The report of the Senate committee into corporate tax avoidance will be fascinating when it finally drops. The taxation structures of multinationals are so vastly complex that addressing – or attacking – them with policy responses is a fraught endeavour at a time when Australia, according to the Prime Minister, is supposed to be open for business.
Today’s committee hearings didn’t reveal much new about the specific tax arrangements of global technology companies operating in Australia, though we did learn that Apple, Microsoft and Google are all under investigation by the ATO.
The ATO has a detailed written submission to the committee (which you can find in full here) which lays out a range of facts on the make-up of Australia’s tax base.
While the tax-minimising arrangements of super-wealthy corporations are in the headlines at the moment, the ATO has also pulled the curtain back on the extraordinary lengths to which wealthy individuals in Australia go to manage their money.
That rich people use trusts and companies to shuffle money around is no surprise, but the ATO’s stats on it are staggering – and the structures get more insane the richer people get.
From the ATO:
There are 147,000 private companies associated with 220,000 private groups linked to 119,000 Wealthy Individuals (resident individuals who, together with their business associates, control more than $5 million in net wealth). Of this approximately 2,800 are considered High Wealth Individuals (HWIs), i.e. a sub-set of Wealthy Individuals who control more than $30 million in total assets.
Wealthy individuals and their private groups often have complex arrangements and utilise flow-through entities such as trusts and partnerships in addition to companies. On average High Wealth Individual group structures consist of five companies, five trusts, one Self-Managed Super Fund (SMSF) and one partnership. Other wealthy individual group structures on average consist of one company and one trust, with two thirds including an SMSF and one third including a partnership. The top 80 HWI groups consist of more than 50 entities.
So roughly translated this means that on average, people in Australia with more than $5 million in net wealth have a network of 12 entities that they move money through. And the 80 richest people have more than fifty.
At least they can afford to pay someone to keep track of it all.