Figure 1 Supporting voluntary compliance in the large business market
There are 1,850 economic groups and entities in the large market, encompassing over 32,000 businesses. The types of entities include mainly companies, but also government departments, partnerships, trusts, non-profit organisations and superannuation funds. Of the 1,850 economic groups approximately two-thirds (1,300) are public companies, of which 1,100 have an annual turnover greater than $250 million. The remainder are businesses that due to their unique characteristics are managed within the large market.
Large market taxpayers are registered for a range of tax obligations, including GST, fringe benefits tax (FBT), income tax, fuel tax credits, luxury car tax and wine equalisation tax (WET), and may also be licensed for excise purposes.
In the 2010-11 financial year, total tax receipts collected from large business were:
- 43% of total net income tax, comprising
- 63% ($35.1 billion) of company tax
- 100% ($0.8 billion) of petroleum resource rent tax
- 43% ($1.4 billion) of FBT
- 82% ($5.3 billion) of super fund income tax
- 33% ($43.9 billion) of pay as you go withholding tax on behalf of individuals
- 46% ($21.3 billion) of total net GST
- 98% ($25.3 billion) of excise tax.
At the same time, the large market encompasses:
- 80 large super funds that report a total of 19,000,000 member accounts
- more than $200 billion in international related party dealings, accounting for 36% of Australia's trade.
In monitoring compliance for income tax (figure 1), 100% of large corporate groups are scanned using a variety of risk filters to detect financial patterns that may indicate potential non-compliant positions, for example, abnormally low tax payments compared to industry peers or high-risk transactions or arrangements that have not been disclosed.
Additionally, about 30% of the large population are formally risk reviewed each year, focusing on those considered to present higher relative risk, taking into account likelihood of non-compliance and the potential consequences.
About 18% of those reviewed are then audited, and approximately 70% of those audited have adjustments. About 30% or so of those adjustments are disputed, and about 30% of those disputes will be settled, under strict guidelines.
Of the relatively few cases that continue through to the court system, between 30% to 50% will be found to have been ultimately compliant by the courts. Our view is confirmed in 50-70% of cases taken to the court, providing certainty to the market.
In monitoring compliance for GST and excise, we constantly monitor activity statements and other information relating to GST and excise to identify potential risks and issues. Each year, we contact about 10% of large businesses and undertake a risk review relating to GST or excise. About 9% of these reviews proceed to an audit, with 21% of these cases requiring an adjustment.
The majority of large businesses are compliant, however we still have concerns about opportunistic tax planning in a relatively small group of large businesses and we will have an intense focus on these businesses.
In 2011-12, for the first time we informed most large business in a single letter about our view of their relative risk of non-compliance for GST, income tax and excise. Figure 2 shows the risk categorisations for large businesses with GST, income tax and excise obligations. For these large businesses:
- 13 were categorised as higher risk and were advised that they could expect fairly intense and constant interactions with us regarding their tax affairs
- about 130 were regarded as key taxpayers and were told that we would work closely with them to monitor their tax liabilities and provide certainty
- about 400 medium risk taxpayers were told that our preliminary risk assessment had identified that there were one or more areas of tax risk where we may need to make further enquires about their tax affairs
- about 680 were lower risk and told we had no further queries and that their income tax return and/or GST affairs and excise returns for 2010-11 were now finalised.
Figure 2 Risk categorisation by tax
Our relationship with large business is ongoing and we need to work cooperatively to make the administration of the tax laws work well. We work together by engaging in open and frank dialogue on material tax issues. This allows us to:
- have a common understanding of your business to facilitate the identification and evaluation of tax risks
- ensure documents are readily accessible, whether stored as a physical document or electronically
- discuss the basis of any claim you make for legal professional privilege, accountants' concession or corporate board documents on tax compliance risk
- escalate concerns.
Our aim is to assist you and encourage you to have adequate tax governance and tax risk management controls in place for transactions in Australia and internationally.
We expect you to:
- pay the right amount of tax in the correct jurisdiction
- lodge and pay on time
- provide your staff with adequate taxation training and resourcing
- regularly report to your board.
Sections within The large business market
Last Modified: Wednesday, 27 February 2013