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ATO Allowing Netflix To Pay Next To Nothing In Taxes & It’s All Legal

Netflix are big, American and they are raking in over a billion in revenues in Australia, but unlike most Australian’s they are paying next to nothing in taxes and it’s all legal and has the blessing of the Australian tax office.

Netflix paid a mere $553,705 in taxes in Australia last year despite generating more than a billion in revenue during the COVID-19 2020 pandemic, they only have 9 local staff.

One has to give them some credit they did increase the amount of income tax it pays locally up from $485,371 in 2019 which was an increase on the $341,793 paid in 2018.

The big question is why they are being allowed to get away with this when small Australian businesses are being crushed into the ground by the Australian Tax Office.

The answer is simple, they are allowed by the ATO to use a corporate structure allowing a Netherlands-based subsidiary to recognise Australian revenue, estimated to be between $700 million and $1.4 billion.

Some observers claim the Netflix tax payment reveals clearly how ineffective the Australian government’s tax reforms have been in getting digital companies like Netflix, Google, and Facebook to recognise the money they earn from Australian consumers and businesses in Australia.

They get away with this by billing local subscribers via a Netherlands-based entity, and the money is collected by Netflix Australia on behalf of Netflix International BV with the local entity charging it a fee to provide those services.

According to Australian Securities and Investments Commission filings, in 2020, Netflix reported an after-tax profit of $878,234 on revenue of $20.54 million. This was up on the $17.3 million in revenue and profit of $854,695 reported in 2019.

The revenue was made up by the service fees paid by Netflix Australia’s immediate parent company, Netherlands-based Netflix International BV which paid $14.5 million to the local entity, up from $12.4 million in 2019. Netflix Australia’s ultimate parent, US-based Netflix Inc paid the local entity $5.9 million, up from $4.8 million in 2019.

“We comply with all Australian and international tax law. In addition, we continue to invest aggressively in Australian content,” a Netflix spokesman said.

“There needs to be more points of view contributing to the conversation”: Que Minh Luu, director of content (ANZ) at Netflix, at Cornersmith cafe in Annandale, Sydney.

Netflix does not disclose how many subscribers it has in Australia, but GST payments reveal it could be around 5.6 million with this tipped to rise to 6.1m this year.

Netflix offers customers three membership tiers, which until September were priced at $9.99, $13.99, and $19.99. Netflix increased the cost of its basic plan to $10.99 and the standard plan went up to $15.99 a month while the premium plan remained unchanged at the monthly cost of $19.99.

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