Facebook sold more than $700m in Australian advertising but tax bill just $20m

Social media giant Facebook generated more than $700m in advertising sales in Australia last year but has been left with a tax bill of just over $20m.

With much of its ad revenue expensed back to its US parent, the Faecbook’s Australian tax bill was just $20.2m. Picture: AFP

Social media giant Facebook scooped up more than $700 million in Australian advertising revenue last year by boosting its online sales as the nation spent more time at home and online through the pandemic.

With much of this ad revenue expensed back to its US parent, the tech giant’s tax bill was just $20.2 million.

Documents lodged with corporate regulator the Australian Securities & Investments Commission revealed Facebook Australia Pty Ltd generated $712.7 million in Australian advertising sales last calendar year, up 5.7 per cent on a year earlier.

Because Facebook views its Australian business as a “re­seller” of ad inventory across its flagship website, Instagram and Messenger apps, it books a “reseller expense” to be ultimately paid to its Californian parent.

Last year, $559 million in Australian sales were expensed.

This huge expense bill allows the company to sharply reduce its Australian profits and puts potential local earnings out of the reach of the taxman.

After this reseller expense, Facebook declared net ad sales in Australia of $154.6 million, down 7.4 per cent on the year earlier.

Net profit for the year for the Australian business came in at $37.86 million, slightly down on $39.48 million a year earlier. The $20.2 million tax bill compares to the previous year’s $16.8 million.

Senator Andrew Bragg said it was vital social media giants paid the correct amount of tax required, particularly given they rake in huge earnings. “The big tech companies make a lot of money in Australia and they need to pay their fair share of tax,” he said.

“Tax is paid on profit and if companies are still unfairly siphoning off profits through transfer pricing, then that is a concern.”

A Facebook spokeswoman said the company had abided by legislation and paid the correct amounts of tax. “During the last financial years, we paid income taxes in Australia at effective tax rates well above 30 per cent and in accordance with local taxation laws,” she said.

“We take our tax obligations seriously and are committed to supporting local communities and businesses in Australia.”

The accounts reveal Facebook is sitting on a cash pile of more than $243 million in Australia, which has grown from $207 million a year ago. It also had 162 staff in Australia at the end of December.

Facebook’s founder and chief executive officer Mark Zuckerberg said in January the company “had a strong end to the year as people and businesses continued to use our services during these challenging times”.

This is despite many Australian media companies being hit with revenue falls during the pandemic, forcing companies to reduce staff and cut costs.

A news media bargaining code was this year reached with Facebook, Google and media companies after the Australian government forced the companies to pay news producers for content is shown on search engines or social media platforms.

In February, Facebook stopped news content from appearing on its platform after refusing to agree to the laws, but backed down after negotiations with the government.

The financial deals between the social media giant and media companies have been done behind closed doors but it was seen as a big win for the media industry, which has been hit with declining advertising revenue and staff cuts in recent years.

Facebook recently finalised deals with several major media companies in Australia, including News Corp (owner of The Australian) and other major metropolitan mastheads.

They are also finalising a deal with Nine Entertainment Co – owner of The Sydney Morning Herald, The Age and Australian Financial Review – and have also struck a deal with Seven West Media.

Media organisations including the ABC, SBS and The Guardian have yet to reach an agreement with the social media giants.