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Reflecting on the major tax developments of 2024 and looking ahead to 2025.
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2024: The year in review
12 December 2024
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Against the backdrop of an unsettling and challenging year due to cost-of-living pressures, the impact of 13 interest rate rises in 15 months and global geo-political tensions, the tax profession dealt with the usual tax developments … and then some! This article reflects on the year that was and looks ahead to what’s in store for 2025.
Key developments this year
Reforms to TPB and TASA obligations
One issue affecting the tax profession dominated the narrative this year more than any other: the new breach reporting rules and additional obligations under the Code of Professional Conduct (Code) in the Tax Agent Services Act 2009 (TASA). Other TASA changes with a lesser impact took a back seat to these two significant measures.
Breach reporting rules
Some of the recommendations from the 2019 James Review of the Tax Practitioners Board (TPB) and the TASA were legislatively well-progressed in 2023, but the unforeseen insertion of the breach reporting rules (BRR) into that legislation in late 2023 was a game-changer. The BRR require registered tax practitioners (practitioners) to self-report or report other practitioners to the TPB within 30 days where they have reasonable grounds to believe that they or another practitioner has breached the Code on or after 1 July 2024, and the breach is a ‘significant breach’.
The TPB is expected to finalise its draft guidance on the BRR very soon.
Code Determination
Hopefully, lessons have been learned by the government from the saga of the Tax Agent Services (Code of Professional Conduct) Determination 2024 (Code Determination) insofar as timely consultation with key stakeholders is concerned. The legislative instrument was registered on 2 July 2024 by the Assistant Treasurer and Minister for Financial Services, Stephen Jones. The original form of the Code Determination that imposes eight additional obligations was a debacle. While public consultation had been undertaken in late December 2023 and January 2024, the registered form of the instrument differed from that consulted on – and there were show-stoppers, namely:
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The unworkable start date of 1 August 2024.
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Notification and disclosure rules that were widely considered an overreach and did not reflect the policy intent.
The government finally came to the table in August 2024 to work with the professional associations through a series of extensive roundtables and discussions and agreed to redesign the most concerning aspects of the Code Determination.
The priority was to defer the start date to allow practitioners a sensible and workable time frame to comply with the new rules. The application date of 1 January 2025 for larger firms and 1 July 2025 for smaller firms is a big improvement.
Next, the notification provisions (‘client dob-in rules’) were rewritten so they now require practitioners to disclose only certain (and limited) information about their clients to the (TPB or) ATO, and only in the most egregious circumstances. Further, the government agreed to narrow the scope of the otherwise unacceptably broad disclosure rules, which have been reshaped into an exhaustive list of matters that practitioners are required to disclose to their clients. The list is not unreasonable and finally puts to rest any concerns that information of a personal or medical nature would have to be disclosed.
Following a public consultation on the TPB’s draft guidance on the new rules, we await the release of the final guidance very soon. It is expected that further guidance will continue to be developed and released in early 2025.
myGovID renamed to myID
On 13 November 2024, the Government’s Digital ID app, myGovID, was renamed myID to reduce confusion with myGov. Users’ login details and identity strength remain the same, and users do not need to set up a new myID or reconfirm their details. Be wary of suspicious emails or SMS containing links as these are a scam.
Client-agent linking
Designed to help defend against attempts to harvest personal information and defraud the tax system, the new secure nomination process for clients to appoint or change registered tax and BAS agents, client-agent linking (CAL), was expanded to all ABN holders (other than sole traders) in November 2023.
In response to feedback from the professional associations and their members, the ATO made some enhancements earlier this year. However, CAL continues to challenge practitioners, particularly with:
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The inability to set up myID without a smartphone.
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The inability to obtain a Strong myID without an Australian passport.
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Outdated data on the Australian Business Register (ABR) that feeds into the Relationship Authorisation Manager (RAM).
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Corporate trustees of trusts and SMSFs that require manual connection over the phone (because the ABR does not allow a non-individual to be listed as an authorised person for an entity).
CAL will also be eventually deployed for individual taxpayers, including sole traders, following further consultation with stakeholders.
Stage 3 personal income tax cuts
As everyone is aware, new rates and thresholds apply from 1 July 2024 following enacted changes to the Stage 3 tax cuts in March 2024. The PAYG withholding tables were updated in mid-June 2024 to reflect the tax cuts.
Workers who are subject to PAYG withholding saw an immediate benefit with an increase in their take-home pay after 1 July 2024, but those who pay quarterly instalments will not see relief until they lodge their 2025 tax returns and determine their final tax liability. Any overpayment of tax for 2024–25 will be refunded.
Change to indexation of student loans
A change to the indexation of relevant student loans that existed on 1 June 2023 is expected to wipe $3 billion in student debt, benefiting more than three million Australians. Enabling legislation has reformed the formula used to index Higher Education Loan Program (HELP) loans so the indexation rate is the lower of the consumer price index (CPI) or the wage price index (WPI), rather than being based only on CPI.
The CPI indexation rate applied on:
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1 June 2023 has reduced from 7.1 per cent to the WPI rate of 3.2 per cent.
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1 June 2024 from 4.7 per cent to 4 per cent.
Students who chose to repay their loans in full before 1 June 2023 are not eligible for the indexation reduction.
A recently announced one-off 20 per cent reduction in outstanding balances before indexation is applied on 1 June 2025 is subject to the passage of legislation.
New reporting requirements for not-for-profits (NFPs)
Non-charitable NFPs
Non-charitable NFP organisations with an active Australian Business Number (ABN) seeking to be income tax exempt have new annual reporting obligations that came into effect on 1 July 2023. To self-assess as eligible for income tax exemption, these NFPs must lodge an annual NFP self-review return (SRR). The first SRR covers the 2023–24 income year and assists NFPs in determining the basis on which they self-assess as income tax exempt. NFPs need to report using the SRR, but they will not pay tax on their income unless they are a taxable NFP. More than 14,000 NFPs have already lodged their inaugural SRR.
The due date for lodging the 2023–24 SRR is 31 October 2024. However, the ATO has advised that, for 2023–24, NFPs have been given additional time to lodge the SRR, up to 31 March 2025. NFPs do not need to contact the ATO to request this extra time.
NFPs can submit their SRR online using Online services for business or by using a registered tax agent authorised to lodge on the NFP’s behalf. An important first step in preparing to lodge the SRR is to update any new associates and authorised contacts appointed to the NFP and related ABN details to access Online services for business using myID and RAM. If the NFP is appointing a tax agent for the first time, they need to securely nominate the agent through client-agent linking.
An NFP that does not meet the eligibility criteria in one of the eight categories of NFPs that can self-assess as income tax exempt will be taxable. A taxable NFP:
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Does not need to lodge the SRR as it must instead lodge an income tax return (or notify the ATO that a return is not necessary).
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May need to consider applying the principle of mutuality to their income – this is a legal principle established by case law and is based on the proposition that an organisation cannot derive income from itself.
Charitable NFPs
Charitable NFPs with an ABN are income tax exempt only if they:
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Register as a charity with the Australian Charities and Not-for-profits Commission (ACNC).
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Are formally endorsed by the ATO.
Charitable NFPs that do not register as a charity with the ACNC will be taxable, as they are not eligible to self-assess as income tax exempt. In this case, the taxable NFP may need to lodge an annual income tax return (or notify the ATO if a return is not necessary).
Small business instant asset write-off (IAWO) for 2023–24
The IAWO threshold for 2023–24 was temporarily increased to $20,000. Schedule 1 to the enabling legislation oscillated between the Senate and the House of Representatives for several months earlier this year, finally becoming law on 28 June 2024, just two days before year-end. The delayed passage created uncertainty for small businesses that were unclear on the tax treatment of their depreciating assets for most of 2023–24.
The increased threshold applies to eligible assets first used or installed ready for use from 1 July 2023 to 30 June 2024 by businesses with an aggregated annual turnover of less than $10 million.
Energy incentive
The temporary energy incentive enables eligible businesses (aggregated annual turnover of less than $50 million) to claim an additional 20 per cent deduction for the cost of eligible depreciating assets that support electrification and efficient energy usage. Eligible assets or upgrades needed to be first used or installed ready for use between 1 July 2023 and 30 June 2024. Up to $100,000 of expenditure is eligible for the incentive and the bonus deduction is capped at $20,000 per business. (See Schedule 2 to the enabling legislation.)
Increased superannuation guarantee rate
The superannuation guarantee rate for 2024–25 increased to 11.5 per cent, up from 11 per cent for 2023–24. The increased rate applies to the ordinary time earnings of salaries and wages paid from 1 July 2024, irrespective of when the work was done or the pay period to which the payment relates.
The rate increases again on 1 July 2025 by 0.5 per cent to 12 per cent. This is the last currently legislated increase in the rate.
Changes to foreign resident capital gains withholding rules
Under legislative changes that apply from 1 January 2025:
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The foreign resident capital gains withholding rate increases from 12.5 per cent to 15 per cent; and
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The $750,000 threshold – below which withholding does not apply for transactions involving taxable Australian real property and certain indirect Australian real property interests – will be removed.
While targeting foreign residents, these changes will also affect Australian residents selling real property for less than $750,000 who, to date, have not needed to obtain a clearance certificate. This will be necessary from the start of next year to avoid withholding on the sale of their homes and investment properties.
Another increase in penalty unit
Enabling legislation increased the amount of a penalty unit from 7 November 2024 from $313 to $330. This affects the amount of penalties imposed across the tax system for non-compliance.
Denying deductions for GIC and SIC
The general interest charge (GIC) and shortfall interest charge (SIC) will be non-deductible from 1 July 2025.
Schedule 2 to the enabling legislation, which proposes to give effect to the Government’s announcement, is before the House of Representatives.
Luxury car tax (LCT) changes
The definition of a fuel-efficient car will be updated by reducing the maximum fuel consumption for a car to be considered fuel-efficient for LCT purposes from (currently) 7 litres per 100 kilometres to 3.5 litres per 100 kilometres. The change will broadly apply from 1 July 2025.
Schedule 1 to the enabling legislation, which proposes to give effect to the Government’s announcement, is before the House of Representatives.
Dispute resolution
The Administrative Review Tribunal (ART) was replaced by the Administrative Appeals Tribunal (AAT) on 14 October 2024. The ART is a new federal body tasked with conducting merits reviews of administrative decisions, including tax rulings and has assumed all existing AAT cases.
What’s still outstanding and what’s in store for next year
Small business instant asset write-off (IAWO) for 2024–25
The unlegislated extension to 30 June 2025 of the temporary increase in the IAWO threshold to $20,000 – overlaying the legislated measure for 2023–24 (see above) – continues to create uncertainty for small businesses. The IAWO is proposed to be $20,000 for 2024–25 for eligible depreciating assets first used or installed ready for use by small businesses by 30 June 2025. This marks the seventh change in the IAWO threshold since 12 May 2015.
The Opposition moved amendments in the Senate proposing a permanent threshold of $30,000 from 1 July 2024 but this proposal was not accepted. On the last Parliamentary sitting day for 2024, the Bill was amended in the Senate to omit the enabling schedule, ensuring passage of the remaining measures.
Accordingly, the proposed $20,000 threshold for 2024–25 is in doubt. Without this measure, the threshold reverts to the standard legislated threshold of $1,000 from 1 July 2024. While the government has indicated it will revisit the measure in the new year, yet again, small businesses have no certainty on the tax treatment of their depreciating assets for 2024–25 six months into this income year.
Bendel appeal on Division 7A unpaid present entitlements
The Commissioner’s appeal to the Full Federal Court (the Court) from the decision in Bendel and Commissioner of Taxation [2023] AATA 3074 is being closely monitored by those who control corporate beneficiaries that have UPEs with an associated trust. In that case, the Tribunal found a UPE arising from an entitlement to income (or capital) of a trust is not a loan for Division 7A purposes.
This finding is in direct contrast to the administrative position taken by the ATO in public guidance issued over the past 14 years. Following the release of an interim decision impact statement in November 2023, the ATO will not be issuing any further guidance while the appeal is pending. Importantly, although the Tribunal’s decision is administrative only and does not change the law, the Court’s decision will confirm the character of a UPE at law.
The Commissioner’s appeal has test case funding and was heard on 22–23 August 2024. The Court’s decision has been reserved and we await its release. A decision either way (in favour of the Commissioner or one in favour of the taxpayer) will have implications, and there is the potential for a special leave application to appeal the Court’s decision to the High Court. This may not be over yet.
Division 296 tax
In 2023, the government proposed to introduce a new tax from 1 July 2025 on individuals with a total superannuation balance of more than $3 million on 30 June 2026. New Division 296 – a proposed insertion into the Income Tax Assessment Act 1997 – would tax at 15 per cent the earnings attributable to that part of an individual’s balance that exceeds $3 million.
The Tax Institute and other stakeholders have raised concerns that taxing unrealised gains would set a dangerous precedent for future tax proposals and that the unindexed $3 million threshold would effectively equate to ‘bracket creep’ over time.
The enabling legislation was divided into two bills on 28 November 2024 to ensure passage of the non-Division 296 measures. The Division 296 legislation remains before the Senate. The Bill is unlikely to be debated before the 2025 Federal election and is expected to lapse with the election.
Payday super
Under Payday super, employers will be required to pay their employees’ superannuation at the same time as their salary and wages from 1 July 2026. Targeted consultation continues with key industry stakeholders, as we await the release of exposure draft legislation. Treasury’s recent factsheet sets out further policy details.
Parliament, the federal election and the status of ABUMs
The country awaits the Prime Minister’s call on when the 2025 federal election will be held. A half-Senate election must be held no later than 17 May 2025 to enable newly elected senators to start their six-year term on l July 2025. This is expected to be held with a concurrent House of Representatives general election (noting the latest date for a House-only election is 27 September 2025).
There are no more sitting days for 2024. The 47th Parliament is scheduled to resume on Tuesday 4 February 2025. If a general election is held in May 2025, then the federal budget 2025–26 (budget) is expected to proceed as scheduled on Tuesday 25 March 2025. However, if the government holds the election earlier, it is unclear whether the budget would be released before or after the election, given any sitting days ahead of a March 2025 election are unlikely.
Once the election writs are issued, the government assumes a conventional caretaker role. Any legislation before the House of Representatives lapses, and bills before the Senate lapse immediately before the commencement of the next Parliament. Accordingly, it may be some time before we know the fate or progress of the long list of announced but unenacted measures (ABUMs).
About the author
Robyn Jacobson is the Senior Advocate at The Tax Institute.
About the Tax Institute
The Tax Institute is the leading forum for the tax community in Australia. Our reach includes membership of over 10,000 tax professionals from commerce and industry, academia, government and public practice and 40,000 Australian business leaders, government employees and students. We are committed to representing our members, shaping the future of the tax profession and continuous improvement of the tax system for the benefit of all, through the advancement of knowledge, member support and advocacy. Read more at taxinstitute.com.au
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