One third of companies paid no tax to the Australian Taxation Office (ATO) in the 2019-20 financial year, new transparency data released on Friday shows.
The ATO’s annual Corporate Tax Transparency Report found 782 of 2,370 large Australian companies claimed losses, or credits for previous losses, that wiped out their 2019-20 tax bill.
Some 371 companies incurred an accounting loss, while 52 companies used offsets, and 237 used losses from a prior year.
The ATO report takes in foreign-owned and Australian public companies with incomes of $100 million or more, and private Australian companies with incomes of $200 million or more.
The latest report found a tax gap of 4.3 per cent, or a $2.6 billion shortfall on the tax amounts the ATO expected these large companies would pay.
Tax office deputy commissioner Rebecca Saint said there were often “legitimate reasons” as to why a company may pay zero tax.
“Just because an entity doesn’t pay tax doesn’t necessarily mean that there’s tax avoidance or similar activity occurring, there can be good commercial justification for that,” Saint said.
“We have high levels of confidence around those entities that don’t pay tax, and what I mean by that is we actually go and have looked into whether those losses are generated from commercial activities, as opposed to tax-avoidance arrangements.”
She said the report indicated big business was more willing to pay tax, with the percentage of companies the ATO trusted as doing the right thing increasing from 6 per cent in 2019 to 49 per cent in 2021.
“We attribute this to a combination of businesses recognising that investing in their tax governance has tangible real-world benefits – as well as a significant investment of time and resources by the ATO in scrutinising structures, transactions and tax-governance frameworks,” she said.
“The health of the tax system is underpinned by willing participation, which is shown by four out of five of the largest businesses in Australia having obtained either a high or medium assurance rating.”
However, the ATO also noted there was an increase in the number of Australian public companies that paid no tax over COVID-19.
The transport, finance and service industries were among the sectors most impacted by the lockdowns, with this reflected in the new tax data.
At the same time, the number of foreign-owned companies that paid no tax declined.
In total, large companies paid $57.2 billion in tax, representing around 65 per cent of all corporate income tax in the 2019-20 financial year.
That was a $1.1 billion increase on 2018-19, as higher mining profits bolstered tax income.