Companies with an income of more than $5 billion represent only 2 per cent of the corporate transparency population but paid 53 per cent of tax. The nation’s 100 largest firms paid 41 per cent of all company tax.
Foreign-owned companies were the largest contributors to the increased tax take, adding $3.8 billion as 66 foreign-owned businesses joined the scope of the report. The ATO has also been clamping down on international profit shifting, targeting BHP, Google and Chevron among others since 2017.
The $6.6 billion overall surge is helping drive the Morrison government’s return to surplus as Treasurer Josh Frydenberg prepares to hand down his mid-year economic update on Monday.
The ATO said the banking, financial services and mining sectors were Australia’s biggest taxpayers. The big banks, which were hit with the $6 billion major bank levy six months before the banking royal commission, contributed to $16.2 billion in total tax payable by the financial services industry. The number of financial service providers earning more than $100 million has surged by 40 per cent since 2013-14.
Tax payable by the mining sector reached $16.1 billion in 2017-18, a $4 billion lift on the previous year and a 155 per cent jump on 2015-16.
The ATO believes more may come out of the mining sector as companies bring their use of offshore marketing hubs into line with domestic tax law.
ATO deputy commissioner Rebecca Saint said tougher laws around transparency were contributing to the lift in the tax take.
“We think in part there has been an improvement in voluntary compliance,” she said.
The Tax Office believes at least $500 million of the increase in corporate tax take is due to better compliance by businesses, with the rest largely due to the improved economy led by stronger commodity prices.
Ms Saint said while there were legitimate reasons for companies not to pay tax, the ATO was keeping a close eye on those that repeatedly failed to pay.
“The ATO is very focused on ensuring that companies making sustained losses understand their obligations to the ATO and the wider taxpaying community,” she said.
Ms Saint said there were signs some oil and gas companies were moving closer to paying income tax as their projects were in full production and generating revenues.
She said these firms were still generating tax losses in 2017-18 but that would soon end.
“We expect that as production increases these companies will move from generating losses to utilising losses and then paying income tax, some by the early 2020s,” she said.
Ms Saint said it would still be some time before the string of new LNG plants in Queensland and Western Australia cleared their accumulated losses and offsets and started paying petroleum resource rent tax.
Nine companies, down from 14, paid PRRT through 2017-18. They paid almost $1.2 billion in PRRT, up from $946 million, with the Tax Office putting the increase down to a lift in global oil prices and a weaker Australian dollar.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra