Apple Australia profits crash 97 percent after tax adjustment

Apple Australia has reported a slight drop in revenue and a massive decline in after-tax profit in its consolidated income for the 2016 financial year, after paying a hefty tax adjustment relating to previous years.

The iPhone maker’s consolidated Australian revenue fell $296 million, or three percent, to hit $7.5 billion for the 12 months to 24 September 2016, according to its annual report to corporate regulator ASIC.

The result marks a return to declining revenue for a company whose success is tied directly to the launch cycle of its most popular product, the iPhone.

Apple posted a positive performance in 2015 when sales surged $1.7 billion, or 27.9 percent, to $7.9 billion for the 12 months to 25 September 2015. The company had seen a flat 2014, when annual revenue was down 0.5 percent to $6.07 billion compared with the same period in 2013.

The most dramatic figure for FY2016, however, was yearly profit, which crashed $119 million, or 97 percent, to $3.6 million. That figure is the result of a massive increase in the company’s reported tax expense. The Australian wing of Apple paid $128 million in tax, a figure made up of $69.8 million, related to FY2016, and an adjustment of $58.3 million relating to prior years.  

The bottom line wasn't the only casualty. Apple's FY2016 pre-tax profit was also down $76 million, or 36 percent.

Apple Australia’s tax bill has seen a great deal of fluctuation in the past three years. In the 2015 financial year Apple also paid a tax adjustment of $11 million to total $84.9 million. In 2014 Apple paid $80.3 million in tax, which was more than double than its 2013 tax bill of $36.4 million, though 2014’s taxable income was $163 million greater than the year prior.

It is not yet understood which years Apple’s FY2016 tax adjustment accounts for, or how exactly it was calculated. The ATO is currently auditing the company's 2012 results. Apple Australia was contacted for comment.

The Australian government last year announced it was cracking down on multinational company tax accounts, following its scrutiny on the likes of Apple, Microsoft and Google shifting profits overseas. The 2016 budget, announced in May, introduced a Diverted Profits Tax, which would impose a 40 percent penalty rate on large multinationals trying to shift their profits offshore.

In August last year, Apple was ordered by repay €13 billion (A$19.2 billion) taxes after the European Commission found its Irish tax structure "illegal under EU state aid rules".

The decision came after an investigation spanning more than two years. The commission found that through two tax rulings, Ireland had "artificially lowered" the tax paid by Apple since 1991, enabling the Irish tax dodge that has enabled Apple to pay an effective tax rate of less than 1 percent. Apple Australia, as an international subsidiary, reports into Ireland.

The company fronted a 2015 Senate Enquiry into corporate tax avoidance, where it denied "inflating the transfer price" of products in order to reduce taxable income in Australia.