The Australian Taxation Office (ATO) has published the ninth annual Corporate Tax Transparency (CTT) report revealing large corporates paid a record $83.8 billion in income tax in 2021-22.
The 2021-22 report includes data from 2,713 entities, a net increase of 245 entities, who paid a cumulative total of $83.8b in income tax, which is up 22.2% from the previous year, and almost 50% higher than 2 years ago.
ATO Deputy Commissioner Rebecca Saint said tax paid in 2021-22 was again the highest since CTT reporting started, showing how Australia’s large taxpayers rebounded from COVID-19 and lockdowns.
‘This is a fantastic result for the Australian community. A combination of a rapidly recovering economy, high commodity prices and high levels of voluntary tax compliance, backed up by the hard work of the Tax Avoidance Taskforce over many years, has delivered in spades,’ said Ms Saint.
All sectors of the economy showed increased tax payable from the prior year. However, consistent with recent years the significant increase in tax came from the mining sector reflecting strong commodity prices.
‘The 2022 income year was the first year that the mining sector paid more tax than all other sectors combined, something we haven’t seen in the history of the CTT report. In fact, the mining sector paid more tax in 2021-22 than the total tax from all sectors in the each of the first 3 years of CTT reporting,’ Ms Saint said.
‘The increase in population in the report as well as tax paid is not only a reflection of strong business conditions at the time, but also the high levels of tax compliance by most large businesses in Australia.’
‘We continue to see improvement in the tax compliance of large businesses, reflecting how the Tax Avoidance Taskforce has supported improvement in voluntary compliance in addition to strong compliance actions.’
‘Corporate tax compliance in Australia sets the bar for the rest of the world, and these results reflect years of sustained effort from the Tax Avoidance Taskforce to drive and support increased tax compliance by large businesses,’ said Ms Saint.
The percentage of those entities that paid no income tax has decreased since the first publication of the CTT report from 36% in 2013-14 to 31% in 2021-22.
‘The fact that an entity pays no income tax, does not necessarily mean that they are not meeting their obligations. Tax is paid on profit not gross income. Even entities with large revenue streams may not make a profit for a variety of reasons,’ Ms Saint said.
‘There are legitimate reasons why a company may pay no income tax, for example they may not have made a profit for the year or may be in the start phase of their business.
‘The Australian community can be assured we pay close attention to those who pay no income tax to ensure that they are not trying to game the system,’ Ms Saint said.
Since the Tax Avoidance Taskforce commenced in 2016, it has helped secure more than $27.7 billion in additional tax revenue from multinational enterprises, large public and private businesses up to 31 August 2023.
In the 2022-2023 year, the ATO secured a record $6.4 billion of tax revenue from public and multinational businesses alone.
Corporate Tax Transparency Report
The ATO is required under law to publish tax information reported to us by certain large companies each year. This year’s tax transparency report covers 2,713 corporate entities, of which:
- 1,496 are foreign-owned companies with an income of $100 million or more
- 590 are Australian public entities with an income with $100 million or more
- 627 are Australian-own resident private companies with an income of $200 million or more.
The companies in the report paid a combined total of $83.8 billion corporate income tax in 2021-22.
It is important to note that data in the report is taken directly from tax returns and does not reflect any intervention or compliance work after lodgment of the returns.
Changes to the tax law that will come into effect from the 2022-23 income year will alter the threshold for inclusion in the corporate tax transparency report. The amendment changes the $200 million income threshold for Australian-owned resident private companies to $100 million. This will affect the data that will be reported in 2024 and onwards with a significant increase of private entities included in the report expected.
Tax Performance of Large Business
We measure and report the tax performance of the tax and super systems to assess the health of the tax system. Tax gaps estimate the difference between what the ATO expects to collect and the amount that would have been collected if every taxpayer was fully compliant with the law.
We estimate the net income tax gap for large corporate groups is approximately 4.2% or $3 billion in 2020-21. In other words, in the 2020-21 year, we estimate large companies paid approximately 95.8% of the total theoretical tax payable. This compares to the small business income tax gap of 12.8% or $15 billion for 2020-21.
The tax gap estimate shows that most large businesses meet their tax obligations and are paying the right amount of tax. However, we strive to improve the tax compliance of large corporates further to 98%.
Tax Avoidance Taskforce
The Australian Government has provided funding to the ATO to support the Tax Avoidance Taskforce. The Taskforce currently supports around 2,500 staff, significantly adding to our focus on the compliance of large public and private groups and high wealth individuals. We are continuing to grow the Taskforce with an aim to have 3,000 staff.
With the support of the Taskforce, the ATO currently has around 1,600 staff focussed on the tax compliance of large corporate groups. These staff are deployed across a number of programs including assurance programs, where we actively scrutinise the business affairs of large business to ensure they pay the right amount of tax, and our audit program.
Oil and Gas
The report shows some large oil and gas companies have moved into a tax payable position. This is following the completion of LNG projects and the recoupment of start-up costs over a number of years.
Tax payments from this sector have grown markedly in the 2022-23 income tax year to in excess of $11 billion. Some of these companies are now amongst the largest taxpayers in Australia. The significant growth in tax payments will be reflected in the report to be published in 2024.
‘The Tax Avoidance Taskforce has been instrumental in moving a number of large oil and gas companies into a tax payable position. Oil and gas companies contributed $4.4 billion of the record $6.4 billion tax revenue secured from public and multinational businesses for the 2022-23 financial year. Our intervention ensured that these companies paid more tax and sooner,’ Ms Saint said.
Petroleum Resource Rent Tax (PRRT) payable doubled to almost $2 billion, with oil prices being a key driver. It is the highest reported PRRT since CTT reporting started.
