Tax Transparency: reporting of entity tax information

In making this private companies report, the Commissioner recognises that he has a legislative duty to report certain specified information (including the amount of tax paid) by certain corporate tax entities for the 2013–14 income year and later income years under s3C of the Taxation Administration Act 1953 (TAA). These entities include certain foreign controlled entities with total income of $100m or more (s3C(1)(a)) and Australian private companies,  with total income of $200m or more (s3(1)(b)). This private company reporting happened in March 2016 (later than for foreign entities in December 2015). There was split reporting, in respect of the 2013-14 year, as s3C(1)(b) was inserted later, by the Opposition using its numbers in the Senate to amend to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015, to insert a new cl4A into Sched1. It was this provision which inserted a new para (b) into s3C(1) of the TAA.

Various headings:    In this page on the Commissioner’s website, he traverses material under the following headings: About the report; Information included in the report; Entities may provide more information; Tax return labels; Total income (Label 6S of ITR); Taxable income (Label 7T); Income tax payable (Label T5); Background information; factors affecting taxable income; Factors affecting tax payable.

[ATO website] [Related Tax Month article]

 

 

Corporate tax transparency – further contextual background

The transparency population:   In 2013–14, more than 1,800 corporate tax entities (for income tax purposes) met the required income thresholds. These entities represent more than 1,600 economic groups. Some economic groups had two or more tax groups and other non-consolidated entities within them. Foreign entities outnumbered public entities with income exceeding $100 million but public entities were typically a much larger presence in Australia. Public entities were clustered in the financial services, insurance and mining sectors while foreign entities were prevalent in the wholesale sector. Australia’s largest private companies (those who reported total income of $200 million or more) operated across many sectors of the economy, but were most prevalent in the manufacturing, sales and services, banking and finance sectors. These largest corporations tend to operate in sectors of the Australian economy that are characterised by a high degree of capital intensity, economies of scale, and are exposed to cross-border trade.

Other headings:   In this page on the Commissioner’s website, he traverses material under the following headings: Understanding tax performance; Tax groups not aligned with accounting groups; Economic and tax losses; Stapled groups; Life insurance companies; Offshore banking units; Taxation of financial arrangements; Permanent establishment; Reductions in tax payable; Ensuring taxpayers pay the correct amount of tax; Assurance; Audit yield; Our areas of focus; International risks; Structuring Risks.

[ATO website]

 

The 2013-14 Report of Entity Tax Information

You can go to the Report page, which in turn directs one to a downloadable spreadsheet. Go to the ‘December’ tab for the foreign controlled entities and the ‘March’ tab for the large Australian private entities.

The information is often indeterminate for the reasons alludes to by the Commissioner (in the above webpages). Further, the names of many of these private companies will not be familiar to readers. I have sifted through some of the more recognisable names, as follows.

  • Taxable income and tax payable reported: Henley Properties; Insurance Manufacturers of Australia; Linfox; Rip Curl Group; Simonds; Stratco Holdings; various Teys companies; The Myer Family Investments; Win Corporation.
  • Taxable income reported but no tax payable: Pratt Consolidated Holdings.
  • No taxable income or tax payable reported: Hoyts Group; Macdonalds Asia Pacific Consortium; Peters Food Group; United Energy Distribution Holdings.

 

 Privately owned and wealthy groups demographics

In this page on his website (not directly relevant to this Transparency Report), the Commissioner goes on to note that, in the ATO’s approach to tax assurance activities, we segment privately owned and wealthy groups into three populations. There are:

  • 156,582 private groups
    • economic groups with an annual turnover of greater than $2 million that are not public groups or foreign-owned
  • 128,005 wealthy Australians (WA)
    • Australian-resident individuals who, together with their associates (often including small business enterprises), effectively control an estimated net wealth of between $5 million and $30 million
  • 4,586 high wealth individuals (HWI)
    • Australian-resident individuals who, together with their associates, effectively control an estimated net wealth of $30 million or more.

Note that these populations are not mutually exclusive – some associated entities belong to more than one population:

Diagram showing the overlap of the high-wealth individuals, wealthy Australian and private groups population segments described above. Of the 156,582 private groups: 35.8% of private groups have links to wealthy Australians, 8.0% of private groups have links to high-wealth individuals.

 

 

This data was current at September 2015 and is based on data for the 2013–14 financial year.

[ATO website]

 

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