The ATO’s fifth annual report on corporate tax transparency shows that 2,214 of Australia’s largest companies paid $52.3 billion in income tax in 2017–18, contributing to over 60 per cent of all corporate tax paid in that year.
These large corporates include 1,197 foreign-owned companies with an income of $100 million or more, 594 Australian public entities with an income of $100 million or more, and 423 Australian-owned resident private companies with an income of $200 million or more.
Compared to 2016–17, tax payable rose by $6.6 billion, primarily driven by strong commodity prices and a net increase of 105 entities.
Of the 2,214 entities, 710 did not pay tax, down from 722 in 2016–17.
These 710 entities either had prior-year losses available to deduct against their profit, reported an accounting loss, reported an accounting profit but reconciliation items resulted in a tax loss, or reported a taxable income but were also entitled to offsets at least equal to the tax otherwise payable.
“Paying minimal or zero tax may be a result of companies making a loss, utilising losses from prior years or having projects operating in start-up phase. However, groups that consistently report losses or unusually low taxable income are more likely to attract ATO attention,” said ATO deputy commissioner Rebecca Saint.
“The positive trend we are now observing is that many companies have ceased generating accounting losses and are now offsetting profits by utilising losses from prior years. We expect many companies to exhaust these losses and begin paying income tax in the coming years.
“However, companies that consistently report sustained losses do raise a red flag. The community should be reassured that we closely scrutinise the tax affairs of the largest companies.”
Corporate tax gap
ATO analysis of the entire market estimated that in 2016–17, these large corporate groups lodged returns recognising on average 92 per cent of the theoretical tax payable, moving to 96 per cent after compliance activity.
However, individuals on average pay 94 per cent of the tax due at lodgement.
“The community would expect that large corporate groups should hold themselves to even higher standards,” the ATO said.
“The challenge we have set, for large corporate groups and ourselves, is to increase the voluntary tax performance of large business to 96 per cent on average, and 98 per cent after compliance activity.”
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.