Australia’s largest companies are paying more tax under a government crackdown on avoidance, but almost a third paid no tax in 2020-21, Australian Taxation Office figures reveal.
The ATO published on Thursday its yearly report into the taxes paid by the nation’s largest 2486 companies, and announced that $68.6 billion landed in the 12 months to June 2021.
The record haul was driven by higher commodity prices, particularly iron ore, and an ongoing tax office crackdown on big firms avoiding taxation.
There have been some major wins, with the ATO clawing back hundreds of millions in tax from mining giants that were trying to use overseas marketing hubs to drastically reduce their Australian income tax bills.
But experts said issues remain, including tech companies like Apple and Google using their global status to post relatively small taxable incomes.
Apple posted $11.8 billion in total income in Australia for 2020-21, but its taxable income was just $578 million – resulting in tax of $173 million.
Facebook paid just $20.3 million in tax, despite posting a total income of $707 million with its taxable income only $67 million.
Australia’s largest taxpayers
Australia’s tax hierarchy is still very top heavy, with the largest taxpayers contributing the vast majority of tax into public coffers.
Iron ore giants BHP and Rio Tinto were the largest taxpayers in 2020-21, paying a combined $11.5 billion in income tax on more than $100 billion in total reported income.
These two miners posted $52.5 billion in taxable income to the ATO.
Australia’s third largest miner, Fortescue Metals, paid $5.7 billion in tax on $19 billion in taxable income and about $28.8 billion in total income.
One big reason miners paid so much tax were near-record iron ore prices during the 2020-21 financial year.
But crucially, big miners like Rio Tinto have started paying more tax after the ATO successfully clawed back hundreds of millions in tax from overseas operations that were being used to reduce local tax bills.
Many large companies paid no tax
Among the largest companies to pay zero income tax in 2020-21 were oil giants like Viva Energy (income: $12.8 billion), ExxonMobil (income: $11.1 billion), and Chevron Australia (income: $9.1 billion).
Australian energy giant AGL also paid no tax on $10.4 billion in income.
Big airlines, including Qantas (income: $5.9 billion) and Virgin Australia (income: $6 billion) also paid no tax, thanks to huge COVID-19 losses.
The ATO said there are “many genuine reasons” why big companies do not pay income tax in a particular year, but noted those who repeatedly contribute nothing to public coffers will be placed under closer scrutiny.
BDO tax expert Mark Molesworth said one major legitimate reason that big companies pay zero income tax is that they’re either not profitable or are carrying forward losses from earlier years to reduce their tax bills.
“Companies can carry forward losses indefinitely and utilise them against future tax bills,” Mr Molesworth said.
“Between either current year losses or the absorption of prior year losses that’s probably the main reason companies are reporting zero.”
Institute of Public Accountants policy director Tony Greco said that an additional reason companies might pay zero tax in a year comes down to deductions like capital expenses, and research and development costs.
“You’ve got a lot of things that can reduce the amount of tax paid, and most of those things are a matter of timing – companies can’t keep doing it forever,” he said.
Big tech dilemma lingers
Mr Greco said that while additional funding has allowed the tax office to expand its tax avoidance crackdown, there are still thorny issues that remain unresolved when it comes to companies paying their fair share.
One such problem is tech giants like Apple and Google reducing their taxable incomes in Australia by charging their local arms huge fees for the use of their intellectual property.
This has the effect of transferring large amounts of sales from Australia to countries with low tax rates, where those firms base their operations.
“The ATO can only apply the rules as they stand,” Mr Greco said.
“These are international companies, Apple has got its intellectual property in a jurisdiction where it’s not paying a lot of tax.”
Google, for example, posted $1.39 billion worth of income, but because its taxable income was just $300 million it only paid $77 million in tax.
Dealing with this problem is difficult, Mr Greco said, because it requires global action by many countries at the same time.
The good news is that such an effort is under way, with the federal government set to enact local reforms as part of an OECD plan to lift the minimum tax rates large multinationals are paying around the world.
