Operating across multiple entities is common for growing businesses. Whether for asset protection, tax structuring or operational efficiency, group structures can deliver significant benefits.

However, a recent Full Federal Court decision has reinforced a critical legal point: if arrangements between related entities are not properly documented, they may not be legally enforceable.

This can expose businesses to regulatory risk, financial loss and disputes, even where the underlying commercial activity is legitimate.

The Legal Issue

In S.N.A Group Pty Ltd v Commissioner of Taxation [2026] FCAFC 10, the Court considered whether intra-group service charges were legally incurred.

While services had clearly been provided and charges were commercially reasonable, the Court found there was insufficient evidence of enforceable legal obligations between the entities.

As a result, the arrangements failed from a legal perspective.

What Went Wrong

The issues identified in the case are common across many business groups:

• Expired agreements that were not updated or replaced
• No formal contracts governing services or asset use
• Lack of invoicing between related entities
• Payments not clearly linked to specific services
• Transactions recorded after the fact, rather than as they occurred

The group relied on informal or implied arrangements. The Court rejected this, confirming that legal rights and obligations must be clearly established and evidenced.

Why This Matters for Your Business

This decision goes beyond tax. It highlights broader legal and governance risks that can arise where intra-group arrangements are not properly structured.

Without clear documentation, businesses may face:

• Regulatory challenges from authorities reviewing transactions
• Difficulty enforcing agreements between entities
• Increased risk for directors in meeting governance obligations
• Complications during audits, restructures or business sales
• Disputes between related entities or stakeholders

In practice, informal arrangements that “work operationally” can fail when tested legally.

5 Key Legal Elements to Get Right

1. Written Agreements

All arrangements between related entities should be clearly documented.

This includes:

• Service agreements
• Management or administration agreements
• Asset or intellectual property licences
• Lease or property use arrangements

Agreements should set out:

• The scope of services or assets provided
• The basis for calculating fees
• Payment terms and timing

2. Contemporaneous Documentation

Legal obligations should be created and recorded at the time the arrangement is entered into, not retrospectively.

Backdating or reconstructing arrangements after year-end creates significant risk.

3. Clear Invoicing and Payment Processes

Transactions between entities should be supported by:

• Regular invoices
• Consistent payment of amounts invoiced
• Clear records linking payments to specific obligations

This helps demonstrate that the arrangement is genuine and enforceable.

4. Alignment with Commercial Reality

Documentation should reflect how the business actually operates.

If the legal structure does not align with day-to-day operations, it increases the risk that arrangements will be challenged.

5. Ongoing Review and Governance

Group structures evolve over time. Agreements should be:

• Regularly reviewed and updated
• Adjusted where business operations change
• Integrated into broader governance processes

Common Pitfalls to Avoid

• Allowing agreements to expire without renewal
• Relying on verbal or informal arrangements
• Leaving inter-entity charges to be calculated after year-end
• Failing to issue invoices or properly record transactions
• Using documentation that does not reflect actual operations

How Hillhouse Legal Partners Can Help

Hillhouse Legal Partners advises businesses on structuring, documenting and managing intra-group arrangements to ensure they are legally sound and commercially aligned.

Our Corporate and Commercial team can assist with:

• Drafting and reviewing inter-entity agreements
• Structuring group arrangements
• Governance and compliance frameworks
• Preparing businesses for audits, transactions or restructuring

We work closely with your accountants and advisors to ensure your legal and commercial position is aligned – simply strategic.

Get in Touch

If your business operates across multiple entities, now is the time to review your documentation.

Visit our Corporate and Commercial team here:
https://hillhouse.com.au/expertise/corporate/corporate-commercial/

Or contact our team to discuss how we can support your business.