The agreements expired in 2015. The payments kept flowing. The deductions did not survive.
Your client’s intragroup service fees might not be deductible. The Full Federal Court has said so.
Commissioner of Taxation v S.N.A Group Pty Ltd [2026] FCAFC 10 should concern every accountant preparing returns for private groups with related-party arrangements. Short version: if the written agreements have lapsed and you are relying on “business as usual”, the deductions are at risk.
What happened
The Coronis real estate group separated operating companies from asset-holding trusts in 2005 for asset protection. Written licence agreements governed service fee payments until 2015.
After the agreements expired, the operators kept using trust assets, trademarks, rent roll, key staff, and kept paying. They claimed deductions under s 8-1 of the ITAA 1997 for FY2016 to FY2019.
The Commissioner disallowed them. The primary judge inferred contracts from the parties’ conduct and allowed the deductions. The Full Court (McElwaine, Feutrill and Wheatley JJ) unanimously reversed.
What the Full Court found
The Court applied the objective theory of contract with full force to related-party dealings. Four findings matter.
The common directors’ subjective belief that fees were owed did not create a contract. Private thoughts are not outward communications, even when the same person sits on both sides of the transaction.
The group’s accountant was still preparing returns against the 2005 agreements, which had expired in 2015. Nobody communicated new arrangements to him. The Court found the entire financial record was built on a “mistaken assumption”.
The payments were “incoherent” (the Court’s word). Service fees, salary reimbursements, CBA loan repayments and surplus fund transfers were all lumped under the same labels. The expert identified significant amounts miscoded as service fees.
No GST tax invoices were ever issued between the entities, inconsistent with a genuine commercial supply. The bottom line: the “directing mind and will” of common directors does not replace properly documented agreements between separate legal entities.
The practical checklist
Check whether your client’s intragroup agreements are actually in force or quietly expired years ago. Confirm you know the current contractual basis for the charges being recorded, not historical arrangements.
Review payment coding. Are service fees, loan repayments and distributions properly separated or all mixed together? Look for a documented methodology for the fee, applied consistently across entities and years. And confirm GST tax invoices are being issued for every intragroup supply.
The ATO will be emboldened by this decision. This is not a future risk. It is a current-year deduction risk for every private group where the paperwork has not kept pace with commercial reality.
General information only. This note was accurate when written. The law may have changed since and the note is not updated. It is not legal or tax advice, does not take account of your circumstances and must not be relied upon as a substitute for advice on your own matter. If the issue is live for you or your client, email arda@nortonquaytaxlaw.com.au for advice on the current position.