ASIA
03 October 2025
AUSTRALIAN CORPORATE TAXATION.
Taxation rates are a contentious issue as all sectors of the economy are affected, writes Glen Robinson.
Taxation rates are a contentious issue as all sectors of the economy are affected,and there are two distinct groups, those which have to pay tax, and those which directly benefit from it.
There are strident cries emanating from the corporate sector, but also other groups including some politicians, calling for the corporate taxation rate to be reduced.
The cries are that the taxation rate is far too high in comparison to our contemporaries and that has deleterious effects on our potential inward investments as it discourages the foreign companies from investing, and it puts our Australian companies at a disadvantage in international markets.
The authorities publish sound information on the taxation regime on the larger public and private corporation statistics, and we have the opportunity to extrapolate the information to cover the wider population, and moreover when a critical evaluation of our system is undertaken some very interesting information arises as the following paragraphs will attest.
The rate of taxation for the corporates is published to be 30%, but 30% of WHAT??? Most people would assume it is from the profit of the company, but it is not, it is from the profit less a number of allowable deductions which reduce the amount of tax to be paid.
The OECD provide a tax table of all the 38 countries, and this table shows the TAX paid as a percentage of GDP in 2022 was Australia 29.4% and the OECD average was 34.0%. In the previous year 2021, the tax paid by Australia was 29.2% and the average paid by the OECD members was 34.1%. So, Australia was well below the average OECD tax rate. [Revenue Statistics 2024 © OECD 2024]
The ATO in Australia publish the tax paid by those both private and public companies which have a total revenue in excess of $100 million, and the information includes the total revenue, the taxable income and the tax payable. For the Y/E 2023 there were 4049 companies in this category, and their taxation status was evaluated, and of those 27.3% had no Taxable Income, hence no Tax Payable; 45.7% had a Taxable Income and a Tax Payable of 30%; and 27.0% had a taxable income and a tax payable of less than 30%.
In fact, the average Tax Payable for those companies which had a Tax Payable was 24.3%. There is no suggestion that the system encourages or condones “rorting the system”, however, the system has some
anomalies which can be exercised to minimize tax liability. [Taxation Revenue, Australia, 2023-24 financial year I Australian Bureau of Statistics]
The other issue is in relation to the oft quoted statements that we need to increase our taxation income to finance our ever-increasing government financial requirements.
However, as shown in the previous paragraph the average tax payable is 24.3% whereas if it were actually 30% in the case of large corporate, and if that situation actually applied to all companies which had a taxable income, the tax “foregone” is quite substantial at $42,479 Million, an amount which is very significant. [Government Finance Statistics, Annual, 2023-24 financial year/ Australian Bureau of Statistics]
With the publicly available information on the corporate taxes, and on the total tax intake, it is clear that firstly, corporate taxes are below the average of those counterpart companies in the OECD, which tends to indicate that a reduction in the rate is not warranted, and conversely, if the amount of foregone tax were actually collected then perhaps that may satisfy the need for additional funding.
However, the situation may well be that those who are paying the tax will seek to reduce the amount to be paid, and those receiving the payment will claim it is insufficient. That dichotomy will never be resolved, so we must move on and accept it for what it is.
There are strident cries emanating from the corporate sector, but also other groups including some politicians, calling for the corporate taxation rate to be reduced.
The cries are that the taxation rate is far too high in comparison to our contemporaries and that has deleterious effects on our potential inward investments as it discourages the foreign companies from investing, and it puts our Australian companies at a disadvantage in international markets.
The authorities publish sound information on the taxation regime on the larger public and private corporation statistics, and we have the opportunity to extrapolate the information to cover the wider population, and moreover when a critical evaluation of our system is undertaken some very interesting information arises as the following paragraphs will attest.
The rate of taxation for the corporates is published to be 30%, but 30% of WHAT??? Most people would assume it is from the profit of the company, but it is not, it is from the profit less a number of allowable deductions which reduce the amount of tax to be paid.
The OECD provide a tax table of all the 38 countries, and this table shows the TAX paid as a percentage of GDP in 2022 was Australia 29.4% and the OECD average was 34.0%. In the previous year 2021, the tax paid by Australia was 29.2% and the average paid by the OECD members was 34.1%. So, Australia was well below the average OECD tax rate. [Revenue Statistics 2024 © OECD 2024]
The ATO in Australia publish the tax paid by those both private and public companies which have a total revenue in excess of $100 million, and the information includes the total revenue, the taxable income and the tax payable. For the Y/E 2023 there were 4049 companies in this category, and their taxation status was evaluated, and of those 27.3% had no Taxable Income, hence no Tax Payable; 45.7% had a Taxable Income and a Tax Payable of 30%; and 27.0% had a taxable income and a tax payable of less than 30%.
In fact, the average Tax Payable for those companies which had a Tax Payable was 24.3%. There is no suggestion that the system encourages or condones “rorting the system”, however, the system has some
anomalies which can be exercised to minimize tax liability. [Taxation Revenue, Australia, 2023-24 financial year I Australian Bureau of Statistics]
The other issue is in relation to the oft quoted statements that we need to increase our taxation income to finance our ever-increasing government financial requirements.
However, as shown in the previous paragraph the average tax payable is 24.3% whereas if it were actually 30% in the case of large corporate, and if that situation actually applied to all companies which had a taxable income, the tax “foregone” is quite substantial at $42,479 Million, an amount which is very significant. [Government Finance Statistics, Annual, 2023-24 financial year/ Australian Bureau of Statistics]
With the publicly available information on the corporate taxes, and on the total tax intake, it is clear that firstly, corporate taxes are below the average of those counterpart companies in the OECD, which tends to indicate that a reduction in the rate is not warranted, and conversely, if the amount of foregone tax were actually collected then perhaps that may satisfy the need for additional funding.
However, the situation may well be that those who are paying the tax will seek to reduce the amount to be paid, and those receiving the payment will claim it is insufficient. That dichotomy will never be resolved, so we must move on and accept it for what it is.