Atlassian CorpTEAM
Atlassian Corp Income Taxes Disclosure
16. Income Taxes
The components of loss before provision for income taxes by U.S. and foreign jurisdictions consist of the following (in thousands):
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (137,403) | $ | (139,687) | $ | (25,250) | |||||||||||
| Foreign | 38,508 | 54,280 | (285,886) | ||||||||||||||
| Total | $ | (98,895) | $ | (85,407) | $ | (311,136) | |||||||||||
The provision for income taxes consists of the following (in thousands):
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (1,249) | $ | 2,134 | $ | 4,327 | |||||||||||
| State | 4,534 | 3,969 | 1,045 | ||||||||||||||
| Foreign | 149,908 | 209,002 | 162,072 | ||||||||||||||
| Total | 153,193 | 215,105 | 167,444 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 927 | (14,030) | 1,467 | ||||||||||||||
| State | 1,814 | 3,680 | (1,066) | ||||||||||||||
| Foreign | 1,858 | 10,357 | 7,780 | ||||||||||||||
| Total | 4,599 | 7 | 8,181 | ||||||||||||||
| Total provision for income taxes | $ | 157,792 | $ | 215,112 | $ | 175,625 | |||||||||||
The effective income tax rate differs from the federal statutory income tax rate applied to the loss before income taxes due to the following (in thousands):
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Tax at federal statutory rate | $ | (20,768) | $ | (17,935) | $ | (65,339) | |||||||||||
| State, net of the federal benefit | 28,097 | 16,362 | 13,042 | ||||||||||||||
| Effects of non-U.S. operations | 7,332 | (14,575) | 15,163 | ||||||||||||||
| Tax credits | (233,946) | (151,912) | (99,398) | ||||||||||||||
| Stock-based compensation | 94,305 | 123,719 | 80,471 | ||||||||||||||
| Non-deductible executive compensation | 10,462 | 6,721 | 6,022 | ||||||||||||||
| Australian R&D deductions forgone in lieu of R&D credit | 29,169 | 29,502 | 30,303 | ||||||||||||||
| Foreign taxes | 1,159 | (131) | 2,457 | ||||||||||||||
| Basis difference in investments | (34,562) | 14,615 | (43,564) | ||||||||||||||
| Change in reserves | 29,886 | 32,505 | 132,528 | ||||||||||||||
| Change in valuation allowance | 239,975 | 174,994 | 98,613 | ||||||||||||||
| Other | 6,683 | 1,247 | 5,327 | ||||||||||||||
| Provision for income taxes | $ | 157,792 | $ | 215,112 | $ | 175,625 | |||||||||||
| Effective Tax Rate (%) | (160) | % | (252) | % | (56) | % | |||||||||||
Significant components of the Company’s deferred tax assets and deferred tax liabilities are shown below (in thousands). Where necessary, a valuation allowance has been recognized to offset the Company’s deferred tax assets by the amount of any tax benefits that are not expected to be realized.
| As of June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Property and equipment | $ | 11,028 | $ | 7,748 | |||||||
Loss carryforwards | 615,687 | 779,554 | |||||||||
| Credit carryforwards | 401,629 | 252,444 | |||||||||
| Operating lease liabilities | 56,962 | 62,300 | |||||||||
| Basis differences in investments | 2,040,203 | 1,811,999 | |||||||||
Provisions, accruals, and prepayments | 66,735 | 58,820 | |||||||||
| Deferred revenue | 317,761 | 306,629 | |||||||||
| Capitalized research and development | 113,489 | 81,503 | |||||||||
| Other, net | 571 | 717 | |||||||||
| Total deferred tax assets | 3,624,065 | 3,361,714 | |||||||||
| Less valuation allowance | (3,549,451) | (3,268,643) | |||||||||
| Total deferred tax assets, net of valuation allowance | 74,614 | 93,071 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Unrealized foreign currency exchange losses | 1,522 | 2,705 | |||||||||
| Unrealized investment gains | 4,163 | 1,007 | |||||||||
| Operating right of use assets | 46,348 | 47,825 | |||||||||
| Stock-based compensation | 7,205 | 5,526 | |||||||||
| Intangible assets | 35,495 | 52,461 | |||||||||
| Total deferred tax liabilities | 94,733 | 109,524 | |||||||||
| Net deferred tax liabilities | $ | (20,119) | $ | (16,453) | |||||||
The Company recorded a valuation allowance of $3.5 billion, $3.3 billion and $3.0 billion as of June 30, 2025, 2024, and 2023, respectively, primarily relating to the basis difference of the U.S. investment in a wholly owned partnership, U.S. net operating loss and credit carryforwards, and the deferred revenue deferred tax assets. The change in valuation allowance as of June 30, 2025, 2024 and 2023, was primarily related to an increase in the basis difference of the US investment in a wholly owned partnership, certain credit carryforwards, and the deferred revenue deferred tax assets, offset by the utilization of U.S. federal and state net operating losses. The Company regularly assesses the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of its deferred tax assets will not be realized. The Company evaluates and weighs all positive and negative evidence such as historic results, future reversals of deferred tax liabilities, projected future taxable income, as well as prudent and feasible tax planning strategies. The assessment requires significant judgment and is performed in each of the applicable jurisdictions. The Company intends to maintain a full valuation allowance on its federal deferred tax assets in the U.S. and Australia until there is sufficient positive evidence to support their reversal.
As of June 30, 2025, the Company had U.S. federal, state, and foreign net operating loss carryforwards of $633.4 million tax effected. Of the $538.1 million tax effected U.S. federal net operating loss carryforwards, $537.9 million may be carried forward indefinitely, and the remaining $0.2 million will begin to expire in 2032. The state net operating loss carryforwards of $95.1 million tax effected begin to expire in 2026. The foreign net operating loss carryforwards may be carried forward indefinitely. As of June 30, 2025, the Company also had research and development U.S. federal and state tax credits of $244.7 million and $117.9 million, respectively, and U.S. federal foreign tax credits of $50.6 million. The U.S. federal research and development credits will begin expiring in 2036 if not utilized, and the U.S. federal foreign tax credits will begin expiring in 2034. The state tax credit carryforwards do not expire except for the state research and development credits of Texas which will begin to expire in June 2038.
Utilization of the Company’s US net operating loss and tax credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit
carryforwards before utilization. As of June 30, 2025, the Company also had Polish R&D credits of $13.2 million, which will begin to expire in 2028.
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act (“OBBBA”) which includes, among other provisions, changes to the U.S. corporate income tax system such as allowing of immediate expensing of qualifying domestic research and development expenses and permanent extensions of certain provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for the Company beginning in fiscal year 2026. The Company is currently evaluating the future impact of these tax law changes on its consolidated financial statements.
The Organization for Economic Co-operation and Development released Pillar Two model rules defining a 15% global minimum tax for multinational corporations. Many countries in which the Company operates, including the member states of the EU, have enacted Pillar Two. Pillar Two rules began to apply to the Company in fiscal year 2025. Based on enacted laws, Pillar Two is not expected to materially impact the Company’s effective tax rate or cash flows. New legislation or guidance could change the Company’s current assessment.
U.S. income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of investment in foreign subsidiaries that is indefinitely reinvested outside the United States. Un-remitted earnings become taxable upon repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such un-remitted earnings is approximately $1,072.6 million as of June 30, 2025, and the corresponding unrecognized deferred tax liability is not material.
The Company recognizes the tax benefit of an uncertain tax position only if it concludes it is more likely than not that the position is sustainable upon examination by the taxing authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit which is greater than 50 percent likely to be realized upon settlement with the taxing authority. A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in thousands):
| Fiscal Year Ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning of the period | $ | 104,453 | $ | 122,302 | $ | 53,483 | |||||||||||
| Tax positions taken in prior period: | |||||||||||||||||
| Gross increases | 105 | 10,887 | 112,781 | ||||||||||||||
| Gross decreases | (4,547) | — | (198) | ||||||||||||||
| Tax positions taken in current period: | |||||||||||||||||
| Gross increases | 36,871 | 25,707 | 15,171 | ||||||||||||||
| Settlements | — | (53,648) | (57,004) | ||||||||||||||
| Lapse of statute of limitations | — | — | (32) | ||||||||||||||
| Currency translation effect | — | (795) | (1,899) | ||||||||||||||
| End of period | $ | 136,882 | $ | 104,453 | $ | 122,302 | |||||||||||
As of June 30, 2025, 2024, and 2023, the Company had gross unrecognized tax benefits of approximately $0.4 million, $10.9 million, and $113.2 million, respectively, that would impact the effective tax rate if recognized.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, Australia, and in various other international jurisdictions. Tax years 2013 and forward generally remain open for examination for U.S. federal and state tax purposes. Tax years 2018 and forward generally remain open for examination for non-U.S. tax purposes. To the extent utilized in future years’ tax returns, net operating loss carryforwards as of June 30, 2025, and 2024 will remain subject to examination until the respective tax year is closed.
There are differing interpretations of tax laws and regulations, and as a result, disputes may arise with tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations. It is reasonably possible that an immaterial decrease in unrecognized tax benefits may occur during the next 12 months.
During the year ended June 30, 2024, the Company finalized an Advanced Pricing Arrangement with the Australian Taxation Office with respect to its transfer pricing arrangements between Australia and the U.S. that
covers the tax years ended June 30, 2019 to June 30, 2025. Pursuant to the terms of the agreement, the Company made a cash settlement payment of approximately $60.5 million of taxes and interest.
The Company believes it is reasonably possible that the balance of unrecognized tax benefits could change in the next 12 months due to the completion of ongoing income tax audits. The estimated range of the change is a decrease of $4.2 million to an increase of $5.2 million.
The Company has not recognized any interest and penalties related to unrecognized tax benefits in the income tax provision during fiscal year 2025 and recognized approximately $0.6 million and $5.8 million during fiscal years 2024 and 2023, respectively. As of June 30, 2025 and 2024, there were no accrual balances, and as of June 30, 2023 the accrual balances were $5.8 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 15, 2025 | Showing above |
| 2024 | Aug 16, 2024 | |
| 2023 | Aug 18, 2023 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.