Under a new agreement with the Australian Tax Office (ATO) Microsoft has been hit with a 5% tax increase – paying 20%, up from 15% – for every dollar of profit generated in Australia.

The deal comes on the back of an undisclosed settlement with the ATO, which is said to be worth hundreds of millions of dollars, following significant inquiry into its tax practices.

Microsoft’s Corporate VP of Worldwide Taxes, Daniel Goff, says the agreement will extend until 2022, subject to local laws remaining the same.

Microsoft formerly had processes in place where its Singapore business would sell various products to Australian customers, resulting in a large value of tax dollars being registered within Singapore, which notably has a lower tax rate than Australia.

Goff states that the new way of doing business will involve Microsoft Singapore selling to Microsoft Australia, who will then onsell to Australian consumers.