Generally, around 20–30% of Australian Securities Exchange (ASX) 500 companies report a current-year net loss to their shareholders in any given year (see Figure 21). Importantly, this shows even extremely large companies will sometimes make a loss in a particular year.
Figure 21: Proportion of companies with reported loss, by ASX population, 2008–2017
This chart was compiled using Morningstar DatAnalysis Premium and contains 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 2008 to 2017 period.
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While the majority of entities in the corporate transparency population made profits and paid tax in relation to the 2016–17 income year, some do not pay tax. 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 all 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 2,109 entities in the 2016–17 transparency report, 66% paid tax; however, due to features of the tax system, the remainder did not. At an entity level, those that didn’t pay tax are grouped in Figure 22 by the primary feature of the tax system that resulted in nil tax being payable in the income year. Of these:
- 251 entities reported a taxable income but prior-year losses were available to deduct against that profit, so no tax was payable
- 59 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
- 117 entities reported an accounting profit but reconciliation items (e.g. tax deductions allowed at higher rates than accounting permits) resulted in a tax loss
- 295 entities reported an accounting loss.
Figure 22: Entity tax outcomes, 2016–17
The proportion of companies paying tax at an economic group level is significantly higher at 77% (Figure 23). This is because entities without a tax liability for a given year may have been part of a broader economic group that did have a tax liability.
At the economic group level, a total of 1,854 economic groups or standalone entities were to some degree in scope for the transparency report. Of these, 77% had a tax liability through one or more member entities (noting some of these entities may not be included in the reported entity list in their own right), while 23% did not (Figure 23).
Figure 23: Economic group level tax outcomes, 2016–17