Facebook, Google process accounts in Australia

Weekend Australian
Saturday April 29, 2017

Tech giants Google and Facebook have bowed to legal pressure from the Turnbull government and brought their businesses onshore, ending their long-standing practice of booking Australian revenue in offshore tax havens. 

In accounts filed with the corporate regulator yesterday, Google Australia also for the first time admitted it had been under Taxation Office audit and has been slugged with fresh tax bills. It vowed to "uphold its positions against any and all such claims". "The company will lodge an objection and make a payment to the Commissioner of Taxation to stay recovery action, consistent with the Australian Taxation Office’s practice," it said in notes to the accounts.

Financial reports lodged by the Australian arms of both Google and Facebook reveal significant surges in local income, and tax paid here, as a result of compliance with the Multinational Anti-Avoidance Law introduced by former treasurer Joe Hockey.

Bringing $882 million in advertising revenue onshore from tax haven Singapore more than doubled Google’s revenue, lifting it from $498m in 2015 to $1.14bn in 2016. The remainder of Google’s local revenue comes from R&D services for its US parent. It is believed 2016 was a transitional year for the company as it adapted to the new rules, meaning yet more revenue is set to be booked locally next year.

Profit before tax surged from $50m to $121m, doubling the company’s tax bill from $16m to $32.8m. The amount of actual tax paid to the ATO in cash during the year, which may also relate to the previous year’s bills, increased from $16.6m to $40.6m, the company’s cashflow statement shows.

Google Australia said it "invested more than $400m in our Australian operations, and our workforce grew to around 1300 people".

Under the new rules Facebook’s local revenue in 2016 was almost 10 times what it declared in the previous year - $327m against 2015’s $33.5m. But with $271m paid away to related parties for "purchase of advertising inventory", only a slim profit was declared.

Facebook Australia made $6.3m before tax, compared with a $156,000 loss the previous year, and declared a company tax bill of $3.4m, up from $1m. Actual cash tax paid during the year was $1.9m.

Facebook said it changed its structure on January 1 last year, when the MAAL came into force. "Under the new arrangement, the company was converted into a local reseller of advertising inventory and concludes all sales contracts with customers managed by the sales in Australia," Facebook director Shane Crehan said in a note to the company’s accounts. "These customers will no longer have a contractual relationship with Facebook Ireland. The new structure is transparent and easier to understand."

** End of Report