Google Australia slugged with AU$51 million income tax adjustment

Google Australia has seen its post-tax profit slump from AU$129 million to AU$34 million on the back of AU$51 million in income tax adjustments and higher expenses.

This profit fall comes despite revenue growing from AU$1.07 billion to AU$1.24 billion for the year to December 31. Compared to the year prior, advertising revenue was up AU$158 million to AU$719 million, service revenue grew AU$42 million to AU$333 million, while hardware sales of its Pixel, Home, and Chromecast devices fell from AU$216 million last year to AU$179 million.

With an AU$73 million increase in operating expenses, Google Australia reported lower pre-tax profit year on year, AU$134 million for 2019 against AU$156 million for the year prior.

This turned into a post-tax profit slump once the company accounted for an extra AU$73 million in income tax expense for 2019.

In its tax breakdown, Google Australia had a current tax charge of AU$58.7 million and AU$50.6 million in adjustments for past years, set against AU$9.6 million in deferred tax. In its cash flow statement, the company revealed it had paid AU$134 million in income tax during 2019, compared to AU$91 million a year prior.

At the end of 2019, the Google mothership and the Australian Taxation Office ended a long-running tax dispute with the search giant agreeing to pay Australia AU$482 million.

"They join the likes of Microsoft, Apple, and Facebook who have all publicly stated that they have settled their tax affairs with the ATO and we welcome their transparency," the ATO said at the time.

In its filing, Google Australia said its principal activity is marketing and the selling of ads, as well as management technology, and support for ad sales. Google Australia earns a commission on ad sales from Google's Singaporean output, Google Asia Pacific.

"[Google Australia] notes that it is the agent in the transaction as it does not control the advertising inventory before it is transferred to the advertiser," the company said.

Overall bookings made by Google Australia amounted to AU$5.2 billion compared to AU$4.3 billion a year prior, with payments to suppliers also increasing from AU$3.5 billion to AU$4.9 billion.

Google Australia reported having 1,731 employees, wages increasing AU$77 million to AU$419 million, and total employee benefits expenses jumping by $112 million to AU$589 million. The company added its wage bill for its key management personnel had also spiked, going from AU$16 million a year prior to AU$24 million.

The Australian company said its immediate parent is Google International incorporated in the US, with the ultimate holding company being Alphabet.

Google Australia said on January 6 it issued 310 million shares at $1 to Google to "support investment in our Australian operations and workspaces".

Announcing its first quarter last month, Alphabet reported ad revenues plunged due to coronavirus, while Google Cloud revenue grew 52% to $2.6 billion.

Overall, Alphabet reported a 13% revenue increase to AU$41.2 billion.

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