More than 1,200 large companies paid no tax, ATO reveals, as it vows to fight profit shifting

More than 1,200 large companies paid no tax in 2022-23, an Australian Taxation Office (ATO) report reveals.

The ATO’s tenth corporate tax transparency report, which covers 3,985 entities that lodged tax returns in 2022–23, found that while the amount of tax collected increased due to higher mining and oil and gas company profits, there were still 1,253 entities (31 per cent) that did not pay tax.

The report attributes no tax being paid to various reasons, including companies making an accounting loss or claiming tax offsets that reduced their tax bill to zero.

ATO Deputy Commissioner Rebecca Saint said there were “legitimate reasons” why a company may pay no income tax, and that the agency plays close attention to ensure that companies “are not trying to game the system”.

The ATO also provided ABC News with exclusive data about the number companies they have issued tax bills against and the cases currently under dispute.

It said 124 companies had assessments raised against them during the 2024 financial year, to the value of about $2.76 billion.

The bulk of the liabilities ($2.5 billion) was raised against 24 different taxpayers following audit and review activities.

About $2.22 billion of the $2.76 billion was being disputed by 14 different taxpayers, and some of that money has been paid to the ATO under what’s known as a 50:50 arrangement.

Global minimum tax rate ‘isn’t going to solve profit shifting issues’

About 140 countries including Australia have signed up to the Organisation for Economic Cooperation and Development (OECD) “Global Minimum Tax” deal, a plan that’s been decades in the making.

The tax deal imposes a minimum rate of 15 per cent on the profits of multinationals, aiming to end the days of “no-tax havens” where multinationals could easily get away with paying no tax at all.

While the deal requires companies to pay that as a minimum on corporate profits, Ms Saint notes that’s still a big difference with the corporate tax rate in Australia of 30 per cent and “‘it’s not going to solve Australia’s global profit shifting issues”.

“I think it is good that globally, there’s consensus to move to a global minimum tax rate of 15 per cent,” she said.

“However, I would say to you, there is still a big difference between 30 per cent and 15 per cent.

“So, whilst we might see some reduced appetite for this type of behaviour, we’re still expecting that it’s going to be a key risk that we’re going to need to monitor and to take appropriate action.

She said a significant amount of the ATO’s compliance work was focusing on companies “mispricing” or “mischaracterising” during cross border dealings.

“We say (to the company) ‘well, in substance, that’s not actually what is happening, and we think in substance, there is a different tax outcome’,” she said.

She referred to public cases including the ATO’s case against US-based beverage giant PepsiCo.

The company is disputing the tax bill through the courts.

The ATO alleges Pepsi owes millions in royalty withholding tax and diverted profits tax over deals with the former Schweppes Australia, subsequently Asahi Beverages, for the 2018 and 2019 financial years.

“So mis-characterisation of business dealings or capital flows in an attempt to reduce the profit in Australia is something that we’re really focused on.”

Asked whether, in addition to food and beverage and retail brands, the ATO was also seeing problems in the technology sector, she said: “We’ve certainly got issues with the tech sector.”

She noted business models for data centres was increasingly under focus.

For the first time, ATO includes smaller private companies in its report

It is the first year that data for Australian-owned private entities with total income between $100 million to $200 million is being reported, which is why there’s now close to 4,000 entities included in the report.

Compared to 2021–22, this represents a net increase of 1,272 entities or 46.9 per cent.

Of all the entities included in the report, their total taxable income was $381 billion, an increase of 11.3 per cent on the year before.

For the 69 per cent of entities that did paid tax, the ATO collected a total of $97.9 billion from them.

This is an increase in tax payable of about $14 billion, or 16.7 per cent, on the year before.

The ATO is required under law to publish tax information reported to it by certain large companies each year.

Of the 3985 corporate entities covered:

• 1,646 are foreign-owned companies with an income of $100 million or more
• 600 are Australian public entities with an income with 100 million or more
• 699 are Australian-own resident private companies with an income of $200 million or more
• 1,040 are Australian private entities with income between $100 million and $200 million

In 2022–23, 252 entities exited the population covered in the report, 1,524 entities were new entrants, and 2,461 entities were part of last year’s population.

Entities may exit the population because they restructured or joined a tax consolidated group, reported income below the transparency thresholds, hadn’t yet lodged or had lodged a company tax return or weren’t required to lodge a company tax return due to deregistration.

Why do some companies report zero tax?

The ATO’s report suggests that an entity may not pay tax in an income year where it reports an accounting loss, has profits but reduces that thanks to tax deductions, or has prior-year losses to deduct against current profit, bringing its tax bill to zero.

For the 31 per cent of entities that paid no tax, the report noted that 14 per cent “incurred an accounting loss”, 7 per cent “incurred a tax loss”, 2 per cent “utilised offsets” and 8 per cent “utilised tax losses from prior year”.

Ms Saint said the percentage of tax not being paid is consistent with the numbers reported in 2021-22, because this year there is a larger sample size included in the report.

But the report suggests this increase in the population examined in the report “has had minimal impact overall on the total income, taxable income and tax payable”.

“This is because corporate tax is highly concentrated in the largest entities,” the report said.

Which sectors paid most tax?

Ms Saint said most sectors of the economy showed increased tax payable from the prior year.

“However, consistent with recent years the significant increase in tax came from the mining sector, this year with the oil and gas and coal sectors showing significant increases in tax contribution,” she said.

She noted 2022-23 is the second year in a row that the mining sector paid more tax than all other sectors combined, paying more than five times than they did in 2014-15.

Tax payable was dominated by the “mining, energy and water” segment at 55.9 per cent ($54.7 billion) of the total. Tax paid by this segment increased by $12.5 billion (29.5 per cent) on the year before.

The next biggest contributions were from companies in “wholesale, retail and services” which made up $19.1 billion of the total, and “banking finance and investment which made up $16.1 billion of the total.

Total petroleum resource rent tax payable decreases

Ms Saint also noted that tax paid by the oil and gas sector increased from $1.5 billion in 2021−22 to $11.6 billion in 2022−23.

This result was largely driven by higher commodity prices, she said, but was also due to tax deals the ATO had locked in with these companies in previous years.

Ms Saint said that $4.3 billion of the $11.6 billion was from settlements with companies or what’s known as “Advanced Pricing Agreements” with corporates about the taxes they pay.

But companies paying the petroleum resource rent tax (PRRT) decreased.

There are 11 entities in the 2022–23, with total transparency population, with total PRRT payable of $1.9 billion.

The amount paid fell by 6.5 per cent from almost $2 billion the year before.

The report noted the decrease in PRRT payable reflects the lower profitability of PRRT-liable companies in 2022–23, with oil prices and falling demand from China being a key driver.