• New data sources will help in understanding tax compliance

    An important feature of the Australian tax system is that the details of income earned and taxes paid by taxpayers are kept confidential. This applies for both people and entities. We believe this confidentiality supports full and honest disclosure to us.

    However, there are a range of tools an interested person can call upon to better understand a company’s tax position. New data sources are also becoming available. These will help the community understand more about the tax compliance of large corporate groups.

    We encourage community enquiries. These support an informed debate about tax compliance in Australia. Informed debate can balance speculation about low or no tax paid by some corporate groups. It can address concern over non-compliance by the large corporate groups population in general.

    On this page:

    Sources of information

    Relevant sources of information about a company’s tax position include:

    • reports prepared by the corporate group itself, especially reports written under the voluntary tax transparency code (TTC)
    • financial reports prepared by the corporate group and lodged, directly or indirectly, with the corporate regulator, ASIC
    • our annual publication of key financial and tax data relevant to large corporate groups under the corporate tax transparency measure
    • informed analysis and media commentary of particular corporate groups and/or industries. This includes analysis of annual reports prepared by a corporate group in Australia, or reports filed by the overseas headquarters of a multinational with operations in Australia.

    How large corporate groups are taxed

    In looking at the tax paid by a particular large corporate group, it is important to remember:

    • income tax isn’t paid on gross income: it is paid on taxable income meaning they may pay less or no tax in subsequent years
    • even very large corporate groups sometimes make losses that may mean they don’t pay tax in that year and, subject to integrity provisions in the law, they can carry forward and claim as a tax deduction in future years
    • Australia generally doesn’t tax the offshore profits of corporate groups where they are comparably taxed overseas
    • the profits of businesses run through trusts are usually taxed at the investor level not the trust level.

    Voluntary tax transparency code

    We encourage large corporate groups to adopt the voluntary tax transparency code (TTC). This includes entities treated as companies for Australian tax purposes, and foreign multinationals with operations in Australia.

    The code was developed by the Board of Taxation (BoT) and endorsed by the Australian Government in the 2015–16 federal Budget. It is designed to encourage greater transparency within the corporate sector, particularly by multinationals. It will improve the community’s understanding of the corporate sector’s compliance with Australia’s tax laws.

    We are encouraged by the number of corporates volunteering to produce tax performance reports. We believe this will support more informed community debate about the tax system.

    The first Voluntary Tax Transparency Code report for 2015–16 was published on data.gov.au in September 2016. This report will be updated as we receive more reports from businesses.

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    Requirement to lodge general purpose financial statements

    Most large corporates file detailed accounts with ASIC. These general purpose financial statements (GPFS) provide some tax payment details, including:

    • the amount they expect to pay as tax liabilities
    • a tax note explaining material tax adjustments, for example, profits and/or dividends from a foreign subsidiary may be exempt for income tax purposes, but treated as income in the accounts
    • any amended assessment received, subject to principles of materiality
    • information on substantial tax disputes, where the reporting entity has to disclose contingent liabilities under the Corporations Act 2001.

    Some large global entities with Australian operations may not have been required to provide full GPFS to ASIC. Sometimes they have been able to lodge special purpose financial statements. Separately, grandfathering provisions provide exemptions from filing GPFS with ASIC for some Australian large private companies.

    Legislation has now been enacted requiring significant global entities to lodge GPFS with us if they don’t already provide them to ASIC. We will then pass these on to ASIC.

    This measure applies to income years commencing on or after 1 July 2016. This means some companies will need to prepare GPFS to lodge with their tax returns for the financial year ending 30 June 2017. Most of these should be lodged with us by early 2018. As we receive these, we will forward them on to ASIC. They will then become available like other financial records.

    This measure will increase transparency of large multinational companies operating in Australia. ASIC will publish the financial statements to their document register where they will be available to the public.

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    Corporate transparency report

    We publish limited tax details of certain large corporate taxpayers in accordance with tax returns as lodged. This is part of a global push to improve transparency and inform public debate about tax policy. The law requires us to publish this information each year. We also provide supporting commentary to give context to the data and help users understand the tax adjustments that may be relevant in arriving at taxable income. Importantly, this data doesn't get updated for subsequent ATO-initiated amendments to the returns lodged.

    The information published is drawn from tax return labels and covers:

    • total income
    • taxable income
    • tax payable
    • Minerals Resource Rent Tax payable
    • Petroleum Resource Rent Tax payable.

    Many companies prepare additional information available to the public that provides context to the data we publish.

    We released the 2014–15 Report of Entity Tax Information in December 2016, published on data.gov.au

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    Other sources of information

    Some media and professional analysts study corporations and/or industries. They accurately report on key financial and tax issues. These reports sometimes draw on detailed financial updates filed by multinational enterprises in their ‘home’ jurisdiction. They can indicate taxes paid globally and sometimes taxes paid here in Australia.

    Other analyses of a corporate group’s financial and tax position might arise upon a significant or material event. This may include a merger/acquisition/takeover proposal, or a major change in their financial position following receipt of an amended tax assessment.

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    Last modified: 11 Oct 2017QC 53279