Australians paid Netflix more than $1 billion. By using a Netherlands subsidiary, Netflix paid Australia just $550,000 in tax.



Talking Business May 7 2021




Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast app, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at

I am Leon Gettler. My job is to review and monitor      the week’s news in business, finance and economics. I bring it all to you, every week.

This is episode number 14 in our series for 2021 and today’s date is Friday April 7.

First, I’ll be talking to Michael Ohannessian, CEO of managed accounts platform Praemium. And I’ll be talking to economist Nicholas Gruen about how we should re-evaluate fiscal and monetary policy.

But now, let’s talk to Michael Ohannessian

AOL and Yahoo are being sold again, this time to a private equity firm. Verizon will sell Verizon Media, which consists of the pioneering tech platforms, to Apollo Global Management in a $US5 billion ($A6.5 billion) deal, giving up its digital media ambitions in the face of competition from Google and Facebook. Verizon said Monday that it will keep a 10% stake in the new company, which will be called Yahoo. Yahoo at the end of the last century was the face of the internet, preceding the behemoth tech platforms to follow, such as Google and Facebook. And AOL was the portal, bringing almost everyone who logged on during the internet’s earliest days.

The Reserve Bank of Australia has kept the official cash rate on hold at 0.1%.

Australia’s housing boom is showing some signs of slowing as the rapid rise the past six months begins to constrain affordability and dampen demand. House prices rose at a slower pace in April, a month after hitting a 32-year high, but strong demand is expected to further drive the boom for at least another year. Nationwide dwelling values rose 1.8% in April, the slowest pace since January after last month’s record rise, CoreLogic Inc. data released Monday show. Capital city prices also gained 1.8%, led by Darwin and Sydney, data show. Sydney home prices jumped by 2.4% last month, Melbourne’s prices climbed 1.3% and, in Brisbane, prices advanced 1.7%. By contrast, in March Sydney home prices bounced by 3.7%, and in Melbourne and Brisbane prices climbed 2.4%.

Surging investor lending, which rose at its fastest pace in almost two decades, has pushed Australia’s booming residential market out of regulators’ comfort zone and made macroprudential controls more likely, according to economists.. New data showing home loan commitments to investor buyers jumped 12.7% from February, the fastest increase since July 2003, to a seasonally adjusted monthly total of $7.8 billion,


Netflix paid around $550,000 in tax in Australia despite estimates it brought in more than $1 billion in revenue from its subscribers in 2020 who had little else to do during COVID-19 pandemic lockdowns than binge its television and movies. The US-based streaming giant is slowly increasing the amount of income tax it pays locally, coughing up $553,705 for the 2020 calendar year, up from $485.371 in 2019 which was on the increase from $341,793 paid in 2018. However, the company continues to use a corporate structure allowing a Netherlands-based subsidiary to recognise Australian revenue, estimated to be between $700 million and $1.4 billion. Local subscribers are billed by the Netherlands-based entity, and the money is collected by Netflix Australia on behalf of Netflix International BV with the local entity charging it a fee to provide those services. According to Australian Securities and Investments Commission filings, in 2020, Netflix reported an after-tax profit of $878,234 on revenue of $20.54 million. This was up on the $17.3 million in revenue and profit of $854,695 reported in 2019. The revenue was made up by the service fees paid by Netflix Australia’s immediate parent company, Netherlands-based Netflix International BV which paid $14.5 million to the local entity, up from $12.4 million in 2019. Netflix Australia’s ultimate parent, US-based Netflix Inc paid the local entity $5.9 million, up from $4.8 million in 2019.

Boston Consulting Group’s original quote for its work reviewing Australia Post’s operating structure was $1.38 million for less than four months of work, a Senate inquiry into former CEO Christine Holgate’s departure has heard. Despite the taxpayers putting the bill, the report has never been released into the public domain. Managing director and senior partner Miguel Carrasco will not reveal the profit margin the firm made on the work.

The NSW government will look to develop manufacturing capacity for RNA based vaccines and medicines. Facilities would be potentially online in the next 12 to 18 months. NSW Premier Gladys Berejiklian says this could include manufacturing COVID-19 vaccines but will also include other vaccines, including RNA technology. She says it’s about the medium to long term.

Australia’s budget deficit this fiscal year will be $30 billion narrower than the government’s mid-year forecast as a surge in hiring and iron-ore prices bolstered revenue, Deloitte Access Economics said. The underlying cash deficit in the 12 months through June will be A$167 billion, Deloitte said in a report released Monday, compared with Treasury’s December estimate of $197.7 billion. The budget shortfall will almost halve again in fiscal 2022 to $87 billion, it said. Australia’s economy has recovered rapidly from the pandemic as early containment of Covid-19 boosted confidence and fiscal and monetary stimulus supported firms and households through the crisis. That helped fuel a surge in hiring, with unemployment falling to 5.6% in March from a peak of 7.5%, meaning increased tax revenue and fewer welfare payments. In addition, iron ore, Australia’s largest export, last week approached all-time highs. Miners have been struggling to keep up with demand from Chinese steelmills as the world’s second-largest economy accelerates. Looking further ahead, Deloitte forecasts underlying cash deficits of $56 billion in fiscal 2023 and $49 billion in fiscal 2024. That suggests that over the four years to fiscal 2024 the budget will be almost $100 billion better off, Deloitte estimated.

The federal budget will set aside money for the construction of a gas-fired power station in NSW, amid a growing view within government that it is more likely than not the taxpayer-funded project will go ahead, regardless of what the private sector decides. Because the power station would be built by the government-owned corporation Snowy Hydro Limited  it would be listed as a cash-for-asset transfer and have no impact on the budget bottom line, which is the same way the NBN is treated. Last year, when launching plans for his “gas-led recovery”, Prime Minister Scott Morrison gave the private sector until April 30, 2021 to file final investment plans for a power station to replace the capacity that would be lost when the AGL-operated Liddell coal-fired power station closed as scheduled in April 2023. If the private sector did not “step up” the government would, Mr Morrison said, via a gas-fired plant in Kurri Kurri generating between 350MW and 650MW.


And Energy Australia has finally given the go-ahead for a new gas-powered plant to be built in NSW’s Illawarra region. The Tallawarra B plant will be at least 300 megawatts and will come online in time for the summer after the closure of AGL Energy’s Liddell coal plant in NSW, EnergyAustralia said on Tuesday. It will be able to use gas as well as green hydrogen, enabling it to be switched to carbon-free fuel when it is available. Tallawarra B will be Australia’s first net zero emissions hydrogen and gas-ready power plant, with direct carbon emissions from the project offset over its operational life. EnergyAustralia will offer to buy 200,000kg of green hydrogen per year from 2025.

Australian businesses have been slugged with premium jumps of up to 30% to cover cyber attacks, according to a new report by insurance brokers Marsh. The rise has been fuelled by insurers pulling back from covering such costly information-technology attacks and hits from ransomware, in which hackers demand a payment to end the damage. Businesses that have been hit by cyber attacks include Nine Entertainment, publisher of The Australian Financial Review, and logistics outfit Toll. Toll was hit with ransomware attempts while no demands were made to Nine, even through the cyber hit had hallmarks of ransomware.  Marsh noted that businesses renewing their annual insurance in the first quarter of calendar 2021 had a 35%  rise in cyber premiums in the United States, “double the increase seen in the prior quarter and the largest increase since 2015”. In Britain, it was 29% . Australian businesses had paid similar figures in the first quarter and the trend was worsening this quarter.

Furniture retailer Nick Scali expects full-year net profit to rise 85% to 90% as demand for sofas, dining suites and coffee tables, which surged at the height of the pandemic, continues to soar. In a trading update on Tuesday, Nick Scali said it expected net profit for the 12 months ending June to reach between $78 million and $80 million, compared with underlying net profit of $42.1 million in 2020. Retailers such as Nick Scali, Harvey Norman, JB Hi Fi, Temple & Webster  Adairs and Beacon Lighting have benefited from a sales boom as consumers cocoon at home and redirect spending on travel and restaurants to furniture, homewares and appliances.

Westpac has told the market it is aware of a statement of claim where ASIC alleges insider trading related to interest rate hedging activity during the privatisation of Ausgrid, a transaction which Westpac worked on in 2016. The claim also alleges unconscionable conduct and non-compliance with its financial services license. ASIC has commenced civil proceedings related to this in the Federal Court.

Westpac has reported a better than expected first half cash profit, as the economic recovery in Australia and New Zealand continues. The bank’s revenue from ordinary activities rose 1% to $10.7 billion while statutory net profit rose 189% to $3.44 billion. Cash earnings were up 256% to $3.54 billion, beating estimates for a $3.44 billion cash profit. Excluding notable items, cash earnings rose 60% to $3.82 billion.

ANZ has reported a more than doubling in first-half cash profit to $2.98bn and a better-than-expected dividend, buoyed by its retail and commercial banking division and receding COVID-19 risks.

Solomon Lew’s Premier Investments has bowed to pressure to repay $15.6 million in JobKeeper subsidies but faces new scrutiny amid claims it received more than $100 million in wage support despite lifting earnings by 12% in 2020 and almost 90% in the first-half of 2021. As well, Premier will not be followed by a number of other notable ASX-listed recipients, including Harvey Norman founder Gerry Harvey. In March, Premier chairman Solomon Lew and chief executive Mark McInnes defied calls to pay back net JobKeeper subsidies of $15.6 million received in the January half or the $69 million received last year. Mr Lew and Mr McInnes said the wage subsidies received in the first half would not be used to fund dividends or bonuses and would be quarantined to pay full-time and part-time staff stood down in future snap lockdowns. Premier said on Monday it used JobKeeper subsidies to pay staff stood down during snap lockdowns in Queensland and Western Australia in the past few months. However, higher sales had fully offset the cost of supporting staff teams through these lockdowns and the JobKeeper subsidies were not required. However, Premier’s backflip has not brought to an end to scrutiny over the retailer’s use of JobKeeper subsidies. Andrew Leigh, the shadow assistant minister for Treasury, said Premier may have received as much as $110 million over the first phase of the scheme – based on 6500 Australian employees receiving $750 a week between March and September – and has demanded Premier repay the full amount. The wage subsidies, combined with $52 million in rent relief and strong margin growth, helped boost Premier’s retail earnings by 88.5% to $237.8 million in the January half. This followed a 12% increase in underlying earnings in fiscal 2020. On Monday, Dr Leigh wrote to the Australian Securities and Investments Commission asking if it would force Premier to disclose the total JobKeeper support it received, rather than just the net amount.


Indian-Australian business leaders have warned of serious risk to trade and diplomatic relations from draconian COVID-19 travel bans as Scott Morrison faces a growing backlash over threats of hefty fines and jail time for returning citizens. On Monday, the Prime Minister said the likelihood of anyone being charged under biosecurity bans on travel from India were “pretty much zero”, but he defended the two-week measure as necessary to protect Australians from the raging pandemic. Australia India Business Council chairman Jim Varghese said the threat of fines of up to $66,000 and five years’ jail for returning citizens were likely to hurt the Australian-Indian community and bilateral business and trade.

Taxpayers face being saddled with a near $500 million payout if a review recommends the Morrison government should tear up the 99-year lease between the Northern Territory and a private Chinese-owned company for the Port of Darwin. The port’s owner, Landbridge, said though it would participate with the review if required, the $506 million deal had already been heavily scrutinised. While at the time the Defence Department did not raise any objections, the deal done in 215 has attracted criticism on national security grounds for handing control of a strategic asset to Chinese interests. During a visit to Darwin last week, Prime Minister Scott Morrison indicated the government could unravel the deal  if Defence or national security agencies changed their mind and felt it had security implications.

Virgin Australia sank to a $3.1 billion loss last financial year and remains saddled with $1.2 billion of debt it carried into administration, according to filings with the corporate regulator., demonstrating for the first time the full scale of the airline’s strife before it was rescued out of administration.  The airline called in administrators from Deloitte in April 2020, and after a competitive bidding process was sold to US private equity firm Bain Capital when creditors approved a deed of company arrangement in September. The financial report for the 12 months to June 2020, which was filed to the Australian Securities and Investment Commission a fortnight ago but only published this week, shows nosediving revenue and depleted cash holdings. Revenue fell 20% to $4 billion during the period due to the pandemic, which forced airlines globally to ground their fleets and mothball networks as travel demand and activity faltered. Virgin also only had $740 million of cash to service over $5 billion of debt that was due within the next year or so. The airline called in administrators from Deloitte in April 2020, and after a competitive bidding process was sold to US private equity firm Bain Capital when creditors approved a deed of company arrangement in September.

Domino’s Pizza Enterprises is taking advantage of the demise of rival food outlets to snap up sites to help meet its ambitious growth targets for new stores. Chief executive Don Meij said Australia’s largest pizza chain, which is aiming to open a record 260 stores this year, was in talks to buy or take over the locations of bakeries and sushi bars that had gone bust during the pandemic. “It’s very unfortunate some companies haven’t had the privilege to trade,” Mr Meij told the Macquarie Australia Conference on Tuesday.



And that’s it for this week. And next week, I’ll be talking to Dr Sam Huppert, the CEO of Pro Medicus, the listed technology provider which helps large medical facilities store and transport large images. And I’ll be talking to Rabobank economist Michael Every about what seems to be a recovery in the Chinese economy, and the implications for Australia.

In the meantime you can catch me on Facebook, Twitter and LinkedIn. And if you want leave a comment. Wishing you all a safe and healthy week. And looking forward to bringing you Talking Business next week.