BHP handed big tax bill
Mining giant BHP Billiton has been left with an $82 million tax bill after a battle with the ATO.
The legal fight related to BHP’s Singapore marketing hub.
BHP has both Australian and British arms, which it has tried to argue are completely separate.
The company sells coal to its own BHP marketing hub in Singapore.
BHP Australia owns 58 per cent of the Singapore operation while its British sister owns 42 per cent.
BHP Australia conceded that controlled foreign corporation rules mean it must pay Australian tax on the 58 per cent share of the income from Singapore.
However, the company argued it should not also have to pay tax on the share of the income that its British arm gets from sales of Australian goods through Singapore.
BHP won a case on this basis in the Administrative Appeals Tribunal (AAT) last year, but the full Federal Court has now sided with the ATO on appeal.
The appeals court ruled that BHP’s Australian and British arms are associates.
Tax Institute president Tim Neilson said much of the case revolved around the lengthy definition of “associate”.
“The relevant legislation is necessarily drafted in very general terms, and no-one could expect the drafters to be clairvoyant, but the case typifies the kind of interpretational complexity which people in tax often have to try to unravel,” he told the ABC.
“It would come as no surprise to most tax practitioners that of the four judges who have heard the case to date two think the answer is ‘yes’ and two think it's ‘no’.”
BHP can still apply for special leave to appeal to the High Court of Australia.