The Australian Taxation Office's (ATO's) eighth annual report on corporate tax transparency (CTT) reveals the amount of tax paid by large corporates in 2020-21 is the highest since reporting started.
ATO Deputy Commissioner Rebecca Saint said despite the pandemic, Australia's large corporate taxpayers generally performed well in 2020-21.
"This year's report represents 2,468 corporate entities, who paid a combined $68.6 billion in income tax, $11.4 billion or 19.8% more than the previous year and the highest since reporting began."
High commodity prices were once again the key driver of the increase in corporate tax payments.
Australia has some of the highest levels of tax compliance of large business in the world with 93% of tax paid voluntarily, and 96% after the ATO's compliance activities.
"These results demonstrate there are high levels of tax compliance amongst our largest corporates," Ms Saint said.
The ATO is a world leader in combating tax avoidance by large corporate entities and the Tax Avoidance Taskforce (the Taskforce) bolsters our efforts to ensure companies pay the right amount of tax. Since 2016, the ATO has raised tax liabilities of $29.0 billion, with the Taskforce funding helping to generate $17.2 billion of this amount.
The ATO's efforts to tackle tax avoidance have been further bolstered by the Government's budget announcement that it will extend the Taskforce by a year and will also provide an additional $200 million per annum to expand the focus of the Taskforce. This brings the total investment in the Taskforce to $1.1 billion over the next four years.
"The increased investment in the Tax Avoidance Taskforce, is a strong show of support for our ongoing efforts in holding big business to account. The increased investment by the Government will allow the Taskforce to expand its initiatives to new and emerging areas of business tax risk."
"The Tax Avoidance Taskforce is able to identify and take action against those companies that don't pay the right amount of tax and Australians should be confident that those seeking to avoid their obligations are being held to account," Ms Saint said.
There are also a number of examples of companies committing to long-term behavioural change, including restructuring and settling long-standing disputes with the ATO that include "locked in" outcomes for the future periods.
"This future focus ensures companies are paying the right amount tax into the future, saving taxpayers and the ATO time and money on future disputes."
"We're also seeing a shift in attitudes where many companies are now viewing tax compliance as an important part of their social contract. Being a good corporate tax citizen is increasingly being worn as a badge of honour with many companies now publishing their ATO ratings," Ms Saint said.
The percentage of entities paying no income tax has decreased to 32% from a high of 36% in 2015-16. There are many genuine reasons why companies might pay no income tax.
"We pay close attention to companies not paying tax. We hold those companies that report continual year-on-year losses to an additional layer of scrutiny."
"While it's true some large entities paid no income tax, we're seeing through our justified trust program that there are high levels of compliance by these entities, and taking decisive action where there's not," Ms Saint said.
Notes for journalists
Corporate Tax Transparency report
The ATO is required under law to publish tax information reports to us by certain large companies each year. This year's tax transparency reports covers 2,468 corporate entities, of which:
- 1,376 are foreign-owned companies with an income of $100 million or more
- 563 are Australian public entities with an income with 100 million or more
- 529 are Australian-own resident private companies with an income of $200 million or more.
The companies in the report paid a combined total of $68.6 billion in corporate income tax in 2020-21.
It is important to note that data in the report is taken directly from tax returns and does not reflect any intervention or compliance work after lodgment of the returns.
Changes to the tax law that will come into effect from the 2022-23 income year will alter the threshold for inclusion in the corporate tax transparency report. The amendment changes the $200 million income threshold for Australian-owned resident private companies to $100 million. This will affect the data that will be reported in 2024 and onwards.
Large corporate groups income tax performance
Most large businesses do the right thing and are paying the right amount of tax, as reflected in our estimate of the large corporate groups income tax gap. Our latest estimates show that for the 2019-20 tax year 93% of tax was paid on lodgment increasing to 96% after amendments, including ATO compliance activities
Through the ATO's justified trust program we assure the tax compliance of large corporate groups and privately owned and wealthy groups. Justified trust builds and maintains community confidence that taxpayers are paying the right amount of tax. It also allows us to focus our resources in the right areas.
Our Top 100 report shows that 4 out of 5 of our largest corporates have achieved a high or medium level of assurance, with the high assurance taxpayers having increased from 6% in 2019 to 51% in 2022.
