Why Spotify’s revenue from Australia plummeted from $129 million to $416,000 – allowing the music streaming giant to sidestep tax
- The Swedish music streaming service has adjusted its accounting policy
- It no longer recognises individual subscriber revenue in each country
- Revenue is instead directed to the Luxembourg parent account for tax purposes
- Luxembourg’s corporate tax rate is 17%, compared to Australia’s 30%
Spotify has reduced its Australian revenue from $129 million to just $416,000 over the course of four years despite experiencing a spike in user numbers.
The Swedish music streaming service has adjusted its accounting policy to lower its tax exposure.
Instead of Australian subscribers paying Spotify Australia, the payments now go to the parent company in Luxembourg, which has a tax rate of 17 per cent on sales revenue, compared with Australia’s 30 per cent.
Spotify has reduced its Australian revenue from $129 million to just $416,000 over the course of four years despite experiencing a spike in user numbers (stock image of woman checking her Spotify account)
A company spokesman told Australian Financial Review the updated accounting policy is enforced internationally.
The spokesman said the decision was compliant with all relevant tax laws.
The revenue collected in Australia from individual subscribers was now zero, and the $416,000 declared in 2019 was residual revenue from a business deal with an Australian telco.
All other income is then subject to tax in Luxembourg.
In 2020, Billie Eilish (pictured) was named a top Spotify artist. Recent estimates suggest about eight million Aussies use the streaming platform
University of Technology accounting professor Peter Wells said as Spotify continues to grow in Australia, the new policy of diverting revenue to the parent company could come under scrutiny for breaching the ‘spirit’ of tax laws.
‘It’s something we can expect the government to address through more legislation and the ATO to address through judicial responses,’ he said.
In 2016, Spotify Australia lodged $129 million of ‘premium revenue’ from local subscribers who paid for the service.
But in the last tax year, that number plunged to just $416,000.
While the company doesn’t release national figures to show where the lion’s share of its 130 million users are based, survey company Roy Morgan recently estimated about eight million Australians use the service.