Australia: Corporate tax transparency data for 2019-2020

The Australian Taxation Office (ATO) on 10 December 2021 published the Corporate Tax Transparency Report (CTTR) for the 2019-2020 income year.

The report (published each year using income tax and petroleum resource rent tax data) continues to stand out as one of the more transparent measures for tax payments globally. Recent EU developments show other jurisdictions are introducing mandatory publication of tax information on a country-by-country basis.

The ATO is legally required to publish certain tax entity information in the CTTR for entities including:

• Australian public and foreign-owned entities with total income of $100 million* or more
• Australian-owned resident private entities with total income of $200 million or more
• Entities that have petroleum resource rent tax (PRRT) payable

_{*$=Australian dollar}

• The data set in the CTTR means there are limitations on interpretations that can be made, especially in terms of what is the right amount of tax to be paid.
• The information highlights, however, that the total tax payable for the population included in the report has increased over time.
• The CTTR continues to serve as a catalyst for groups to understand and be able to articulate the wider message beyond the CTTR data. In doing so, it helps narrate the broader purpose and impact of companies for the benefit of investors and staff, in addition to regulatory and civil society stakeholders.  

The statistics in the CTTR are derived from the total income, taxable income, and tax payable labels of tax returns. It does not reflect any intervention or compliance work after filing (lodgement) of returns. It also does not provide details on recipients of JobKeeper or other COVID-19 stimulus payments.

A snapshot of the CTTR over its lifespan is as follows:

[Note 1: The taxable income number is consistent with 2019-2020 Report of Entity Tax Information. It excludes certain entities that may not have been reported with negative taxable income pursuant to the corporate tax transparency legislation.]

The figures continue to show broad increases in both the reporting population and the tax payable by this population. Year-to-year fluctuations are affected by a wide variety of factors including the performance of the broader economy.

The increase in the headline tax payable figure underlines the importance and impact this population has on the Australian economy. The ATO observed the tax payable was “dominated” by the mining, energy, and water segment largely attributable to the high iron ore prices during the reporting period. Entities with income over $5 billion across industries represent only 2.7% of the reporting population but account for around 57% of tax payable (around $32.6 billion).

The information also provides an interesting snapshot of the makeup of corporate activity in the Australian economy (of the groups captured in the reporting regime):

• Foreign-owned entities account for 58.2% of the corporate transparency population in 2019–2020 and 28.9% of tax payable
• Australian public entities account for 21.6% of the population and 62.8% of tax payable
• Australian private entities account for 20.2% of the population and nearly 8.3% of tax payable

The ATO indicated in its media release that most large companies are paying the right amount of tax and that for 2018-2019, the ATO estimated a net gap of 4.3% or $2.6 billion after ATO engagement, meaning large corporate groups paid over 95% of the theoretical total amount of income tax payable in 2018-2019.

The CTTR’s release each year traditionally triggers curiosity in the number of companies that paid no corporate income tax for the covered period.

This year, of the 2,370 entities covered by the CTTR for 2019-2020, 782 (or 33%) did not pay tax in the relevant period. Commonly this is driven by financial performance which is reflected in taxable income figures. There are also a range of tax law-based factors such as carry forward losses and allowable deductions.

From an industry perspective, there was a smaller increase in tax payable by entities in the mining sector, of $2.1 billion than for the prior year and a small increase for wholesale retail and services of $0.1 billion. Manufacturing, construction, and agriculture was flat.

There were reductions in the following sectors:

• Banking, finance and investment by $.8 billion
• Insurance by $0.3 billion

The CTTR shows that the total PRRT payable was $0.9 billion in 2019-2020—down from the $1.06 billion for 2018-2019 and the $1.16 billion in 2017–2018. This was paid by 12 corporate entities, an increase from 11 entities in the previous year. The ATO in its commentary noted related commodity price decreases affected PRRT.

As mentioned above, the EU is another jurisdiction requiring mandatory publication of data, albeit the EU is moving forward a mechanism requiring companies themselves to publish country-by-country data, and a higher income threshold has been adopted.

As always, it is relevant to keep in mind the CTTR exists in a broader tax transparency context, involving ever increasing interest in the payment of taxes and how taxes are managed by companies, with a component of the focus now on environmental, social, governance (ESG). The move by the EU is an example response.

Much like the CTTR information, while data transparency is clearly important, the broader theme is contribution and impact on societies through not just payments of income tax, but also payments for other taxes, and payments to suppliers and employees. CCTR as ever, serves as a catalyst for groups to understand and be able to articulate the wider message beyond the CTTR data, in a way which narrates their purpose.

With a trend towards greater transparency globally, the opportunity for organisations may be to proactively provide and continue to enhance their narrative beyond the data.

For more information, contact a KPMG tax professional in Australia:

Phil Beswick | +61 2 9455 9569 | pbeswick@kpmg.com.au