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.)
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, 2006–2016
This 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 2006 to 2016 period.
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While the majority of entities in the corporate transparency population made profits and paid tax in 2015–16, 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.
Of the 2,043 entities in scope for the 2015–16 transparency report, 64% paid tax; however, due to features of the tax system, the remainder did not (Figure 14). The proportion of companies paying tax at an economic group level is significantly higher at 76% (Figure 15). 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 an entity level, those that 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. Specifically:
- 219 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
- 127 entities reported an accounting profit but reconciliation items (for example, tax deductions allowed at higher rates than accounting permits) resulted in a tax loss
- 327 entities reported an accounting loss.
Figure 14: Entity tax outcomes, 2015–16
At the economic group level, a total of 1,809 economic groups or standalone entities were to some degree in scope for the transparency report. Of these, 76% 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 24% did not (Figure 15).
Figure 15: Economic group level tax outcomes, 2015–16
Australian public and foreign-owned entities have a higher proportion of entities with nil tax payable when compared to Australian private entities (Figure 16). The proportion of entities with nil tax payable was broadly stable for all three segments in 2015–16.
Figure 16: Proportion of corporate transparency report entities with nil tax payable, by ownership segment, 2013–14 to 2015–16
Nil tax payable by industry segment
The proportion of entities with nil tax payable differs across industry segment, with the energy and resources segment and manufacturing segment experiencing the highest rates (Figure 17). The remaining segments all experienced similar rates of entities with nil tax payable. There was a downward shift in the share of nil tax payable entities in the financial sectors over the reported timeframe, and a marked increase for energy and resources.
Figure 17: Proportion of corporate transparency report entities with nil tax payable, by industry segment, 2013–14 to 2015–16
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, 2015–16