In the last few months the Australian Government has increased pressure on multi-national groups operating in Australia to ‘pay their fair share’ of tax.

The government has introduced two pieces of legislation. 

The first requires the Australian Tax Office (ATO) to publish financials, including the taxable income and income tax paid in Australia by companies that report worldwide income of over AU$100 million.

This ‘naming and shaming’ will not affect the amount of tax that these companies pay under Australian tax law but the information will be publically available. This is a real departure from the strict privacy rules normally imposed on the ATO.

The second piece of legislation has been introduced but not yet passed by parliament. It introduces a tax on services provided by multinationals to Australian consumers, known colloquially as the ‘Google tax’. 

The new law focuses on scheme where foreign multinational with global income of over AU$ 1 billion provide services to Australian customers but do not derive income from these services in Australia. 

The conditions are: 

  • a foreign multinational derives income from sales made to Australian customers;
  • it avoids booking the income in Australia;
  • the profits generated from the sales are subject to low corporate tax rate overseas; and
  • the ‘principal purpose’  of the structure is to avoid Australian income tax.

A new regime with penalties of up to 120% of the tax payable will be introduced in support of these provisions, along with extensive reporting requirements.