Related-Party Transactions Australia 2025: New Rules & Compliance Guide

Related-party transactions have always been a complex aspect of doing business in Australia, but 2025 is shaping up to be a year of heightened scrutiny and fresh regulation. With the Australian Taxation Office (ATO) and the Australian Securities & Investments Commission (ASIC) both tightening their approach, understanding the ins and outs of related-party dealings is more important than ever for directors, shareholders, and finance teams.

What Are Related-Party Transactions?

Simply put, a related-party transaction is a deal, arrangement, or transfer of resources between two parties who have a pre-existing relationship. In Australia, these transactions most commonly occur between:

• Companies and their directors or major shareholders
• Companies and subsidiaries or joint ventures
• Family members of directors or shareholders
• Entities under common control

These transactions can include loans, asset sales, leases, service agreements, or even share issues. While they can be legitimate and beneficial, they also create risks of conflicts of interest, tax avoidance, or shareholder disadvantage if not managed transparently.

2025 Regulatory Changes and ATO/ASIC Focus

In response to ongoing concerns about tax minimisation and corporate governance, 2025 has seen several key developments:

• ATO Spotlight on Private Groups: The ATO’s 2025 compliance program singles out related-party loans and asset transfers in private companies, with particular focus on Division 7A breaches and improper loan forgiveness.
• ASIC Disclosure Requirements: Updated ASIC Regulatory Guide 76 now requires enhanced disclosure of related-party transactions in financial statements, including more granular breakdowns and explanations for non-arm’s length pricing.
• Listed Company Rules: ASX-listed companies must now gain shareholder approval for most related-party transactions over 5% of net assets, following a 2025 update to ASX Listing Rule 10.1.

Failure to comply can trigger hefty penalties, forced transaction reversals, and reputational damage. In April 2025, for example, an ASX200 company faced a $2.5 million fine and public censure after failing to adequately disclose a multimillion-dollar asset transfer to a director’s family trust.

Best Practices for Managing Related-Party Transactions

With regulators watching closely, Australian businesses should adopt these best practices:

• Arm’s Length Principle: Always ensure pricing and terms match what would be agreed between unrelated parties. Independent valuations are often necessary for significant transactions.
• Board Oversight: Related-party transactions should be reviewed and approved by non-interested directors or an audit committee. Maintain detailed meeting minutes recording the rationale and process.
• Clear Documentation: Every related-party deal needs a formal, written agreement outlining terms, pricing, repayment schedules (for loans), and the parties involved.
• Comprehensive Disclosure: Be transparent in annual reports and financial statements, detailing the nature, amount, and justification for each transaction.
• Stay Current with Division 7A: For private companies, ensure loans to shareholders or associates comply with Division 7A rules—failure here is a major ATO trigger in 2025.

For example, a mid-sized Melbourne manufacturing firm recently avoided regulatory issues by engaging an external auditor to review all related-party agreements annually and implementing a policy requiring board approval for any transaction over $50,000.

Red Flags and Common Pitfalls

Even well-intentioned businesses can stumble. Watch out for:

• Unsecured or interest-free loans to directors or family members
• Asset sales or purchases at below-market value
• Service contracts with vague deliverables or excessive fees
• Failure to update registers of related-party transactions as circumstances change

In 2025, the ATO has made it clear that even inadvertent mistakes—like missing disclosures or underestimating asset values—can result in investigation or penalty.

Looking Ahead: The Future of Related-Party Oversight

As Australia’s regulators step up both enforcement and technology-driven surveillance, the message is clear: related-party transactions must be above board, well-documented, and fully disclosed. With AI-powered data-matching becoming mainstream at the ATO, expect fewer transactions to fly under the radar in the years ahead.