Report of entity tax information
We produce the Report of entity tax information annually. The information is taken from tax returns and certain amendments of:
- Australian public and foreign owned corporate tax entities with total income of $100 million or more
- Australian-owned resident private companies with total income of $200 million or more
- entities that have petroleum resource rent tax (PRRT) payable
- entities that have minerals resource rent tax (MRRT) payable (for the 2013–14 and 2014–15 MRRT years only).
You can access the Report of entity tax information on the data.gov.auExternal Link website.
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Producing the report
We have a legislative duty to report information about certain corporate tax entities under section 3C of the Taxation Administration Act 1953. A corporate tax entity is defined in section 960–115 of the Income Tax Assessment Act 1997 and includes all taxpayers treated as corporations for tax purposes, for example, companies, corporate unit trusts, public trading trusts and corporate limited partnerships.
The 2015–16 Report of entity tax information will have:
- an alphabetical listing of Australian public and foreign-owned corporate tax entities and Australian-owned resident private companies
- separate information for income tax and PRRT.
The report uses information contained in returns and amendments requested by the relevant entity that have been processed before the reporting cut-off date (1 September of the calendar year following the tax year that is being reported). If an entity lodges a return after the reporting cut-off date their information will instead be published in a separate tab in the following year's report. The report of an entity's information for a given income year is final and is not updated to reflect any later amendment.
We report information for corporate tax entities that have lodged a tax return. The head company of a consolidated tax group lodges a single company tax return for the group. If an entity enters or leaves a consolidated group during the year or transitions from one accounting period to another, its income year may be less than or greater than 12 months.
If an entity's relevant labels show an amount of zero or less, we leave that field blank.
Due to tax law confidentiality provisions, we cannot provide information beyond that provided in the report. However:
- some entities and organisations may choose to provide further context and explanation on their own websites, or in financial or tax reports
- under the new voluntary tax transparency code for business, some companies have decided to publicly disclose additional details of their tax affairs in their annual accounts. Adoption of this code is voluntary and intended to complement Australia’s existing tax transparency measures.
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Report data sources
We use the following tax return labels for Report of entity tax information:
- Total income – shown at income label 6S of the company tax return
- The amount to be written at income label 6S is an accounting system amount and generally corresponds to the relevant amount in the entity's financial statements for the income year.
- It is a gross revenue figure (not a net profit amount) and may include exempt income, other non-assessable income and foreign source income.
- Including these amounts increases total income relative to taxable income and accounting profit.
- Total income does not take into account expenses – the total income figure is similar to gross accounting revenue, not profit and it makes no allowances for the costs of earning income
- Taxable income – the amount shown at label 7T (Taxable/net income or loss) of the company tax return
- If the amount is a loss, we will leave taxable income blank in the report.
- If the entity is a resident, taxable income is assessable income derived from all sources less allowable deductions incurred in gaining that income.
- If the entity is a non-resident, taxable income is assessable income derived from sources within Australia, plus income that is included on some basis other than having an Australian source, less allowable deductions incurred in gaining that income.
- An entity's taxable income may include franking credits and non-deductible items that increase taxable income relative to accounting profit, but will also reflect available concessions or deductions allowable for income tax purposes such as tax losses used from prior years that will decrease taxable income relative to accounting profit.
- The inclusion of assessable amounts and allowable deductions to arrive at the taxable income reported, and the omission of expenses from the total income reported, means there is not a simple correlation between total income and taxable income.
- Tax payable – the amount shown at label T5 of the company tax return
- This figure is determined by multiplying the taxable income by the 30% corporate tax rate and then deducting tax offsets, such as the research and development (R&D) incentive and franking credits.
- Some corporate tax entities will have an amount of taxable income but no income tax payable due to these offsets. This is a function of our system and the way tax payable is calculated.
- MRRT payable – the amount shown at label 15H of the MRRT return (repeal of the MRRT legislation means that the period ending 30 September 2015 was the final quarter of the MRRT regime).
- PRRT payable – the amount shown at label 25I of the PRRT return.
Entities and report data
The figures in the Report of entity tax information do not themselves indicate whether an entity is paying a high or low rate of tax. Measuring a company’s 'effective tax rate' (how much tax they pay as a percentage of profits) requires more information than that included in the report and comparing effective tax rates across single entities does not take into account related-party transactions, the broader economic group or a number of other factors.
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How entities are reported
The Report of entity tax information is at the corporate tax entity level (for income tax purposes), however these entities may represent economic groups, and some economic groups contain two or more tax groups and other non-consolidated entities within them.
These largest corporations tend to operate in sectors of the Australian economy that are characterised by a high degree of capital intensity, economies of scale, and are exposed to cross-border trade. We will include more detailed analysis of the population when the report is published.
Legal forms and structures
Entities may choose to use different legal forms or structures to meet their business needs. This means that economically similar activities may end up being taxed differently, depending on choice of legal structure.
Entities listed in Report of entity tax information may not be directly comparable to entities reporting as financial groups under corporation law. Many economic groups are made up of multiple entities and lodge returns for each entity in the group, even though they may all be included in one set of financial statements. This can also result in the tax being paid by one entity in the group, for the whole group, and others in the group showing nil tax payable.
Many private companies are associated with private groups that contain flow-through entities such as trusts and partnerships and the group's income may be taxed at the beneficiary or individual level, rather than at the corporate level. Tax and income reported at the entity level may result in two or more associated entities reporting the same third-party income twice, but ultimately only one amount of group profit and therefore one amount of tax. For example, a trust may hold an asset and charge the private company for its use arriving at a zero profit for the company, while the trust returns the profit as assessable income and distributes that income to trust beneficiaries who are each taxed accordingly. We do not publish the tax affairs of associated entities if they do not also meet the requirements under the law. We do not publish the tax affairs of individuals associated with private companies.
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Some economic groups may include a company and a trust that are 'stapled'. Others may include two or more trusts that are stapled. In these stapled groups, one of the companies or trusts may be included in the transparency reporting, but others may not, so that aspect of the overall economic group will not be reflected in the data. It will also be difficult to reconcile the total income in the report with the income reported by the group for financial reporting purposes.
Life insurance companies
Life insurance companies have two taxable incomes – ordinary income and complying superannuation income. The taxable income or loss of each class is worked out separately. The tax rate is different for each class, with:
- ordinary income subject to the rate of 30%
- complying superannuation income subject to a lower rate of
- 15% if in the accumulation phase of a super fund
- or effectively 0% (non-assessable) if the income is from assets supporting pension or annuity liabilities.
This ensures that income tax is taxed in the same way as income of a complying super fund.
Franking credits received in relation to assets supporting superannuation, pension and annuity liabilities are refundable to a life insurance company, which also ensures they are treated in the same way as franking credits received by a superannuation fund. This may reduce the net tax paid by a life insurance company.
Report of entity tax information shows an aggregation of the two classes and may give the impression of artificially low tax payable compared with total income and taxable income as those amounts will include income attributable to policy holders (and taxed at concessional rates). Conversely, the effective tax rate (tax paid or accounting tax expense as a percentage of accounting profits reported in a company's financial accounts) may also be distorted to provide an artificially high effective tax rate because of tax paid (or refunded) attributable to policy holders.
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Offshore banking units
The offshore banking unit (OBU) regime provides a concessional tax rate to encourage genuine offshore banking activity in Australia. An OBU, or the part of an entity that is a registered OBU, is subject to an effective tax rate of 10% on income from eligible activities. Other income of the entity is taxed at the normal company tax rate of 30%.
Consolidated groups disregard transactions between members in the group when compiling their accounts. This does not happen for dealings with unconsolidated members of the group. An example is where a foreign multinational trades in Australia through a permanent establishment, such as a branch of a financial institution that has dealings with other members of that group. So the amount reported as total income by different entities may not be directly comparable.
Inbound approved deposit taking institutions (ADIs) will generally operate their wholesale banking business in Australia through a permanent establishment as opposed to a locally-incorporated subsidiary. They are generally low-margin, high-volume businesses and the disparity between total gross income and taxable net income will be greater than in other industries.
If a group containing an ADI also conducts other activities in Australia, such as broking, through locally-incorporated subsidiaries that form a tax consolidated group, transactions may occur between the permanent establishment and the tax consolidated group. While these transactions may not have any economic effect, they will effectively be reported on a gross basis and inflate the total income disclosures for the combined permanent establishment and tax consolidated group.
Taxation of financial arrangements
The Taxation of financial arrangements (TOFA) rules provide for the tax treatment of gains and losses on financial arrangements. The reporting of TOFA gains and losses for tax purposes is at a gross level rather than net level at which these gains are reported for accounting purposes. This can distort the ratio of total income to tax payable.
There is a timing difference with credit losses being recognised from an accounting perspective, being when impaired and deductible from a tax perspective, and when actually written off.
Tax and report data
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Variations between an entity's tax expense as recorded in its statutory accounts and tax payable as recorded in a tax return can arise for a number of reasons, including:
- Timing in the depreciation of capital assets will cause differences in the accounting and tax position of an entity; generally tax is more concessional to provide business with incentives to invest.
- An entity registered as a joint venture will generally distribute its profit and loss amounts to each participant meaning taxes are borne by them and not at the joint venture entity level.
- Deductions for exploration expenditure are allowed under tax law as they are incurred and may result in deductions in development years before a mine or well becomes income producing.
- Tax losses can generally be offset against taxable income of later income years. Losses carried forward are subject to integrity rules that restrict the use of those losses where there is a substantial change in company ownership (the continuity of ownership test) and the type of activity undertaken by the business (the same business test). Losses generated by one member of a tax consolidated group can generally be used against profits earned by other members of the same group.
- Receipt of foreign dividend income is often exempt from Australian tax but is included in total income.
- the franking credit attributed to the receipt of a franked dividend is added to accounting profit, with a corresponding tax offset given which affects tax payable.
- In the Joint Petroleum Development Area, a straight comparison of revenue or reported profit and tax paid does not align with reported revenues due to the existence of a revenue share agreement between Timor Leste and Australia.
The tax system provides for a range of deductions and offsets affecting final tax payable figures:
- Franking credits attaching to dividends received by companies
- Tax offsets for foreign tax paid on foreign sourced income
- R&D tax offsets. The majority of offsets claimed by companies are allowed under the R&D incentive. In some cases the high investment in R&D may result in the offset exceeding the tax otherwise payable.
Different economic performance factors affect particular sectors of the economy at different points in the economic cycle (for example, commodity prices, policy changes and impacts of financial crises).
Different sectors of the economy are subject in some cases to different tax issues.
Tax losses and economic losses
Generally a tax loss occurs where the total deductions claimed for an income year exceed the total of assessable and net exempt income for that year. Accounting profit/loss will rarely equate to tax profit/loss. On average accounting losses occur in 20–30% of the ASX top 500 companies in any one year. This may not reflect the underlying economic performance of an entity in a particular year. Economic losses (or those reported for financial statement purposes) generally reflect the position of a company for the particular year and can include losses that are recorded for asset impairments or write downs
Petroleum resource rent tax
Unlike income tax, where many capital costs are deductible over a defined life, all deductible expenditure for PRRT purposes, whether capital or revenue, is immediately deductible. A number of factors may affect the reported PRRT payable by individual companies in relation to their interests in a petroleum project, including the following:
- PRRT is a profits-based tax that only taxes profits above a specified rate of return. A tax liability will be dependent on a range of factors, including commodity prices, foreign exchange rates and project development and operating costs.
- The long lead time associated with PRRT projects means that a PRRT liability is unlikely to arise until a number of years after production commences.
- PRRT is a project-based tax. Deductible expenditure (which is made up of exploration expenditure, general project expenditure and closing down expenditure) of a petroleum project that exceeds assessable receipts of that project in a year of tax is uplifted and carried forward to be deducted against assessable receipts of that project derived in future years. The uplift rate varies based on the type of expenditure and year in which it was incurred.
- Eligible exploration expenditure incurred in relation to exploration permits and other petroleum projects is deductible against assessable receipts of a petroleum project that a taxpayer holds, subject to the transferability rules. The transferring of exploration expenditure to a petroleum project in a year of tax has the effect of reducing the PRRT that would have otherwise been payable for that year of tax for that project.
- For the North West Shelf project and onshore projects, other resource taxes and charges from a project (such as state and federal royalties and production excise) are grossed up and deducted, together with starting base expenditure, against assessable receipts of the petroleum project to which they relate.
- The amount of PRRT payable is likely to vary across joint venture participants in a particular project due to differences in each participant's circumstances.
Minerals resource rent tax
Like PRRT, all deductible expenditure for MRRT purposes, whether capital or revenue, is immediately and fully deductible at the time it is incurred. MRRT is payable only when annual profits reach $75 million.
This tax was repealed with effect from 1 October 2014 and the final reporting period ended at 30 September 2015.
Comparisons with other sources
You cannot easily compare or reconcile the figures in Report of entity tax information with aggregated figures reported in our annual report, or through figures from the Australian Securities & Investment Commission (ASIC) and the Australian Securities Exchange (ASX).
The Report of entity tax information figures cannot always be taken as the final tax position of an entity as they may be amended either by the entity or by us as a consequence of compliance activity.
Accounting groups will often include entities outside the Australian tax group, for example some partially-owned subsidiaries as well as foreign subsidiaries. Stapled groups will often include both sides of the staple in their accounting group, whereas only one side of the accounting group may be included in the transparency reporting.
In some cases the tax group may include entities outside the Australian accounting group, in particular where a group holds its Australian operations under multiple offshore companies, meaning that there are multiple entry points into Australia.
Figures for private companies cannot easily be compared with those for public companies. Many private companies are associated with private groups that contain flow-through entities such as trusts and partnerships and the group's income may be taxed at the beneficiary or individual level, rather than at the corporate level.
The tax transparency report details information of certain corporate tax entities with total income of $100 million or more and Australian-owned resident private companies with total income of $200 million or more. It also reports information of entities that have MRRT or PRRT payable.