The Australian Taxation Office (ATO) has today published a report on its interim findings from the Top 500 tax performance program. The program, established under the Tax Avoidance Taskforce, encourages transparency from Australia’s largest privately owned groups and helps the ATO to determine whether they are correctly meeting their income tax and GST obligations.
Established in 2016, the Tax Avoidance Taskforce ensures multinational enterprises, large public and private businesses (and associated individuals) pay the right amount of tax in Australia.
“As a key program under the Tax Avoidance Taskforce, the Top 500 program provides insights into the operations of Australia’s largest privately owned groups and allows us to provide the community with confidence that this group, which comprises some of Australia’s largest private businesses and wealthiest taxpayers, pay the right amount. Pleasingly, we have found that most large private groups report correctly and meet their taxation obligations,” Assistant Commissioner Kasey Macfarlane said.
“However, greater transparency around the tax affairs of large private groups is always welcome as it helps the ATO assure that they are meeting their tax obligations.”
“The ATO believes that working with and engaging early on complex tax issues prior to lodgment, provides certainty to large private groups, prevents disputes, and guarantees tax revenue for Australia,” Ms Macfarlane said.
Australia’s Top 500 private groups control $207 billion in net assets, report around $195 billion in total income and have over 16,000 associated entities. The group structures they use are complex, large in terms of the number of entities involved, and contain any combination of company, partnership and trust structures, operating both inside and outside of tax consolidated groups.
“So far, we have engaged with more than 400 groups through this Top 500 program with the aim of improving their transparency and building mutual trust, with more than 50 groups attaining the highest transparency rating. This underscores how an effective regulator is actively assuring revenue from Australia’s largest private taxpayers,” Ms Macfarlane said.
The ATO notes that the trust and confidence established under the Top 500 program has prompted several groups to provide intelligence and commercial insights that have informed the ATO’s industry-based guides in sectors of the economy where Top 500 groups commonly conduct business.
“However, there is of course always room for further improvement. We have observed that large private groups tend to have lower levels of corporate governance and invest less in tax governance than public groups. Large private groups also face less stringent regulatory reporting requirements and our ability to obtain certainty is frequently complicated by opaque group structures and related party dealings that occur outside of tax consolidation, further emphasising the importance of the ATO’s focus and ongoing engagement of this important group of taxpayers.” Ms Macfarlane said.
“The Top 500 tax performance program has provided a series of insights into the approaches used by large privately held groups in engaging with the tax system. These findings will inform our interactions with this important part of the taxpayer population so that we can continue to support them to meet their tax obligations and be well positioned to act swiftly and appropriately in instances where we identify behaviours of concern.”
Justified Trust
The Top 500 program is an extension of the ATO’s focus on Justified Trust, which is a concept adopted from the Organisation for Economic Cooperation and Development (OECD).
The ATO initially applied the justified trust concept to the top 100 population in 2016. The Top 100 population consists of public and multinational businesses and superfunds that have substantial economic activity related to Australia. The justified trust concept expanded to GST for the Top 100 population in 2019.
The ATO has published two findings reports for the Top 100 population which shows that approximately 30 per cent have attained an overall high assurance rating.
“The success of this program cannot be undersold, as we saw a dramatic increase in the number of taxpayers achieving high assurance during 2020 from 6% to 30%,” Ms Macfarlane said.
“Four out of five of the largest businesses in Australia have obtained either a high or medium assurance rating.”
The ATO considers that businesses that have not achieved a high assurance rating or demonstrated a willingness to improve their tax governance have a higher risk profile. This prompts comprehensive and intensive reviews of low assurance taxpayers and we are more likely to use audits to resolve issues.
While we cannot disclose the assurance ratings of individual taxpayers, a number of taxpayers are now publicly disclosing their ratings in their tax transparency reports.
The Tax Avoidance Taskforce has also allowed the ATO to extend justified trust to the Top 1,000 population which covers large public and multinational companies, focusing on the income tax affairs of taxpayers with turnover above $250 million.
“The expansion of the Top 1,000 program enables us to engage with taxpayers through a variety of tailored approaches that give us confidence in the tax affairs of Australia’s largest businesses.”
“Most taxpayers reviewed obtained an overall medium assurance rating. However, taxpayers with overall low assurance rating can expect comprehensive reviews of high-risk areas and may potentially see some matters being escalated directly to audit.”
Tax Avoidance Taskforce
The Tax Avoidance Taskforce has allowed the ATO to focus on large public groups and multinational corporations. The ATO has raised $13 billion in tax liabilities since the commencement of the taskforce in July 2016, with taskforce funding helping to generate $6 billion of this amount. It has also collected $7.3 billion in cash, with taskforce funding helping to generate $3.5 billion of this amount.
The success of the taskforce is shown in the general improvement over time of the Large Corporate Groups Tax Gap.
Our latest estimates for large corporate groups shows a gross gap of 7.5% (or $4.1b) and net gap of 3.7% ($2 billion) for the 2017–18 income tax year. In other words, this means that large corporate groups paid over 96% of the theoretical total amount of income tax payable by them in 2017–18. Our goal is to reach 96% upon lodgment and 98% compliance after ATO action.
The income tax gap for high wealth private groups and medium businesses have remained stable despite growth in the tax base in recent years.
Background
Read more: Australian tax gaps – overview
The Top 500 private groups cover private groups with:
- >$350 million turnover, regardless of net asset value
- >$500 million net assets, regardless of turnover
- >$100 million turnover and >$250 million net assets
- market leaders or groups of specific interest
- private economic groups with a total business income >$250 million, that are included in the large company tax gap.
The Top 100 population consists of public and multinational businesses and superfunds that have substantial economic activity related to Australia. The Top 100 taxpayers are initially identified based on the size of their Australian operations. Other factors we consider include income tax, GST or excise paid and the influence the taxpayer may have on their market segment. We review and moderate the Top 100 population annually.
Read more: Findings report Top 100 (income tax) program
The Top 1,000 tax performance program was established in July 2016 and covers public and multinational groups and large superannuation funds with annual turnover above $250 million.
Read more: Findings report Top 1,000 income tax and GST assurance programs
The ATO has today published a report on its interim findings from the Top 500 tax performance program. The program, established under the Tax Avoidance Taskforce, encourages transparency from Australia's largest privately owned groups and helps the ATO to determine whether they are correctly meeting their income tax and GST obligations.