ATO rakes in $4.5bn from compliance actions as profit shifting focus continues

ATO compliance activities raised an additional $4.11 billion in income tax liabilities and $359 million in GST from public and multinational businesses in 2024–25, its latest findings report on public and multinational business disputes revealed.

The Tax Office said it would continue to focus on large businesses and multinational profit shifting to uphold compliance across the broader tax system.

“Large corporates play an important role in our corporate tax system. Corporate tax is highly concentrated in the largest businesses in Australia, with these businesses paying 65 per cent of company tax,” the ATO explained.

“Large business also supports the tax compliance of other taxpayers through their impact on confidence in the tax system and, in some cases, the information they provide to facilitate compliance.”

The ATO acknowledged that large businesses had demonstrated some of the highest levels of tax compliance across all groups. Despite this, the authority noted that a “well resourced and robust audit program” would remain necessary to address Australia’s profit shifting risks.

“The economic characteristics of Australia (a net capital importer with a high tax rate) means we are susceptible to profit shifting,” the ATO said.

“High reliance on corporate tax and high levels of concentration with the largest entities means if tax risk proliferates, it can impact government revenue.”

In 2024–25, approximately 70 per cent of the ATO’s income tax audits for public and multinational businesses involved behavioural risks related to international-related party deals and cross-border structures.

“Transfer pricing is the most relevant event attracting our attention, where well understood issues of financing and marketing hub arrangements continue to be in focus,” the ATO said.

“However, increasing resources are being applied to mischaracterisation and supply chain risks in the context of evolving business models. Intangible arrangements and royalty characterisation are also significant issues attracting our attention.”

The ATO added that it would continue to examine cross-border structural issues, including debt loading, accessing of treaty benefits, and synthetic equity arrangements.

It was also applying “significant resources” to business and asset dissipation and heightened scrutiny of multiple entry consolidated rule exploitation and non-resident tax exemption risks.

The ATO said that the majority of their compliance resources in the public and multinational sector was dedicated to large businesses with turnover above $250 million. Of the ATO’s 127 active audits in the public and multinational space, 62 related to taxpayers in the top 1,000 population.

In 2024–25, the ATO issued 159 amended income tax liability assessments and raised a total of $4.11 billion in total liabilities, a 33 per cent increase on the year prior and well above their expected average of $2 billion per year.

The ATO attributed this growth to a “significant increase” in penalties raised against a small number of taxpayers. In 2024–25, 12 taxpayers received amended income tax assessments greater than $50 million, collectively raising approximately $2.16 billion in tax.

The Tax Office noted that it had witnessed an improvement in the tax compliance of large corporate groups since the assembly of its Tax Avoidance Taskforce in June 2016. In 2022–23, 94.1 per cent of tax was paid upon lodgement, while 96.3 per cent was paid following compliance activities.

Since the Tax Avoidance Taskforce commenced, the ATO has raised $26.9 billion in liabilities from public and multinational businesses. They attributed $15.4 billion of this to the additional funding and resourcing dedicated to the taskforce’s activities.

“We are responsible for ensuring public and multinational businesses (including large business) meet their Australian tax obligations. We do this primarily through the Tax Avoidance Taskforce and specific GST compliance programs,” the ATO noted.

“Significant funding from government for these programs ensures businesses are meeting their Australian tax obligations.”