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  • Medium and large businesses: the big picture

    We are committed to ensuring medium and large businesses pay the right amount of tax. We support businesses who do the right thing and deal firmly with those who don't.

    There are more than 34,000 public and multinational groups and approximately 200,000 privately owned and wealthy groups operating in Australia.

    We have a strong focus on the largest 1,100 public and multinational businesses and 320 privately owned groups, who are responsible for more than two thirds of all corporate tax. These businesses generally earn over $250 million in revenue, making a significant contribution to the Australian economy and tax system.

    We publish information, including the large corporate groups tax gap, to support community confidence in the tax compliance of large businesses.

    For 2015–16, we estimate these businesses voluntarily paid 91% of their income tax. A further 5% was raised through our compliance activities. This level of voluntary compliance is already global best practice and our assurance work, under the justified trust initiative, indicates this is increasing.

    We are developing estimates for the wealthiest private groups and medium businesses income tax gaps. We will publish these gaps when they are considered reliable and credible.

    Find out how we work with medium and large businesses and our focus on multinational enterprises:

    Helping medium and large businesses get it right

    We provide tailored services to help medium and large businesses get things right the first time. The majority of medium and large businesses prefer to avoid tax risk. Helping them to lodge correctly benefits the tax system more than amending later through compliance activity.

    See also:

    Public advice and guidance

    We use public advice and guidance to communicate our interpretation of the law, view of risk and compliance approaches to all medium and large businesses.

    Law companion rulings (LCRs) give medium and large businesses early clarity and certainty on our interpretation of new legislation. Taxpayer alerts (TA) detail transactions and arrangements we have concerns about to allow medium and large businesses to avoid risk. Practical compliance guidelines (PCGs) assist compliance if the law is uncertain or creates a heavy administrative or compliance burden. They also identify what we consider to be higher risk arrangements or activities.

    We provide information on our website to help medium and large businesses to comply with any new or changed reporting and lodgment requirements.

    Medium and large businesses often want certainty about their tax affairs, particularly if they are entering into significant transactions. We provide timely information, advice and services tailored to the circumstances of the business and sensitive to commercial realities.

    We offer:

    • certainty for commercial deals and restructure events
    • annual compliance arrangements
    • advance pricing arrangements.

    See also:

    How we work with large businesses

    Working with the top 100

    We recognise that if the community has justified trust that large businesses are paying the right amount of tax, this will support willing participation by other taxpayer groups. Justified trust, an Organisation for Economic Co-operation and Development (OECD) concept, uses evidence to have confidence a taxpayer is reporting the right amount of tax.

    We engage with the top 100 public and multinational businesses in a tailored way under the key taxpayer engagement approach. This approach looks at their entire Australian-linked economic activity, indirect and income tax compliance.

    The importance of these businesses to the tax system justifies our one-to-one engagement with them. They pay about half of all corporate income tax, and impact community confidence in the tax system. This engagement includes annual reviews of their tax affairs prior to lodgement of a tax return, looking for positive evidence of compliance and the absence of risk.

    Working with us to achieve high levels of assurance over their economic activity and tax affairs benefits top 100 public and multinational business. It means we undertake less intensive reviews and provide more services to assist their continued compliance.

    Less compliant behaviour and co-operation leads to reduced services, more intensive and frequent reviews, and an increased use of formal powers and audits.

    Transparency is key to achieving justified trust. The Reportable tax position schedule (RTP schedule) encourages taxpayers to be more open and transparent and reduces their appetite for tax risk.

    The RTP Schedule requires the largest taxpayers to self disclose their aggressive tax positions to us, so we can quickly focus on taking firm action on those positions.

    The RTP Schedule has historically applied to the top 100 public and multinational businesses, but has recently been extended to the next 1,000 largest public and multinational businesses.

    Working with the next 1,000 largest public and multinational businesses and the 320 largest private businesses

    Additional funding under the Tax Avoidance Taskforce extends the justified trust approach to the next top 1,000 largest public and multinational businesses with annual revenue of more than $250 million. Our approach here is more streamlined, but still aims to gain greater certainty they are paying the right amount of income tax, identify areas of concern and take further action to resolve issues.

    Similarly, the top 320 private group’s tax performance program under the taskforce seeks to assure Australia’s high wealth individuals pay the right amount of tax. Engagement with these groups is tailored, one-to-one and focuses on prevention rather than correction.

    See also:

    Managing disputes

    Company taxation is complex, leading to differences of opinion on how the law applies to particular arrangements. We try to resolve these disputes as quickly as possible.

    In more complex cases, we work with taxpayers and an external dispute resolution practitioner to reach resolution. This avoids prolonged disputes and unnecessary litigation.

    We may also agree to a settlement with a taxpayer if appropriate. To give the community confidence these settlements are fair, reasonable and conducted appropriately under the law of settlements, they are independently assured by retired Federal Court of Australia judges.

    Settlements with public and multinational businesses represent less than 15% of all settlements in the 2016–17 and 2017–18 income years. The variance between our original position and the settlement position with public and multinational businesses is lower than any other taxpayer group.

    In 2017–18, we had approximately 280 settlements of privately owned and wealthy groups matters.

    Tax Avoidance Taskforce

    The Tax Avoidance Taskforce is a key element of the ATO's efforts to ensure that large businesses and wealthy individuals pay the right amount of tax in Australia. The majority of individuals and companies do the right thing, but where we see avoidance behaviour we will act.

    With the formation of our Tax Avoidance Taskforce, we have conducted detailed scrutiny of the tax affairs of multinationals, large corporations, wealthy individuals and their associated private groups, trusts and advisers and collected $5.6 billion in extra tax from July 2016 to June 2018. At the same time, we have raised over $10 billion in tax liabilities with the assistance of the Taskforce.

    Tax avoidance by multinational businesses

    Combatting tax avoidance by multinational businesses operating in Australia is a key priority for us and government. The government has announced initiatives to help us achieve this so everyone pays their fair share of tax.

    New legislation now applies to significant global entities (SGEs) – those multinational businesses earning $1 billion or more in revenue globally:

    • the Multinational Anti-Avoidance Law (MAAL) prevents SGEs from avoiding tax by artificially shifting their revenue offshore
    • the Diverted Profits Tax (DPT) imposes a 40% tax on Australian profits artificially shifted offshore by SGEs.
    • When necessary, we will address tax avoidance through the courts. Key decisions such as the 2017 High Court decision in Chevron Australia Holdings Pty Ltd v Commissioner of Taxation, provide a firm basis for our continued examination of related party arrangements that seek to stretch the bounds of acceptable tax planning.
    • The implications of these arrangements can be significant for the tax system now and in the future. Firm action against aggressive tax avoidance cases through the courts allows us to achieve future compliance outcomes across the public and multinational businesses sector.

    Tax avoidance by wealthy groups and medium businesses

    We support fairness in the system and ensure a level playing field by taking firm action against tax avoidance.

    Some wealthy groups and medium businesses may engage in tax minimisation or avoidance. We have strategies to detect groups who do not pay the right amount tax at the right time.

    In this regard we have a particular focus on:

    • international risk, which focuses on international profit shifting and corporate restructuring
    • inappropriate arrangements that seek to extract profits or capital without the right amount of tax being paid
    • high risk trust arrangements attempting to gain advantage beyond ordinary trust arrangements or tax planning associated with genuine business or family dealings.
    Last modified: 29 Mar 2019QC 57213