Ranking Australia’s billionaires as taxpayers

by | Feb 28, 2020 | Finance & Tax

Which billionaires pay the most tax, and which pay the least? Michael West ranks the Australia’s billionaires.

Josh Frydenberg provoked a burst of hilarity in 2015 when he suggested the wealthiest Australians should keep a cosy exemption, an exemption not available to anybody else, an exemption which allows them to hide their financial statements. They might be kidnapped if this information became public, he said, then as Assistant Treasurer.

It would be a dopey kidnapper who thought Gina Rinehart and James Packer were not rich enough to kidnap, in the absence that is of a forensic analysis of their Form 388 financial statements lodged with the corporate regulator. Politicians, in any case, are good at drumming up ways to mollycoddle our most wealthy and powerful people.

So it is that Australia’s richest old families enjoy a special exemption. They have been “grandfathered”. They they don’t have to file accounts for their private companies, no matter what size. The Lowys, Packers, Murdochs, Foxs, Lews, some 1500 private companies; the size of their income, their taxes, remain a secret.

This is the old wealth, mind you. There is a different regime for the parvenus. Australia’s newer billionaires are required to disclose their financial statements to ASIC just like the rest of us, just like multinationals too for that matter.

Although Gina Rinehart lobbied for this golden exemption, she failed, and Australia’s more recent billionaires, if their companies have revenue above $200 million, do have to disclose accounts. This captures Andrew Forrest and Gina Rinehart. And they, on the publicly available data which we can see, appear to be the best billionaire taxpayers.

The table shows Tax Office transparency data over the five years it has been recorded. From this, we can see that Andrew Forrest’s Fortescue Metals Group has paid $2.6 billion in tax over five years until 2017. Forrest owns 36 per cent of the stock, so he personally collected $1.24 billion last year when Fortescue announced a record profit and bumper dividend to shareholders.

The last set of Fortescue financial statements show the company paid $1 billion in tax in 2018 – almost covering the entire budget of the ABC – and $376 million in 2019.

Gina Rinehart’s Hancock Prospecting paid $1.7 billion over the five years. As she owns the company – it is not publicly listed on the ASX like Fortescue – Gina Rinehart may be Australia’s biggest individual taxpayer. This, of course, is a guess because we simply can’t tell what happens to income once it gets into the hands of any of the billionaires, or their corporate vehicles that is. Old wealth does not have to disclose at all.

We do know that Andrew Forrest gives a lot of money to charity, a lot of that to his personal charities such as the Mindaroo Foundation. These payments are tax deductible.

Nevertheless, the tax paid by both Fortescue and Hancock does get to the Tax Office.

As does plenty from the man who is arguably, not the very biggest, but the best taxpayer, dollar-for-dollar in Australia, Kerr Neilson. Neilson founded Platinum Asset Management whose profit margin is around 75 per cent and tax rate 30 per cent and is major shareholder.

One nillion from Rupert

In contrast, Rupert Murdoch’s News Corporation in Australia has paid zero over the five years of available ATO data despite racking up almost $14 billion in total income. That’s despite making $246 million in taxable profits; still a tax rate of zero compared with the statutory corporate tax rate of 30 per cent. Anthony Pratt’s Pratt Consolidated is not much better, posting more than $13 billion in revenue and paying just $18.8 million – a tax rate of just 4.9 per cent on Pratt’s $387 million of taxable income.

Kerry Stokes was much better, his Seven West Media stumping up $209 million over the five years of ATO data, a tax rate of 26 per cent. Stokes has significant investments elsewhere in mining but his personal interests are also grandfathered as he is a pre-1995 billionaire, which is the time of the Keating government when the exemptions were made.

The Packer family, which is not on the list above, has been a significant taxpayer via its shareholding in Crown Resorts. Four years of Tax Office data show Crown paid $435 million. Crown’s accounts show it paid $140 million over the past two years. James Packer sold down the family’s stake by 20 per cent last year to 26 per cent.

Packer is no saint when it comes to paying tax. An investigation for michaelwest.com.au conducted by data expert Kim Prince found the Packer family’s corporate empire has more than 40 tax haven links to the Bahamas, Bermuda and Barbados.

Still, the Packers have a better public track record than the Murdochs and the Lowys when it comes to tax. Rupert Murdoch’s News Corp was ranked the “number one tax risk” in Australia by the ATO and Frank Lowy’s Westfield has a long history of enthusiastic offshore tax structuring. This was exposed in 2009 thanks to a data leak from a bank in Lichtenstein and subsequent stories involving a $50 million donation to a charity in Israel.

Besides these big-name billionaires there are another 150 or so billionaires who enjoy the grandfathering exemption, many extremely secretive types whose names you will never have heard. The fact is we just do not know what income these billionaires really have, or the size of their assets. Their affairs are acutely structured. They employ the priciest tax lawyers money can buy.

We can safely assume any billionaire will control offshore vehicles in tax havens. These are not merely to dodge tax, they are to legitimately avoid double tax but also to diversify their assets in case Australia fall off an economic cliff. They go to incredible lengths to structure and disguise their tax affairs as this story on the money trail shows.

The late Kerry Packer once famously told a parliamentary inquiry:

“Of course I am minimising my tax. And if anybody in this country doesn’t minimise their tax, they want their heads read, because as a government, I can tell you you’re not spending it that well that we should be donating extra!”

Attitudes towards paying tax however have changed. Tax avoidance is no longer seen as a badge of honour. Paying tax is now deemed part of any person or any institution’s social licence to operate. The demand this week from Senator Rex Patrick that Reserve Bank board member, Catherine Tanna, step down because she is chief executive of Energy Australia and Energy Australia has a record of tax avoidance is testament to these changing standards.

One of the tax lawyers for the Lowy’s Westfield group used to be David Gonski. Gonski was also a Westfield director and was named in a US Senate report as being at an early meeting with a private banker from Liechtenstein’s LGT bank – the bank at the centre of the infamous data leaks in 2009 – to discuss the set-up of the Lowy structure.

Gonski would not go near this sort of tax transaction these days. Community attitudes have changed. But what has not changed, and what must change, is the secrecy around the corporate affairs of Australia’s wealthiest old family business empires. There is absolutely no reason why these people should be treated any differently to other Australians, indeed to any other large enterprise.

Michael West established michaelwest.com.au to focus on journalism of high public interest, particularly the rising power of corporations over democracy. Formerly a journalist and editor at Fairfax newspapers and a columnist at News Corp, West was appointed Adjunct Associate Professor at the University of Sydney’s School of Social and Political Sciences.

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