When a Handshake Isn’t Enough: What Family Businesses Can Learn from the Coronis Service Fee Case

On 17 February 2026, the Federal Court delivered its decision in the Coronis real estate service fee case (Commissioner of Taxation v S.N.A Group Pty Ltd [2026] FCAFC 10), serving as an important warning for family businesses operating through multiple entities.

The case involved the Queensland-based Coronis real estate group and centred on whether millions of dollars in intra-group ‘service fee’ payments were genuinely deductible for tax purposes. The ATO issued amended income tax assessments after denying the deductions, arguing there was no legally enforceable agreement supporting the payments.

The group challenged the assessments. Ultimately, the Court ruled in favour of the Commissioner of Taxation, denying the deductions for the intra-group service fees.

The message from the Court was clear: Commercial reasonableness is not enough. If you cannot prove a legally binding obligation to pay, then the deduction may fail.

What Happened?

In 2005, the Coronis group restructured for asset protection purposes. Operating companies were separated from trusts that held key assets, including trademarks, the rent roll and certain staff.

Written agreements required the operating entities to pay service fees to the trusts for the use of those assets. However, those agreements expired in 2015.

The group continued operating as usual. Payments labelled as ‘service fees’ continued between 2016 and 2019, totalling approximately $2.5 million per year, and were claimed as tax deductions.

The problem? They didn’t put any new written agreements in place.

The Court found that after the agreements expired, there was insufficient evidence of a legally enforceable contract requiring the operating entities to pay those amounts. While services may have continued to be provided, and while payments continued to be made, the taxpayers could not demonstrate a binding legal obligation to incur those expenses.

Without that legal foundation, the deductions failed.

Why The Deductions Were Disallowed

The Federal Court identified several critical deficiencies that led to their decision to disallow the deductions.

1. No clear evidence of a valid binding contract.

There was no clear evidence that a legally enforceable agreement existed after 2015. Informal discussions and assumptions were not enough to prove contractual obligation.

2. Inconsistent explanations of the fee calculations.

Directors gave conflicting evidence about how the service fee was determined (including references to an ‘8% benchmark’), and the payments did not consistently align with any stated methodology.

3. Payments did not reflect genuine service fees.

Evidence showed that amounts coded as ‘service fees’ included:

• Distributions.
• Loan repayments.
• Salary reimbursements.
• Surplus cash transfers.

Between $636,000 and $1.3 million per year was found to be miscoded.

4. No tax invoices issued.

Although GST was recorded in the books, no tax invoices were issued between entities, which is inconsistent with a genuine commercial arrangement.

Wider Implications for Businesses

While this case involved a large real estate group, the implications are far broader.

This decision is particularly relevant to:

• Family business groups operating across multiple entities.
• Service trust arrangements.
• Businesses that restructured years ago and ‘never revisited’ the documentation.
• Groups where the same directors sit on both sides of transactions.
• Businesses relying on informal understandings or historical agreements.

Many groups operate on trust, habit and long-standing relationships. But the ATO, and the Courts, require evidence.

The ATO continues to focus on compliance around:

• Intra-group arrangements.
• Service trusts.
• Related-party transactions.
• Asset protection structures.

Many businesses implemented these structures 10–20 years ago. Few have reviewed them recently.

This case is a timely reminder that what was set up as acceptable practice years ago may not withstand scrutiny today.

The Key Takeaways for Business Owners

1. Expired agreements create real risk.

If your service agreements, loan agreements, or management agreements have expired, but payments continue, you may be exposed.

2. Commerciality alone is not enough.

Even if:

• The fees are reasonable.
• Services are genuinely provided.
• The amounts fall within an arm’s-length range.

The deduction can still be denied if you cannot prove a contractual obligation. The Court made it clear that arm’s-length pricing is not, by itself, proof of a binding agreement.

3. Documentation must match reality.

If you label payments as ‘service fees’, then they must genuinely represent consideration for services – not surplus cash movements or mixed transactions.

Accounting labels do not determine tax deductibility.

4. Governance matters, even in family groups.

The Court’s reasoning highlights that informal conversations and long-standing understandings do not replace properly executed agreements.

Where related entities transact, the same legal standards apply as they would between unrelated parties.

What Should You Do?

If your business operates with:

• Service trusts;
• Management fee arrangements;
• Inter-entity loans;
• Asset-holding trusts; and/or
• Related-party payments.

Now is the time to reflect and review:

• Are agreements current and properly executed?
• Do the terms reflect actual commercial practice?
• Have you issued invoices?
• Are payment calculations documented and defensible?

How Aintree Group Can Help

At Aintree Group, we specialise in integrated advice for business owners and family groups.

Our accounting and legal teams work together to:

• Review existing intra-group agreements.
• Identify risk in service trust or management fee structures.
• Update or re-document arrangements where required.
• Ensure compliance with current tax and legal standards.
• Strengthen asset protection without compromising deductibility.

If you haven’t had a review of your agreements in recent years, we strongly recommend a proactive review.

The cost of reviewing now is far less than the cost of defending an ATO audit later.

Book a Review

If you would like clarity around your structure or related-party arrangements, contact us to arrange a review of your business circumstances. Because in tax law, a handshake is not a contract.

This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice.