Tax compliance - large corporations

The Australian Taxation Office (ATO) has published its seventh annual Corporate tax transparency report which analyses the 2019-20 tax returns of some of Australia’s largest corporations.

This article explores the key findings of the report, and the ATO’s assessment of how compliant large companies have been in meeting their tax obligations.

 

Entities covered in the report

The 2019-20 tax transparency report covers 2,370 corporate entities, of which:

  • 1,378 are foreign-owned companies with an income of $100 million or more.
  • 513 are Australian public entities with an income of $100 million or more.
  • 479 are Australian-owned resident private companies with an income of $200 million or more.

 

How much tax was paid?

The companies in the report paid a combined total of $57.2 billion, or around 65 percent of all corporate income tax in 2019-20. This represents an increase of two percent compared to the previous reporting period, with the growth in tax payable largely driven by the mining sector.

The ATO found that most large corporations are paying the right amount of tax. While the ATO has not reported on the tax gap for 2019-20, it estimates that for 2018-19 there was a net gap of 4.3 percent or $2.6 billion after ATO engagement. This means that large corporate groups paid over 95 percent of the theoretical total amount of income tax payable in 2018-19.

 

ATO intervention

While data in the report does not reflect any intervention or compliance work conducted by the ATO after lodgment of tax returns, ATO intervention in cases involving tax evasion has had a significant impact on increasing general tax compliance.

Since its inception in 2016, the Tax Avoidance Taskforce has allowed the ATO to collect over $10 billion in additional tax from public and multinational businesses while driving improved tax compliance.

The ATO has also established the Justified Trust program, which requires the largest businesses to provide assurance that they are paying the right amount of tax.

 

A trend of increased tax compliance for large corporations

In discussing the ATO’s engagement with large corporations, Deputy Commissioner Rebecca Saint said that “While the tax paid by this population may fluctuate year on year, the overall trend couldn’t be clearer. Corporates are placing a higher value on tax compliance, driving consistent and willing voluntary participation.”

Regarding the top 100 Australian taxpayers, Ms Saint said that the number of taxpayers achieving a high assurance rating increased from 6 percent in 2019 to 49 percent in 2021. “We attribute this to a combination of businesses recognising that investing in their tax governance has tangible real-world benefits – as well as a significant investment of time and resources by the ATO in scrutinising structures, transactions and tax governance frameworks”, Ms Saint said.

 

Key takeaways

In its latest report, the ATO has found that large corporations generally have a high level of compliance in meeting their tax obligations. There has been a marked increase in compliance in recent years due to the work of specialist ATO taskforces and programs.

Nyman Gibson Miralis provides expert advice and representation in cases involving tax offences.

Contact us if you require assistance.