Share with your friends

Australia: Income “tax gap” estimate, large corporate groups

Australia: Income “tax gap” estimate

The Australian Taxation Office (ATO) has released an updated estimate of the income “tax gap” of large corporate groups for each financial year from 2010–11 to 2016–17. The restated figures show a downward trend for the past four years, which some believe may indicate that legislative changes are having an effect on reducing the incidence of diverging views of the law.


Related content

According to the ATO, the large corporate groups’ income tax gap is the difference between (1) the total amount of income tax collected from large corporate groups and (2) the amount the ATO estimated would have been collected if every one of these taxpayers was fully compliant with the tax law. The large corporate groups included in the data are those with gross income exceeding $250 million* in a financial year (approximately 1,500 large corporate groups).

*$ = Australian dollar

The reason for the gap, according to the ATO, is differences in interpretation in complex areas of the law such as:

  • Transfer pricing
  • Treatment of offshore income and the use of controlled foreign companies
  • Business restructures
  • Debt-equity tax arbitrage

According to the ATO, the net income tax gap has been consistently decreasing over the past four years, from 5.2% in 2013-14 to 4.0% in 2016-17. The ATO noted that a range of legislative reforms and operational changes coincide with these changes including:

  • Enhancements made to the general anti-avoidance rule and transfer pricing provisions
  • The adoption of transparency measures
  • The expansion of the justified trust program

Read an October 2019 report prepared by the KPMG member firm in Australia

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal