Spotless Group Holdings Limited
Spotless was taken over by engineering contractor Downer Group two years ago and Downer is still enjoying Spotless tax losses while its revenue has jumped from $7.2 billion to $12 billion over the past two years.
It should be said that Downer is a reasonable taxpayer compared to many of its large company peers such as Lend Lease (as it ought to be from all the government contracts) and Spotless, having been poorly managed, did generate billions in actual losses which enabled it to pay no tax and to build up tax shelter.
This case illustrates one of the challenges for tax authorities, that is, how to deal with carried forward tax losses and tax losses acquired in takeovers. Companies on this list such as SABMiller and Healthscope have abused the system and the oil and gas giants have escaped billions in tax by transferring losses from project to project.
If parliament were to tighten the laws around trading in tax losses and – like the US – were to cap the amount of years a company could bank and use those losses, it would be a good reform. Qantas, for instance, would have been required to pay some tax over the past decade.
Downer’s latest accounts show it is still claiming tax benefits for the Spotless transaction two years later – another $28 million in costs for 2018 – and it recorded $203 million in deferred tax assets.
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We are counting down the Top 40 Tax Dodgers. There are now four years of tax transparency data published by the Tax Office and we have used this data to work out which large companies operating in Australia have paid the least tax, or no tax.
Notable new economy players such as Google, eBay, Booking.com, Expedia are not near the top of the ATO list. That's because they don't (yet) recognise all income earned here; instead, they book Australian revenue directly to their associates offshore. They will be ranked in due course.
For other large corporations, and in particular, multinationals, the main steps in avoiding tax are made by reducing their taxable as much as they can; usually by sending it offshore in interest on loans, "service" fees or other payments to foreign associates. So, we have set a threshold. We have included only those companies which managed to wipe out 99.5 per cent or more of their taxable income over four years.
Qantas, therefore, is not on this list, although it has enormous income and has paid no income tax in Australia for many years. It misses the cut-off due to it not eliminating more than 99.5 per cent of its total income.
The airline had made large losses which were offset against profits. Many large corporations which have paid zero tax in ATO data, have legitimately made losses and have therefore built up "tax-loss shelter".
Further explanation of methodology can be found here.
Many others however, such as ExxonMobil and EnergyAustralia, are on the list as they managed to eliminate all or most of their taxable income by "debt-loading" or other means of aggressive tax avoidance.
In this, the second iteration of michaelwest.com.au corporate tax rankings, we have ranked companies purely on the Tax Office data. We will also publish a list of Australia's better corporate taxpayers, those companies who contribute most to the country in which they operate.
The Tax Office data is not a perfect guide. It does not record refunds, only tax payable and is often at odds with disclosures made for accounting purposes. In some cases, there are multiple entities with the same ultimate offshore parent reporting. One entity may pay zero tax, another may pay at the statutory 30 per cent rate (even if on low taxable income). We endeavour to be fair in our reporting to recognise these issues.
The data also recognises trusts as well as companies. For trusts, it is the members (investors) rather than the trusts who are ordinarily required to pay the tax. In many cases however it is fair to recognise trust structures for what they are, as tax is often the main reason these vehicles have been structured as trusts.
Companies are welcome to debate their rankings or to touch base to clarify or defend their tax practices. We will append or link these submissions.
Hydrox has been taken off the list as it never made a profit.