Tax Transparency Rules and Publication of Tax Information
The Australian Tax Office (ATO) requires the public disclosure of certain information relating to the tax affairs of large corporate entities. A large corporate tax entity is defined by the ATO as an entity whose total Australian income for the year exceeds AUD$100 million.
These tax transparency rules were introduced in order to discourage aggressive tax avoidance practices.
Limitations of reporting
As the details to be published by the ATO are limited, the ATO will also publish on its website (www.ato.gov.au) general explanatory material that provides context for the published information.
This will include explanations for factors that may result in a difference between a company’s total accounting income and taxable income.
The ATO will also seek to explain factors that might result in a company having a low effective tax rate (ETR*), which include permanent incentives provided for by the Australian Government (for example the Research and Development (R&D) tax incentive) and the utilisation of foreign tax credits.
Does Imdex engage in aggressive tax avoidance practices?
- No, Imdex does not engage in aggressive tax avoidance practices. The Tax Risk Governance Framework (that was approved by the Imdex Board of Directors) states that all transactions must have a business purpose or commercial rationale.
Why might the rate of tax that Imdex Australia pays be less than Australia’s headline 30% corporate tax rate?
- Under the Australian tax rules, there are permanent incentives offered to companies by the Australian Government. One such scheme is the R&D tax incentive scheme, which encourages companies to engage in R&D and is jointly administered by AusIndustry and the ATO. Imdex invests heavily in R&D, and therefore utilises this scheme. Imdex receives a tax offset (R&D tax credit) against Australian taxable income once the claim is approved by AusIndustry.
Foreign Tax Credits
- In addition, Imdex operates in a number of countries; these countries may impose their taxing rights on income generated in that country. If this is the case, Imdex will have paid tax in that overseas country. Australian tax rules allow for a credit against Australian taxable income for foreign taxes paid (in certain circumstances).
Impact on ETR
- These R&D, foreign tax and other credits offset against Imdex’s Australian taxable income, and can reduce the amount of tax payable by Imdex. This could result in Imdex having an effective tax rate less than the Australian corporate income tax rate of 30%.
* ETR = corporate income tax expense ÷ profit before tax