ATO issues public group disputes and settlements report
The Tax Office raised billions of dollars in tax revenue from settlements, disputes and increased compliance activities in the 2023-24 year from public and multinational businesses.
The ATO has published the report, 2024 Public Groups disputes and settlements report, which provided insights and key findings on disputes and settlements with public and multinational businesses for 2023–24.
The report highlighted that an additional $2.2 billion of tax compliance was paid voluntarily as a result of ATO preventative compliance intervention.
Only the second report published of its kind, the ATO said this report broadened the scope from last year and outlined key findings and observations on income tax and GST disputes.
ATO deputy commissioner Rebecca Saint said public and multinational businesses play an important and integral role in the functioning of Australia’s corporate tax system.
“To ensure the community has confidence that large businesses are paying their fair share of tax, in addition to our assurance programs, we maintain a robust audit program to address risks and arrangements of concern,” Saint said.
The report showed 24 matters were escalated and endorsed for audit during the year, which remain ongoing.
The Tax Office also issued income tax assessments to 124 public and multinational businesses, which raised $2.76 billion in liabilities.
It was noted that $2.5 billion was raised in respect of 24 different taxpayers following intensive audit and review activities and total liabilities for GST raised were $363 million.
Throughout the year, the ATO raised liabilities for penalties of $177 million; however, some of these applied to the 2022–23 year and penalties for most audits completed in 2023-24 were still being considered.
Saint said the audit and compliance programs were primarily funded via the Tax Avoidance Taskforce.
“For 2023-24 we raised $2.76 billion in income tax liabilities and $363 million of GST liabilities.”
“In addition, a further $2.2 billion was paid voluntarily as a result of our previous compliance interventions and resolved disputes.”
“Since the taskforce commenced in June 2016, we have raised $22.8 billion in liabilities from public and multinational businesses.”
The report highlighted that global profit shifting continued to be a major focus in the ATO audit program due to its legal and factual complexity.
The ATO said around 65 to 75 per cent of current income tax audits involved global profit shifting issues, and it had investigated transfer mispricing, mischaracterisation of business activities, capital flows and withholding tax issues.
“Nearly 80 per cent of income tax litigation decisions relating to public and multinational businesses handed down in 2023-24 involved issues related to global profit shifting, including transfer mispricing and the application of the general anti-avoidance provisions,” the report said.
Another notable section and area of concern for the ATO included was the investigation of arrangements based on tax avoidance.
The ATO said it was considering the application of general anti-avoidance provisions in 30 per cent of current income tax audits.
The increased application of the anti-avoidance provisions was driven by increased concerns and audits related to the mischaracterisation of business dealings, according to the ATO.
The Tax Office resolved disputes via settlement where appropriate and consistent with the Commonwealth’s model litigant policy.
The report demonstrated that across all client groups, public and multinational businesses accounted for more than 20 per cent of all parties to settlement agreements and around 92 per cent of the tax revenue secured.
The total settlement variance for public and multinational businesses was 31 per cent, which meant the ATO secured 69 per cent of the disputed amount that was considered payable under the starting position before settlement.
The ATO noted the five-year average variance of 39 per cent for settlements with public and multinational groups was “broadly consistent” with the five-year average of other key taxpayer segments.
Saint said overall, income tax was the predominant revenue type settled and around 65 per cent of settlements with public and multinational businesses involved global profit shifting risks.
“We encourage taxpayers to engage with us early and seek advice for complex transactions,” Saint said.
“As each of the findings reports demonstrates, early engagement leads to higher positive outcomes for taxpayers.”
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