On 7 December 2017, the ATO published the corporate tax transparency report for 2015–16 which includes some tax information of more than 2,000 large companies operating in Australia. You can read more about the ‘Transparency Measure‘ and the this Report on the ATO site. Also, many companies provide significantly more detailed information through the Board of Taxation’s Voluntary Tax Transparency Code. The ATO strongly encourages companies that have not yet signed up to do so.
The report includes:
- 1,693 Australian public and foreign-owned companies with an income of $100 million or more, and
- 350 Australian-owned resident private companies with an income of $200 million or more.
The companies account for more than $38 billion or almost 60 per cent of total company income tax payable in 2015-16, most of which was paid voluntarily. In 2014–15, large corporate groups paid 91 per cent of their tax due voluntarily, with a further three percent raised through ATO compliance activities. Deputy Commissioner Jeremy Hirschhorn said “Australia has one of the strongest corporate tax systems in the world.” The ATO is trying to increase even this level of compliance. This is being achieved through the establishment of the Tax Avoidance Taskforce, and the introduction of new laws such as the Multinational Anti-Avoidance Law (MAAL), the Diverted Profits Tax (DPT) and Country-by-Country reporting (CbC).
The ATO foreshadowed that there may be a focus on the number of groups which paid either no tax or small amount of tax relative to gross income but warned that is important to remember that:
- corporate income tax is payable on profits, not gross income;
- in any given year a significant percentage of even the largest companies make losses, not just for tax purposes, but also for accounting purposes [and, for that matter, the tax law allows substantial amortising deductions, for capital expenses (sometimes in excess of accounting amortisation), which ‘front ends’ the project, taking some years before it is net assessable];
- it reflects the tax returns as lodged, and does not reflect subsequent ATO compliance activity. “In the last financial year alone, we issued more than $4 billion in amended assessments relating to prior years to public groups and multinationals, and we have already issued a further $1 billion in amended assessments this financial year. These amounts are not reflected in the corporate tax transparency data,” Mr Hirschhorn said.
Mr Hirschhorn said the information published today reflects the state of the economy in 2015–16, which saw a significant drop in profitability of energy and resources companies, a sector where company profits are highly dependent on commodity prices. On the back of solid growth in company profits and higher commodity prices, we are seeing a strong increase in company tax collections in 2016–17 which will be reflected in the data next year,
In addition, we expect to begin to see the impact of the MAAL in the 2016–17 data as companies restructure to comply with the requirements of the new law. In the coming years the data will reflect an estimated $7 billion each year of increased sales returned in Australia as a result of the operation of the MAAL and will also reflect restructures made by companies to avoid paying the DPT. Increasingly, the data will also reflect our approach to resolving past matters in requiring future compliance to be “locked in”.
The ATO also encourages companies, who do not already file General Purpose Financial Statements (GPFS), with the Australian Securities and Investments Commission (ASIC), to adopt a “best practice” approach, to the recent GPFS measure, applying to Significant Global Entities.”
[ATO website – report release; FJM; LTN 236, 8/12/17; Tax Month Dec 2017]