The OECD four pillars of compliance

Large corporate group registration

As significant contributors to the Australian tax system, we're confident large corporate groups who should be registered in the system are registered. With sophisticated business operations of $250 million or more in revenue annually, these groups are well aware of their tax obligations.

Large corporate group lodgment

Large corporate groups predominantly lodge on time. These businesses have significant internal capacity and capability to lodge. Failure to lodge is likely to be symptomatic of broader issues within the business.

Of those that don’t lodge on time, many are late by less than one month and most are late by less than 3 months. We have specific engagement strategies for these entities. There are also higher penalties for significant global entities that fail to lodge on time.

Occasionally we may find individual entities within a large corporate group not meeting their lodgment obligations. Often this is due to the entities being dormant or non-trading, which is not a revenue risk under ordinary circumstances.

Figure 1: Large corporate groups lodgment performance, 2022–23

Correct reporting

Measuring assurance and confidence in tax consequences

Tax assured helps us demonstrate our confidence in the tax system. We consider amounts of tax to be assured where we have evidence they have been reported correctly. We collect evidence from a range of sources including directly from taxpayers.

Where we can't gather evidence to assure tax, we rely on our broader risk management approaches to provide us with confidence in tax reporting.

Tax assured complements other measures, including tax gaps and total revenue effects. Together they provide insight into how well the tax and super systems are performing. We use this insight to assist Treasury with shaping the future design of the systems and our strategies for addressing potential non-compliance.

We have assured $36.9 billion of income tax reported by large corporate groups for 2021–22 and $39.2 billion for 2020–21.

You can also find out about How we gain confidence the right amount of tax is being paid.

Preventative action

We undertake a range of activities aimed at preventing non-compliance. We do this:

• across the large corporate groups population generally
• through direct action with the largest taxpayers in this population.

You can find out more in Population wide approaches to preventing non-compliance and how we engage with specific taxpayers in Active prevention: one-to-one.

Corrective action

Corrective action targets those cases where taxpayers seek to push the boundary of acceptable tax planning. We identify these cases based on:

• intelligence
• data analysis
• risk assessments.

Where we suspect a particular arrangement is being used by multiple large corporate groups we address the potential non-compliance in a targeted and coordinated way. This includes investigating both taxpayers and advisers we suspect are involved. We also provide early warning to the market of our concerns, often in the form of a taxpayer alert.

Results from our compliance activities

Our compliance activities and the results we obtain act as a visible deterrent against large corporate groups choosing not to comply with their Australian tax obligations.

The significant fluctuation in the outcomes of our corrective action each year reflects the characteristics of the large corporate groups population:

• There are low levels of systemic tax avoidance, so we don’t have a regular program of audits on the same fact pattern leading to similar audit results across years.
• The size of the taxpayers and their transactions is such that a single audit case may amount to significant sums in additional tax payable.
• Complex transactions may be subject to multi-year investigations and subsequent litigation before the taxpayer pays additional taxes and penalties.

Table 1: Corrective action targeting large corporate groups income tax, 2018–19 to 2023–24

Corrective action targeting large corporate groups income tax	2018–19 $m	2019–20 $m	2020–21 $m	2021–22 $m	2022–23 $m	2023–24 $m
Total debits (liabilities) (see Note 1)	1,876	2,053	2,818	2,666	1,974	2,824
Audit yield (cash) (see Note 2)	1,136	1,373	1,051	1,428	1,276	1,669

Note 1: Liabilities raised in a given year may relate to multiple years of assessments and include additional tax, penalties and interest.

Note 2: Audit yield is actual cash collected (or estimated to have been collected) against liabilities raised (in the year and prior) and includes collections on tax, penalties and interest.

The complexity inherent in the law and the business affairs of large corporate groups can lead to significant differences in interpretation of how the law applies in a given circumstance. Taxpayers can and do dispute amended assessments made by us, sometimes all the way to the courts. The result is not always in our favour.

Sometimes we settle disputes for a lesser amount than originally assessed. This means the additional cash we collect from an audit doesn’t always equal the amount of additional tax liabilities we raised under the amended assessment.

Observed behaviours

Some large corporate groups may engage in tax minimisation or avoidance. But typically, they are not reckless and do not evade tax.

Where we see an incorrect application of the law and reasonable care hasn’t been taken, we can apply a range of administrative penalties. These vary, depending on the behaviour involved.

Our analysis of culpability penalty rates imposed confirms a strong compliance culture among large corporate groups. We have not raised a penalty in cases where the taxpayer made a voluntary disclosure or, in our view, had a reasonably arguable position and it is otherwise appropriate to not impose a penalty.

Even where we have applied penalties, in most cases we considered there was, at most, a lack of reasonable care and not recklessness or intentional disregard. We may reduce a penalty where appropriate based on the facts and circumstances of the case.

Figure 2: Culpability penalty rates applied to large corporate groups, 2018–19 to 2023–24

You can also view data for Culpability penalty rates applied to large corporate groups, 2018–19 to 2023–24 in table format.

On-time payments

Most large corporate groups generally pay their tax obligations on time and almost all tax is paid within 365 days or within agreed upon timetables.

As with lodgment obligations, our work managing debts of large corporate groups focuses on cooperative relationships. We also emphasise:

• transparency
• prevention before correction
• early assurance
• certainty for all parties.

This is our starting position for working with all businesses. Most businesses work this way with us.

Figure 3: Large corporate groups payment times, 2022–23

Large corporate groups income tax debt is relatively small compared to the total corporate income tax reported. Similarly, the income tax value of debt owed by these groups represents only a small percentage of their total tax paid on time, and the majority of this debt is disputed.

Disputed debt covers tax outstanding that is subject to:

• an objection with us
• a review via the Administrative Review Tribunal
• appeal to the Federal Court.

We expect that in such a large and complex system we will have disputes. Our intention is to resolve disputes as early as possible, in a way that is fair and respectful.

A very small amount of debt is owed by former large corporate groups that are now under some form of insolvency administration.

Figure 4: Large corporate groups debt as a proportion of corporate income tax, 2022–23