For 2021–22, we expect large corporates to voluntarily pay more than 93% of what they should. We estimate this to rise to nearly 96% after ATO engagement.
Large corporate groups population
A large corporate group has a gross income of over $250 million in a financial year. In 2021–22, large corporate groups:
- reported $2.42 trillion in gross income
- generated $343 billion in taxable income
- returned around $86 billion in expected income tax.
This gap forms a part of our overall tax performance program. Find out about the concept of tax gaps and the latest gaps available.
Overview of the latest estimate
The ATO estimates that the economic activities undertaken by large corporate groups should have generated almost $90 billion in income tax for 2021–22. We know that $84 billion was voluntarily reported. This leaves a gap of $6.1 billion, or 6.8%, and we call this the large corporate groups gross tax gap.
After ATO engagement and compliance action, the gap was reduced to $3.6 billion, or 4.1%, and we call this the large corporate groups net tax gap.
A suite of legislative reforms and operational changes have enabled us to continue reducing the large corporate groups tax gap over the last 6 years. We discuss some of these measures in Tax and Corporate Australia, including:
- enhancements made to the general anti-avoidance rule and transfer pricing provisions
- the adoption of transparency measures
- the expansion of our justified trust program
- a continued focus on public advice and guidance.
The tax gap can be viewed in net and gross terms to show the impact of amendments. Table 1 shows the expected income tax collections, amendments, and net and gross income estimates for the period 2016–17 to 2021–22.
The large corporate group transactions are often complex, taking time to review and resolve. Historically, this has resulted in downward revisions to our current year estimate and we expect a similar revision down to our 2021–22 tax gap estimate, shown in Table 2.
Element | 2016–17 | 2017–18 | 2018–19 | 2019–20 | 2020–21 | 2021–22 |
|---|---|---|---|---|---|---|
Population (entities) | 6,877 | 7,261 | 7,836 | 7,809 | 7,940 | 8,305 |
Gross gap ($m) | 2,873 | 3,824 | 5,525 | 3,792 | 4,428 | 6,103 |
Amendments ($m) | 1,261 | 1,793 | 3,035 | 1,761 | 1,760 | 2,458 |
Net gap ($m) | 1,612 | 2,031 | 2,490 | 2,031 | 2,668 | 3,645 |
Expected collections ($m) | 46,588 | 52,985 | 59,515 | 59,114 | 69,983 | 86,233 |
Theoretical liability ($m) | 48,201 | 55,016 | 62,005 | 61,145 | 72,651 | 89,878 |
Gross gap (%) | 6.0% | 7.0% | 8.9% | 6.2% | 6.1% | 6.8% |
Net gap (%) | 3.3% | 3.7% | 4.0% | 3.3% | 3.7% | 4.1% |
Element | Published year | 2016–17 | 2017–18 | 2018–19 | 2019–20 | 2020–21 | 2021–22 |
|---|---|---|---|---|---|---|---|
Net tax gap | Current year | 3.3% | 3.7% | 4.0% | 3.3% | 3.7% | 4.1% |
- | Last year | 3.3% | 3.7% | 3.7% | 3.6% | 4.2% | - |
Gross tax gap | Current year | 6.0% | 7.0% | 8.9% | 6.2% | 6.1% | 6.8% |
- | Last year | 6.5% | 6.9% | 6.9% | 6.1% | 6.5% | - |
Figure 1 displays the trend in the gross and net income tax gap over the same period.
Figure 1: Gross and net income tax gap (percentage) – large corporate groups, 2016–17 to 2021–22