The single largest factor in the underlying deterioration of the federal budget announced by Treasurer Joe Hockey in December was a cash payout of almost $900 million to Rupert Murdoch’s News Corporation.
The massive windfall, revealed in the US group’s accounts a week ago in New York, was at a time when News Corp newspapers were highly critical of the budget and called for deep cuts.
The drama over the payout, one of the largest cash payments made by the Tax Office, played out behind the scenes during the federal election.
On July 25 the Federal Court of Appeal ruled against the Tax Office to allow News Corp to claim a $2 billion deduction from a series of paper shuffles between subsidiaries.
At the time, The Australian Financial Review speculated the win would be worth up to $600 million in future tax benefits, but interest charges had pushed the payout far higher.
The Tax Office was deciding whether to appeal against the judgment as News Corp newspapers launched a ferocious attack on the government, kicking off with the Daily Telegraph’s headline on August 5, 11 days after the court judgment: “Kick this mob out.” In the following days, Labor leader Kevin Rudd would claim that News Corp was running a virulent anti-government campaign in exchange for concessions from the Coalition.
The Tax Office had 28 days to lodge an appeal, a deadline of August 22.
News Corp later reported that the ATO had advised it would not appeal the case. An ATO spokeswoman said all decisions on whether to appeal a court decision are made by senior officers after seeking external legal opinion.
News Corp’s half-year accounts say “a foreign tax authority” paid $A882 million, in instalments. This included the original tax plus several hundred million dollars of interest.
From the moment the decision was made in late August not to appeal, the payout was an outgoing that had to be applied to the federal budget.
In the December mid-year update, Mr Hockey revealed a major blowout in the 2014 deficit since Labor’s statement on August 1 that underlined the need for major spending cuts.
