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| ATO's Tax Claim Against James Hardie Upheld |
by Mary Swire, Tax-News.com, Hong Kong
Wednesday, September 08, 2010
US building materials firm, James Hardie has not yet identified whether
it is to appeal a recent Federal Court tax ruling, which upheld the Australian
Tax Office’s claims that the firm's wholly-owned subsidiary RCI Pty Ltd
owes back taxes and interest, resulting from a company restructuring in 1998-1999.
The case relates to restructuring of James Hardie and its international subsidiaries.
The Australian Tax Office argued that two transactions were structured with
the sole intent of avoiding tax.
RCI, an Australian subsidiary of James Hardie, received USD318m under a tax-exempt
dividend from a James Hardie US subsidiary in early 1998. Seven months later
RCI then sold all of its share in the US subsidiary to a third subsidiary in Malta.
The Tax Office claimed the dividend payment to be "a contrived payment
for the purpose of a capital gains tax avoidance scheme."
In her ruling, Justice Margaret Stone concluded that, "objectively viewed,
those persons entered into the schemes or carried out the schemes or parts of
the schemes with the dominant purpose of enabling RCI to obtain a tax benefit
in connection with the schemes."
In response to the ruling, James Hardie stated that the company is likely to
be required to record a charge. Had the company been required to take this charge
at June 30, 2010 (its last reporting date), the charge would have been an estimated
amount of USD330.4m (AUD387.7m). The company said that it will remain
in compliance with its debt covenants should a charge be taken.
The company stated that it does not intend to comment further on the matter,
but it is considering the decision and its position with regard to any appeal
by RCI.
RCI has 21 days from the handing down of the judgment to appeal the Federal
Court’s decision to the Full Federal Court.
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