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Facebook made $700m in Australia – but only paid this much tax

·Personal Finance Editor
·2-min read
Facebook text on blue background with Australian money in the corner.
Facebook reportedly only paid 2.8 per cent tax last year (Source: AAP/Getty)

Facebook generated $712.7 million in revenue from advertising in Australia last year, yet only paid $20.2 million in taxes, new reports have revealed.

The social media giant reported that Aussie advertising sales were up 5.7 per cent from a year earlier, but used a sneaky loophole to avoid pay only 2.8 per cent tax.

As reported in the Australian the company was able to reduce its taxable income to only $153 million last year.

How did they do it?

Facebook views its Australian business as a “reseller” of its advertising and will therefore charge the Australian business “reseller expense”.

This means the Australian business needs to pay the Californian parent company a fee. Last year the Australian business paid a $559 million fee for the $700 million revenue it made.

That $559 million is expensed by the Californian parent company, and the Australian business is left paying tax on only $153 million.

According to the Australian Taxation Office (ATO) companies in Australia are required to pay a now reduced corporate tax rate of 26 per cent in 2020-21 and 25 per cent in 2021-22.

A spokesperson for Facebook told The Australian that the company had paid the correct tax.

“During the last financial years, we paid income taxes in Australia at effective tax rates well above 30 per cent and in accordance with local taxation laws,” she said.

“We take our tax obligations seriously and are committed to supporting local communities and businesses in Australia.”

  • Also watch: Facebook considers launching Instagram for kids

Tax avoidance taskforce

The ATO is no stranger to large corporations looking to avoid tax and has a designated Tax Avoidance Taskforce to combat the issue.

Last year, the taskforce successfully implemented the multinational anti-avoidance law (MAAL) with restructures that resulted in over $8 billion in additional taxable sales, an additional $850 million in GST paid and an estimated $80 million in business-to-consumer GST.

“We engaged with over 600 of the largest private groups. Of these, we completed 262 engagements with taxpayers who willingly adopt robust tax governance practices to manage and prevent tax risks,” the ATO said.

“There were 54 Top 500 groups with $7.35 billion tax assured across multiple years.”

If you suspect a business isn’t meeting its tax obligations you can make a tip-off to the ATO here.

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