The Commissioner’s recent success on appeal in Commissioner of Taxation v S.N.A Group Pty Ltd [2026] FCAFC 10 (17 February 2026) serves as a strong reminder of the need for robust documentation, particularly valid and well‑drafted service agreements, when entities within the same group provide services to one another.

Without proper records and evidence to support the nature and basis of these services, the ATO may deny the related tax deductions. This risk extends beyond service fees and can also impact other intragroup arrangements, such as management charges or asset leasing arrangements.

Although informal practices between related entities are common in private group and SME sector, the Full Federal Court’s decision underscores the significant tax risks that arise when intragroup transactions are not clearly documented. The matter may still proceed further, as the taxpayer has the option to seek special leave to appeal to the High Court.

Background

The Full Federal Court has overturned an earlier decision involving two companies, SNA Group Pty Ltd and APTR Pty Ltd, and their claims for nearly $19 million in tax deductions. These deductions related to “service fees” there were paid within the same corporate group over a five year period.

The companies argued that the fees were paid for access to group assets and internal services such as management and administrative support. However, they could not provide any written service agreements or documentation to show how the fees were agreed or calculated.

Despite the lack of documentation, the original Federal Court judge accepted that the companies were likely expected to pay for the services based on how the group operated. The judge concluded that there was an implied or “inferred” obligation within the group to charge and pay these types of fees and therefore allowed the deductions.

The Commissioner of Taxation appealed that decision, and the Full Federal Court has now agreed with the Commissioner.

Decision

The Full Federal Court ruled that the taxpayers failed to prove they had a real legal obligation to pay the service fees, which is a requirement for claiming a deduction.

The key reasons were:

  1. No evidence of any agreement
    The Court found that there was no objective evidence showing that the taxpayers and the related entities had actually agreed to any service fee arrangement. Without written contracts or documentation setting out the terms, there was nothing to demonstrate a binding obligation.
  2. Payments don’t prove liability
    The fact that the taxpayers made payments did not prove that they had a legal obligation to do so. Payments made voluntarily or for administrative convenience cannot be claimed as deductions unless they are tied to a proper legal liability.
  3. Onus of proof sits with the taxpayer
    In tax disputes, the taxpayer must prove the Commissioner’s assessment is incorrect. Here, the taxpayers did not provide enough evidence to show that the deductions were valid. As a result, the Court dismissed their appeals and restored the Commissioner’s decision to deny the deductions.
Recommendations

This case is a reminder that service fee agreements and proper documentation will be needed to support intra group transactions in the future. To comply with the ATO, business should consider the following:

  1. Put service agreements in writing
    Always have written contracts in place for management fees, service fees, or cost sharing arrangements across group entities. These should outline the services, pricing method, and payment terms.
  2. Keep strong supporting records
    Retain board minutes, internal approvals, service logs, invoices, and any communications showing that the services were requested, agreed, and delivered.
  3. Review intercompany arrangements regularly
    As business operations change, service agreements and pricing models should be updated to stay accurate and defensible.4. Prepare for ATO scrutiny
  4. Prepare for ATO scrutinyThe ATO closely reviews intragroup charges, especially where documentation is weak. Having proper agreements and evidence makes it far easier to support deductions if reviewed or audited.

We recommend reviewing your arrangements and contacting your HLB Mann Judd tax advisor if you are unsure about your current situation.