🔍 The ATO Annual Report: Addressing Disputes and Securing Tax Compliance in 2023–24

The Australian Taxation Office (ATO) recently released its annual report which included data on settlements with public and multinational businesses. It provides deep insights into disputes, compliance outcomes, and ongoing audit programs.

✨ Key Highlights

💡 Increased Compliance: • Public and multinational businesses voluntarily paid an additional

💰 $2.2 billion following preventative compliance actions.

📊 Audit Outcomes: • Income Tax Liabilities: $2.76 billion raised, with $2.5 billion from intensive audit and review activities. • GST Liabilities: $363 million raised, plus ⚖️ penalties totalling $177 million in certain cases.

🌏 Focus on Global Profit Shifting: • 65–70% of income tax audits targeted risks such as transfer pricing, withholding tax avoidance, and related-party financing. • These risks accounted for 80% of liabilities raised in 2023–24.

⚠️ Anti-Avoidance Provisions: • Applied in ~30% of current audits, including the diverted profits tax, addressing mischaracterized business dealings.

🤝 Dispute Resolution and Settlements The ATO resolves disputes through settlements when appropriate, adhering to the Commonwealth’s model litigant policy:

💼 Public and Multinational Business Settlements: • Over 20% of all settlements in 2023–24 involved these businesses, securing $1.8 billion in tax revenue. • Settlement Variance: 31%, with the ATO retaining 69% of disputed amounts before settlement. • Income tax dominated settlements, with global profit shifting risks featuring in 65% of cases.

🏢 The Role of Large Businesses Public and multinational businesses are critical contributors to Australia’s tax system: • 70% of corporate income tax and 62% of GST liabilities in 2022–23. • The largest 100 companies alone paid 55% of all corporate tax.

🔍 Audit Programs and Emerging Risks As of July 2024, the ATO had 111 audits of public and multinational businesses in progress, primarily focusing on income tax.

⚙️ The ATO’s compliance efforts include: • Monitoring through the Top 100 and Top 1,000 justified trust programs. • Investigating global profit shifting arrangements - transfer pricing, intellectual property royalties, and related-party financing. • Start to apply penalties for significant global entities.

🚀 Moving Forward The ATO is focused on: • Sustaining audit programs targeting emerging risks. • leveraging the Government funding to support the Tax Avoidance Taskforce, (raised $22.8 billion since 2016). Expect to see the ATO continue to focus on large businesses given that corporate tax revenue is concentrated among Australia’s largest businesses.