• Companies

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    The proportion of companies registered for a tax file number

    Purpose

    To observe the trend in registration for a Tax File Number by companies over time by comparing the ATO population to the ASIC registered population.

    Results

    Chart 5: ATO Company TFN registration population as a proportion of the ASIC registered population

    Chart 5

    Table 4: ATO company TFN registration population as a proportion of the ASIC Registered Population

     

    2004 - 05

    2005 - 06

    2006 - 07

    2007 - 08

    2008 - 09

    2009 - 10

    Company registrations

    N/A

    108%

    107%

    106%

    93%

    93%

    N/A - Tax Registration data is unavailable for this year.

    Here, the indicator has been over 100% because the ATO TFN population is larger than the comparable ASIC population. The main difference between the populations arises from the differences between the registration requirements for the two organisations.

    Considerable work has been done to cleanse the ATO data over the past few years hence the decline in the indicator. Further work is required to align the two populations which should make the comparison more meaningful in the future.

    The trend shows the difference between the two populations is closing over time. The significant change in 2008-09 is largely driven by the ATO client register reconciliation process. This process led to a large number of inactive companies being removed from the ATO data.

    Given that ASIC data does not include corporate trustees and shelf companies, the level of correlation suggests high levels of compliance.

    Reliability

    This indicator is deemed to have a low level of reliability. Data quality is good, however apart from showing significant improvement in ATO's data cleansing processes, the trend can not be attributable to improved levels of participation on registration until we fully understand the differences between the two populations.

    Methodology

    This indicator is the proportion of companies registered for a TFN. The TFN is a unique identifier the ATO issues to individuals and entities to help administer tax and other Australian Government systems. Registration enables interaction in the tax, income assistance, support payments, banking and superannuation systems. Taxpayers can apply for a TFN as a stand alone application or in conjunction with an application for an Australian Business Number.

    The indicator was derived by determining the active population for companies. Where a TFN has not been used for five years with the ATO, other government agencies, income institutions or educational institutions, it is deemed inactive.

    The number of companies registered with ASIC was sourced from Insolvency and Company Registration Statistics which can be found on the ASIC website.

    Qualifications

    There are definitional differences between ATO and ASIC data as not all companies registered with ASIC are required to be registered with the ATO. Companies registered with ASIC do not need to be registered with the ATO if they do not engage in any activity that would trigger tax obligations. This includes but is not limited to corporate trustees and shelf companies.

    The proportion of companies lodging an income tax return on time

    Purpose

    To observe the trend in on time lodgments of tax returns by companies.

    Results

    Chart 6: Proportion of companies lodging an income tax return on time

    Chart 6

    Table 5: Proportion of companies lodging an income tax return on time

     

    2003 - 04

    2004 - 05

    2005- 06

    2006 - 07

    2007 - 08

    2008 - 09

    On time lodgment

    86%

    88%

    87%

    86%

    89%

    91%*

    * 2008-09 data is sourced from the new processing system.

    The trend remained relatively steady until a sharp upward shift in 2007-08.

    The increase in timely lodgment in 2007-08 can be attributed to the effect of stimulus activities. As part of the administration of a stimulus package, the ATO provided lodgment concessions for companies. Lodgments which previously would have been treated as late were determined to be on time or may no longer have been due for lodgment by 30 June. 2008-09 appears to continue the increasing trend in on time lodgment. While we believe that the increase is due to the efforts of the ATO we will need to wait a few years to confirm this to ensure the change was not due to the introduction of new processing systems or policy changes.

    Given the slow down in economic growth in many segments of the economy from 2007-08, the upward trend since 2006-07 is a positive sign of high levels of compliance with company lodgement requirements.

    Reliability

    This indicator is deemed to have a medium level of reliability. The indicator is measured consistently over time however, there is a small time delay between the period covered by the data and when it becomes available for use.

    Methodology

    This indicator is the proportion of company taxpayers who lodge their income tax return on time. Companies lodge an income tax return to advise the ATO of their income and deductions for each income year. The statutory due date for lodging a return depends on the size and balancing date of the entity. These dates are detailed in the lodgment program.

    The indicator was derived by determining the number of company income tax returns lodged on time compared to the total number lodged within 12 months. The data was obtained from company fund income tax returns lodged with the ATO. Income tax returns lodged upon or seven days after the due date are taken to be lodged on time, to account for postal delays.

    Qualifications

    Only companies that lodged an income tax return within 12 months of the end of each income year were included in the population.

    For most companies their lodgment date was used to assess the timeliness, however in some cases when a lodgment date was unavailable the processing date was used. There were not a significant number of these instances.

    The indicator does not take into account whether the information in the return is correctly reported.

    The variation in company tax revenue reported

    Purpose

    To observe the growth in company tax revenue compared with the growth in an ABS measure of company performance.

    Results

    Chart 7: Growth in company tax revenue compared to growth in company profits before tax estimated by the ABS. Index basis (2001-02 - base year).

    We have tracked the growth of company tax revenue with the growth in ABS measures of company performance. There has been a reasonable but patchy correlation between the two until 2007-08, but a significant divergence in 2008-09 requires further investigation.

    Stronger growth in corporate profits for many years is likely to be the result of factors outside the national accounts measure of profits affecting tax revenue including: timing (eg substituted accounting periods), investment, foreign exchange, capital gains, and dividends. The revenue data is reported on a financial year basis and takes into account payments from earlier periods and adjustments (eg, from court decisions) applicable to earlier years.

    The difference may also reflect policy parameters and differences between tax and accounting concepts, or the impact of the global economic cycle on different industries. Nevertheless, further investigation is warranted, particularly in relation to the increasing divergence in 2009-10, as to whether there is some fragility in the business tax system or whether these other factors are at work.

    Reliability

    This indicator is deemed to have a low level of reliability. Data quality is good however definitional differences limit its usefulness as a direct measure of reporting.

    Methodology

    This indicator shows the growth for each data source as an index, using 2001-02 as the base year. Companies are required to pay income tax based on the size of their taxable income.

    This indicator attempts to monitor the compliance of companies correctly reporting their income to the ATO.

    Actual company tax revenue were sourced from Final Budget Outcome for 2009-10 or Budget 2010-11, Budget Paper No. 1, Statement 5, Appendix C.

    Estimates for the company profits before tax was sourced from the ABS publication 5676.0 - Business Indicators, Australia, September 2010 - Table 9.

    An index for each series was calculated using 2001-02 as the base year (that is, 2001-02 = 100). The trend for both series is then compared. 2001-02 was chosen as this was the first year of the 30% company tax rate.

    Qualifications

    ABS data uses the economic transaction accounting method, which measures activity related to a particular income year. The revenue data is reported on a financial year basis and relates primarily to three income years, but also includes payments from earlier years due to late lodgment and compliance activity. This is due to the complexities of the company tax revenue system which combine instalments, payments and refunds on assessment.

    The revenue system is further complicated by allowing companies to use substituted accounting period, which are also not accounted for in ABS data. Hence there are significant timing issues when comparing the two populations.

    The proportion of company tax liabilities paid on time

    Purpose

    To observe the trend in company tax liabilities paid on time.

    Results

    Chart 8: Proportion of company tax liabilities paid on time by value and number

    Chart 8

    Table 6: Proportion of company tax liabilities paid on time by value and number

     

    2004 - 05

    2005 - 06

    2006- 07

    2007 - 08

    2008 - 09

    On time by value

    78%

    86%

    84%

    83%

    84%

    On time by number

    73%

    73%

    75%

    74%

    76%

    Since 2004-05 the proportion of payments made on time has improved in both number and value. At the same time, it should also be noted that the number of transactions has increased by 30 percent and their value by 100 percent.

    There is reasonably stable performance here with a surprising and positive upward trend since 2007-08.

    Reliability

    This indicator is deemed to have a medium level of reliability. The trends are directly attributable to participation levels and there is minimal bias in the data or methodology.

      Last modified: 25 Feb 2011QC 24195