Book-Tax Relations of Large Australian Companies

Using the data from the corporate tax transparency reports of entity tax information \nreleased by the Australian Taxation Office for the three income years 2013-14 \nto 2015-16, this study investigates the relations between (a) ‘taxable income’ in \ncorporate tax return and ‘profit before tax’ in financial report and (b) ‘tax payable’ in \ncorporate tax return and ‘tax expense’ and ‘current tax expense’ in financial report, \nas well as other variables that may explain these book-tax relations. This study \nfinds that on average a 1% increase in profit before tax from continuing operations \nis associated with 0.66% increase in taxable income. On average a 1% increase in \ntax expense in income statement is associated with 0.71% increase in tax payable \nin tax return, and a 1% increase in current tax expense is associated with 0.95% \nincrease in tax payable in tax return. Profits from discontinued operations, profits \nattributable to non-controlling (or minority) interests in the corporate group, the \nextent of foreign operations and the tax losses carried forward indicator also explain \nthese book-tax relations.