You may or may not be surprised that some of Australia's biggest ASX shares are among the nation's top taxpayers.
Mining companies, including Fortescue Metals Group Ltd (ASX: FMG) and BHP Group Ltd (ASX: BHP), are shouldering a significant tax burden.
Meanwhile, companies like Qantas Airways Ltd (ASX: QAN) paid minimal or zero tax in the last financial year, whereas others like Woolworths Group Ltd (ASX: WOW) paid their share.
But what does this mean for investors in ASX shares? Let's see what the experts say.
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ASX shares in the tax spotlight
All taxes are not created equal, and neither are all companies. Tax payments among ASX shares vary widely due to different industry dynamics and corporate structures.
According to the Australian Tax Office (ATO)'s annual Corporate Tax Transparency Report, around $98 billion in tax was paid by Australian corporations in 2022-23.
This was an increase of nearly 17% year over year. But it wasn't paid equally.
For example, mining giants like Fortescue and BHP benefit from high commodity prices, forcing them to contribute billions to the Australian Tax Office (ATO) during commodity super-cycles.
During 2022-23, the sector paid more than "all other sectors combined, paying more than 5 times than they did in 2014–15".
Both of these mining behemoths, with their high iron ore profits, play a key role in supporting federal tax revenue. Tax paid by the oil and gas sector increased to $11.6 billion in 2022–23, with some oil and gas companies now amongst the largest taxpayers in Australia.
This result was driven by a combination of commodity prices, the project production life cycle and ATO intervention.
On the other hand, the report also showed that about 1,200 large companies didn't pay any tax during the period. This is about 31%, down from 36% a decade ago.
Some companies, such as Qantas, reported no payment due to tax offsets and carry-forward losses it incurred during the pandemic.
Effectively, Qantas utilised these credits from the massive losses it sustained during COVID-19, bringing its tax obligations to zero. This is not illegal and is common accounting practice.
Woolworths meanwhile paid taxes of $750 million on taxable income of nearly $2.6 billion, an effective rate of 29.2%.
How does this impact investors?
For those who own ASX shares, understanding a company's tax payments can shed light on its financial health and future obligations.
High tax contributions from players like BHP and Fortescue highlight their profitability. However, they also reduce earnings for shareholders, potentially crimping capital growth.
Meanwhile, companies with low or zero tax payments might face closer scrutiny from the ATO under its new Tax Avoidance Taskforce.
ATO Deputy Chair Rebecca Saint said the regulator pays "close attention to those who pay no income tax to ensure that they are not trying to game the system".
Respective companies will need to show legitimate reasons for the lack of profitability and tax payment. Evidence of tax planning or accounting to reduce tax will be closely monitored.
Foolish takeout
According to the ATO, ASX shares continue to pay their fair share of tax. The regulator is focused on reducing any mispayments or tax planning by corporates.
Knowing the tax rates paid by your companies is also essential information to gauge earnings and profitability.
For more on earnings and tax rates for investors, check out our deep dives here and here.
