The top Accounting Times stories for 2024 revealed

1. Treasurer defends revised stage 3 tax cuts plan

Treasurer Jim Chalmers defended proposed changes to the stage 3 tax cuts which aimed to deliver significant cost of living relief to middle Australia. The revised tax plan would provide lower-income earners with greater tax relief, but halve tax cuts for higher-income earners. Prime Minister Anthony Albanese said the revised plan would deliver tax cuts to every Australian taxpayer. The revised stage 3 tax cuts reduced the lowest rate of income tax from 19 per cent down to 16 per cent for taxpayers earning less than $45,000.

2. ATO issues guidance on debt deduction creation rules and Division 7A

The Tax Office published an update explaining how the enacted debt deduction creation rules applied to private businesses and privately owned groups. The debt deduction creation rules kicked in and apply for income years that commenced on or after 1 July 2024. The rules were passed as broader changes to the thin capitalisation rules by the government and resulted in related-party debt deductions for certain related-party arrangements being disallowed. The rules applied to multinational businesses that operated in Australia and at least one other jurisdiction, including private businesses and privately owned groups.

3. Court calls brothers’ bluff in $16m tax appeal

Two brothers lost in court when they tried to claim that millions in unexplained bank deposits were gambling winnings and not taxable income. The brothers were served with a tax bill exceeding $15.7 million after the court dismissed their appeal against ATO assessments for income years between 2011 and 2016. The brothers claimed the unexplained sums were gambling winnings or loan repayments from fellow gamblers rather than undeclared income from their concrete plumbing business.

4. ATO flags biggest compliance issues from Top 1,000 program

The Tax Office outlined common areas of concern based on assurance review data from its Top 1,000 tax performance program. 1,183 taxpayers were reviewed since the ATO began assurance reviews in 2016, with 24 per cent of taxpayers in the review having achieved an overall high assurance. The majority of taxpayers achieved overall medium assurance, which the ATO said was a satisfactory outcome and provided a level of confidence about tax paid.

5. ATO offers lodgment deferral for CBC reporting

The Tax Office extended its lodgment deadline for country-by-country reporting entities to 31 January 2025. According to the ATO, the deferral applied to local files, master files and CBC reports due to be lodged by 31 December 2024, including those that had a replacement reporting period that ended on 31 December 2023. The lodgment deferral would automatically apply and a separate request for the deferral was not required.

6. Dob-in provisions to lead to ‘devasting outcomes’ for tax agents, Tax Institute warns

The breach reporting rules introduced in July were expected to have created a challenging environment for tax agents and could result in practitioners being falsely accused of misconduct. According to the Tax Institute, the dob-in provisions or breach reporting rules were one of the most significant changes passed in the new provisions to the Tax Agent Services Act. The provisions were introduced as an amendment to the Treasury Laws Amendment Bill 2023 and required tax agents to notify the TPB of code breaches.

7. ATO’s warning to agents: stop ‘grave digging’ for GST refunds

Advisers were warned by senior officials that if they aggressively hunted down old tax claims to collect contingency fees would attract regular scrutiny from the ATO. In a speech to practitioners, deputy commissioner Rebecca Saint and senior director Virginia Gogan said the ATO would act quickly to stamp out advisers’ dodgy practices. The ATO was concerned some advisers were pursuing aggressive claims without proper documentation or in direct contradiction to published guidelines.

8. Taxpayer wins High Court appeal in luxury car tax case

A taxpayer won an appeal against the Commissioner of Taxation in the High Court decision Automotive Invest Pty Limited v Commissioner of Taxation [2024] HCA 36. The High Court set aside previous orders from the Full Federal Court in a decision concerning luxury car tax and GST. The decision concerned the Gosford Classic Car Museum, operated by Anthony Denny, which held a collection of vintage and luxury cars that were also for sale. The court examined whether the taxpayer was liable for luxury car tax and GST for the tax periods from June 2016 to November 2027 for 40 cars it had acquired and displayed in the museum.

9. KPMG fined US$25m over exam cheating at the ‘highest levels’

US audit regulator PCAOB issued KPMG Netherlands with the largest fine in the regulator’s history over widespread exam cheating at the firm. On the same day, the US regulator also announced fines against two Deloitte firms for similar exam cheating behaviour. PCAOB found that over the five years from 2017 to 2022, KPMG Netherlands failed to protect against the improper answer sharing of hundreds of its professionals in internal training tests. The wrongdoing occurred due to an inappropriate tone among the firm’s senior leadership which failed to promote an ethical culture.

10. Accounting firm fined $26m for using confidential client information

Mulcahy & Co and its director were ordered to pay millions for breaching confidentiality and fiduciary obligations owed to clients. Justice Jim Delany of the Victorian Supreme Court ordered the Ballarat accounting firm and a related party to pay more than $26 million for relying on confidential information to act on a business opportunity at the expense of its clients. The case demonstrated that trading on confidential client information could prove costly not just for the big four, but for smaller firms as well.