforcement landscape, with heightened expectations around internal governance, record-keeping and advisor-oversight, following the Government’s Budget announcements about greater ATO powers.

The Federal Government has put taxpayers on notice in its 2026 Budget, flagging its intention to continue to prioritise the detection and prevention of fraud in Australia’s tax and super systems by boosting Australian Taxation Office (ATO) resources through additional funding, putting targeted compliance activities and stronger enforcement powers on the agenda.

As always, multinational tax compliance remains a key priority as the Government embarks on a new era of tax collection (via the reforms to capital gains tax and the taxation of trusts and passive income), explicitly calling out tax avoidance, phoenixing activity, fraud and the shadow economy as priority focus areas, as well as specific measures in respect of the research and development tax incentive.

We expect these announcements to translate into a tougher enforcement environment, with the Government announcing plans to give the ATO more powers of enforcement and collection, and to progress tax transparency.

What new powers will the ATO get?

The ATO has been tasked with combatting fraud by tax agents and other intermediaries, following recent reforms to the Tax Agent Services Act 2009 and critical reviews by the Tax Ombudsman. To enable this, the ATO will be given new powers to pause tax debt recovery from taxpayers who are victims of fraud by tax intermediaries and waive those debts in some circumstances. Further, the ATO will be empowered to recover fraudulently incurred tax debts from tax intermediaries.

If delivered, this will be a welcome and overdue reform that addresses and responds to community concern that victims generally bear the costs of fraudulent debts, and will complement the recent introduction of the ATO’s Vulnerability Framework and recent excellent progress by the ATO in relation to vulnerable persons.

Next, the Government has flagged pursuing targeted exceptions to tax secrecy following prior legislative reforms which have incrementally widened permitted disclosures. The stated rationale has consistently been to support whole‑of‑system regulation, fraud detection and effective administration. Against that background, the Budget announcement continues a well‑established reform direction, signalling further refinement and greater transparency rather than a wholesale re‑engineering of Australia’s tax secrecy framework.

Finally, a general broadening of the ATO’s information‑gathering powers has been tabled to support integrity, compliance and effective administration of the tax system. It remains to be seen whether these powers will involve limits on legal professional privilege, the addition of ‘search warrant’ style powers or some other expansion of powers. This announcement comes against the backdrop of many years of policy and administration exploration and evolution around legal professional privilege in advice given by lawyers about tax law matters.

One additional expansion that has been foreshadowed is the expansion of the ATO’s garnishee powers to apply to jointly held assets where such arrangements are being used to frustrate recover actions. It is to be hoped that considerable care will be taken in circumstances where there are family law issues and partners/spousal interests, most particularly in cases of coercive control and financial abuse.

Taxpayers should prepare for increased earlier ATO intervention, real-time data sharing, greater tax transparency and for the ATO to have nearer real-time line of sight over tax positions.

Where to from here?

If there is a unifying thread, it is this: the ATO is being given “more” – more powers, more discretion, and more ability to look through structures and across relationships. History suggests those powers will be used. Taxpayers should stress-test their reporting positions, particularly in higher-risk areas such as R&D, payroll and GST, strengthen internal governance over tax risk and review formal internal controls touching on tax compliance and tax risk.

The question for corporate Australia is how quickly practices, controls and expectations adapt in response. For Boards, it is in recognising that tax is increasingly a risk and governance issue, not just a compliance function. In that sense, the most important reform may not be legislative at all – it will be the quiet resetting of expectations about how tax risks are identified, managed and overseen. For tax managers, the discipline will be in anticipating scrutiny before it arrives.

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Authored by:

Amber Agustin, Partner
Adrianna Meo, Senior Associate