Net losses and nil tax payable
Generally, around 20–30% of ASX 500 companies report a current-year net loss to their shareholders in any given year. This figure appears to have stabilised at closer to 20% in more recent years (see Figure 13).
Importantly, this shows that even extremely large companies will sometimes make a loss in a particular year.
Figure 13: Proportion of companies with reported loss, by ASX population, 2005–20151
1This chart was compiled using listed companies only (including trading and suspended companies). The sectors are classified according to the Global Industry Classification Standard and the search query was PreTax Profit from Annual Profit & Loss. The search results were refined to exclude blank or zero results. As such, the population of companies included in the analysis varies on a yearly basis depending on the number of results returned in the search, which may not match the number of companies listed on the ASX. The companies included in the analysis were allocated to ASX indices based on current data, and this allocation remains constant for the entire 2005 to 2015 period.
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While the majority of entities in the corporate transparency population made profits and paid tax in 2014, sensitivity to economic conditions, reinvestment back into the business, distribution of profits to other entities within the broader group, tax deductions and tax offsets can affect the amount of taxable income and tax payable.
Although taxable income or loss (effectively a taxable profit or loss) is calculated differently to accounting profits or losses, it is useful to compare levels. Confidence can be obtained if loss-making levels are broadly comparable between accounting and tax.
We look to understand the reason for tax losses or nil tax payable. For example, there would often be alignment between the reporting of an accounting or economic loss in a company tax return with a consequential tax loss, given the close relationship between the accounting and tax systems. (The company tax return asks for information to reconcile the calculation of taxable income from accounting profit.)
Of the 1,904 entities in scope for the transparency measure, 64% paid tax in 2014–15, however, due to features of the tax system the remainder did not. This is shown in Figure 14. The entities who didn’t pay tax are grouped in Figure 14 by the primary feature of the tax system that resulted in nil tax being payable in the income year. So, the 291 entities who reported an accounting loss are grouped together. The next 125 entities reported an accounting profit but reconciliation items (for example, tax deductions allowed at higher rates than accounting permits) resulted in a tax loss. A further 128 entities reported a taxable income but prior-year losses were available to deduct against that profit so no tax was payable. The last group of 135 entities reported a taxable income but were also entitled to offsets (such as the research and development incentive) at least equal to the tax otherwise payable.
Figure 14: Entity tax outcomes, 2014–15
For 2014–15, 1,671 economic groups were to some degree in scope for the transparency measure. Of these, 76% paid tax, while 24% did not have a tax liability (see Figure 15).
Figure 15: Economic group tax outcomes, 2014–15
Nil tax payable by ownership type
Public and foreign entities have a higher proportion of entities with nil tax payable when compared to Australian private entities (see Figure 16).
While the proportion of entities with nil tax payable was broadly stable for the Australian public and foreign-owned segments, the proportion for Australian private entities decreased by around 4 percentage points in 2014–15.
Figure 16: Proportion of entities with nil tax payable, by ownership segment, 2013–14 and 2014–15
Nil tax payable by industry segment
The proportion of entities with nil tax payable differs significantly across industry segment, with the energy and resources and manufacturing segments experiencing the highest rates. The remaining segments all experienced similar rates of entities with nil tax payable across the two years (see Figure 17).
Figure 17: Proportion of entities with nil tax payable, by industry segment, 2013–14 and 2014–15
Nil tax payable by ownership and industry segment
The proportion of entities with nil tax payable varies significantly across industry and ownership type, as shown in Figure 18.
Figure 18: Proportion of entities with nil tax payable, by ownership and industry segments, 2014–15