​Google Australia posts AU$125m profit as it continues to fight ATO on tax matters

The local arm of Google paid AU$37 million in tax for 2017, but is still fighting the Australian Taxation Office on an unpaid tax debt.
Written by Asha Barbaschow, Contributor

Google Australia has made its financial results to the Australian Securities and Investments Commission (ASIC) available, reporting AU$125 million in after-tax profit for 2017, up from the AU$104 million posted a year prior.

Profit before tax was AU$149 million, on revenue of AU$1.02 billion, which comprised of AU$604 million from advertising, AU$266 million from research and development (R&D) services, and AU$136 million from hardware.

Reported under Australian accounting standard AASB 15, revenue numbered AU$1.02 billion; however if the company reported under AASB 118, revenue would be revealed as pushing AU$3.46 billion.

Google Australia adopted the AASB 15 standard on January 1, 2017.

Cost of sales and services for the 12-month period was AU$459 million, down from the AU$700 million reported in 2016. Receipts from customers numbered AU$3.5 billion, up from AU$642 million.

Operating expenses were flagged by the search giant as AU$416.5 million.

After last year confirming the Australian Taxation Office (ATO) was chasing it for a debt relating to unpaid tax, Google lodged an objection against the amended income tax assessments it was issued at 2016 year end.

"Such contingencies relate to reviews for open tax years as well as certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business," the company said last May.

"The company will continue to uphold its positions against any and all such claims."

In its ASIC filing on Tuesday, the company said it had lodged objections to the amended assessments and, consistent with ATO practice, made a payment to the Commissioner of Taxation to stay recovery action.

"The tax matters remain ongoing and the company and the ATO are actively working to resolve all issues for open tax years," Google Australia wrote. "As the company cannot reliably measure what the potential outflow of economic benefits might be in the future, a provision has not been recorded."

While the company told ASIC there was a handful of "critical judgements" that were made when preparing its financial statement, including on determining the appropriate accounting for the company's income tax, it said there are certain transactions for which the ultimate tax determination is uncertain during the ordinary course of business, resulting in differing amounts than previously recognised.

"As it related to ongoing tax reviews for open tax years by the Australian Taxation Office, including amended income tax assessments issued to the company from the Australian Taxation Office, judgement has been exercised in assessing whether additional amounts should be recognised when determining the company's income tax and other provisions," the search giant wrote.

"Given the significant judgement involved in this determination, including the company's inability to reliably measure any potential outflow of future economic benefits, the company has disclosed a contingent liability note and has not recognised a provision for the ongoing tax reviews."

Despite the ongoing dispute, Google Australia paid AU$37 million in tax for 2017.

After paying AU$33 million in tax a year prior, in its 2017 statement Google made an adjustment on its balance sheet for previous years of AU$221,831. Deferred tax assets were AU$99.3 million for 2017.

Locally, Google employs 1,282 staff, on which it spent AU$298 million in wages. It also paid AU$231.8 million in income tax.

The immediate holding company of Google Australia is Google International LLC, a company which is part of the Google LLC group within Alphabet, the ultimate parent company.

The principal activities of Google Australia were described by the company as the marketing and selling of certain internet search, advertising, and information management technology services and related products, and to provide services, assistance, and advice in connection with marketing and sales support for web search engine services and advertising services.

The company additionally provides certain R&D support for Google technologies, and also generates revenue from sales of hardware, it said.

The Australian government legislated a new Diverted Profits Tax (DPT) in March last year, which is intended to prevent the practice of multinational organisations shifting profits made in Australia offshore to avoid paying tax.

The DPT will hit multinationals with global revenue of more than AU$1 billion and Australian revenue of greater than AU$25 million with a 40 percent tax on all profits.

The tax is expected to see AU$100 million in revenue per year from 2018-19 stay on Australian soil.

The new legislation mirrors a law implemented in the United Kingdom, which is nicknamed the Google Tax after the search engine giant was ordered to pay the UK government £130 million in back taxes.

See also: ATO stats confirm global giants are coughing up to Canberra

Google was also previously called out by the federal government for employing the so-called Double Irish Dutch Sandwich method, which is the process of funnelling money through other countries from Australia in order to pay a lower tax rate.


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