McDonald's Australia was able to more than halve its tax bill last year after routing payments via the low-tax nation of Singapore.
Each year McDonald's reduces its profit, and thus its local tax bill, by paying McDonald's Asia Pacific based in Singapore, and registered in Delaware, a "service fee" amounting to hundreds of millions of dollars.
McDonald's financial accounts, obtained by Fairfax Media, show that McDonald's Australia reported paying $392.6 million in 2014 to McDonald's Asia Pacific (up from $367.6 million in 2013).
This meant its overall income tax bill, totalling $194.7 million, was more than halved.
McDonald's Australia's senior corporate communications manager, Chris Grant, told Fairfax Media: "We regularly engage with the Australian Taxation Office (ATO) and conduct our business within all Australian standards and regulations."
He said McDonald's was "committed to paying its fair share of tax in Australia" and over the past five years have paid more than $500 million in tax.
"Just like many other franchise businesses we pay royalty fees to our parent company," Mr Grant said.
But tax advocacy groups say it is not a genuine fee because it is inflated. The fee paid is significantly higher than if a 5 per cent loyalty rate was levied on all McDonald's franchise and corporate stores.
Tax Justice Network spokesman Mark Zirnsak said that despite the Turnbull government's tougher anti-avoidance measures, and OECD's Base Erosion and Profit Shifting (BEPS) plan aimed at ending multinational tax avoidance, companies were still pushing the boundaries.
"This highlights that the job of ending tax dodging is still not complete and there's a need to further tighten the laws around royalties and IP payments. The notion of 'arm's length' has clearly failed; we are still not getting companies paying their taxes where the business is really happening."
South Australian senator Nick Xenophon said: "It seems not only can you create your own burger at Mcdonald's but McDonald's can create its own tax rate. And they're lovin' it."
He said any payment overseas must be for goods and services at a commercial rate.
It seems not only can you create your own burger at Mcdonald's but McDonald's can create its own tax rate. And they're lovin' it.Nick Xenophon
Australian Greens leader Richard Di Natale said: "McDonald's is playing us all for a bunch of clowns, helping the Hamburgler get away with the tax dollars that should be funding Australia's schools and hospitals. It doesn't make for a very happy meal."
He said there should be no way for multibillion-dollar corporations to "squirm out of paying their fair share of tax", especially when the government is looking to raise the GST.
"The ATO needs more resources and legal power to get to the bottom of the McFlurry of tax avoidance techniques being used by big corporations," Senator Di Natale said.
Shadow assistant treasurer Andrew Leigh said with ATO data revealing one in four companies earning more than $100 million paying no tax, "there is hardly a person in Australia who doesn't believe big corporations could be doing more to pull their weight".
But Treasurer Scott Morrison said the government was to committed shutting down tax avoidance strategies used by multinationals.
"As a result of the government's legislation the number of multinational companies now under scrutiny by the ATO has gone from 30 to 80," he said.
The McDonald's tax bill would have been even less had it not been for a "adjustment for prior tax years" of $77.8 million. The ATO declined to comment on whether this figure was a settlement with the company.
Had it not been for the one-off adjustment, the company would have only paid $97.6 million in income tax on sales revenue of $1.62 billion.
The company's accounts said profit before income tax was $325.2 million and that profit after income tax was $130.5 million.
McDonald's is among a number of multinationals that have been taking advantage of loopholes in current global tax laws, that the federal government and the OECD are trying to tackle.
Singapore is a popular destination for multinationals accused of profit-shifting as its government offers a range of tax incentives that allow companies to reduce their tax to virtually zero.
Providing it doesn't get hit with further tax assessments stemming from possible ATO audits of its local business, McDonald's Australia faces a "deferred tax liability" totalling $97 million. This could mean that the company will, in the future, pay more income tax.
Conversely as Fairfax Media revealed last week, Apple Australia's $200 million in "deferred tax assets" could allow it to pay virtually no tax in Australia on its profits in 2016.
Call for settlements to be made public
Senator Xenophon urged the Tax Office to make any settlement's details publicly available.
The ATO struck deals worth almost $3 billion with large businesses rather than heading for court last financial year, but the figures do not break down with which 81 companies it locked in deals with.
"When you have publicly listed companies and there's been a settlement, there needs to be transparency, not only regarding the amount of the settlement but the amount that was originally asked for to determine the extent to which the ATO compromised," Senator Xenophon said.
A report last year by a global coalition of trade unions called Golden Dodges: How McDonald's Avoids Paying Its Fair Share of Tax, found that the company avoided paying half a billion dollars of tax in Australia over a five-year period.
It detailed how McDonald's uses royalty payments from franchisees and foreign subsidiaries in major markets to route profits through low-tax nations.
These strategies, the report said, may have allowed it to avoid up to $US1.8 billion in tax in those markets in the years between 2009 and 2013, including €1 billion across Europe and $A497 million in Australia.
The company last week reported its overseas quarterly sales. Sales at McDonald's US restaurants rose 5.7 per cent in the quarter ended December 31, the best quarterly growth in nearly four years.
But McDonald's is facing growing competition from other American fast-food chains. Carl's Jr, which operates in over 30 countries worldwide, wants to open about 300 stores in Australia over the next 10 years.