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BHP settles tax bill with ATO for $529m

BHP settles tax bill with ATO for $529m

Handshake, business

Mining giant BHP has settled a longstanding dispute with the ATO for roughly half of the $1 billion in taxes and penalties the Tax Office had sought from the sale of Australian commodities overseas.

BHP revealed that it will pay $529 million in back taxes for the income years between 2003 and 2018, bringing the “longstanding dispute” to an end.

The dispute was in relation to BHP’s Singapore-based marketing hub.

According to the ATO, “Marketing hubs typically provide marketing and sales functions for goods or commodities that are produced in Australia and sold offshore.”

It pursued BHP for $661 million in unpaid taxes on the profits from these sales between 2003 and 2013, as well as a further $381 million in interest and penalties – equating to a total demand of $1.042 billion.

“This is a landmark and precedential development in the execution of our marketing hubs strategy and sends a strong signal to other industry participants,” ATO deputy commissioner Jeremy Hirschhorn said.

“Given the importance of mining and natural resources to the Australian economy, it is critical that exporters of Australian commodities – whether iron ore, coal, gas or other commodities – pay the correct tax in Australia on their profits.”

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Mr Hirschhorn said that ATO has been cracking down on the use of such “marketing hubs” to ensure companies pay tax in Australia on all profits generated from here.

Resolution provides all-round certainty

Under the settlement, BHP’s Singapore marketing hub will from now on have all profits generated from the sale of Australian minerals taxed in Australia.

In a statement announcing the settlement, the miner said the move “provides certainty in relation to the future taxation treatment”.

“This is an important agreement and we are pleased to resolve this longstanding matter,” the multinational’s chief financial officer, Peter Beaven, said.

“The $529 million payable under the settlement is in addition to the more than $75 billion in Australian taxes and royalties that has already been paid by BHP over that same period.

“The settlement provides clarity for BHP and the ATO in relation to how taxes will be assessed and paid on the sale of Australian commodities. That certainty is good for business and for Australia.”

Not a green light for tax settlements

Despite the high-profile settlement being agreed between the parties, Mr Hirschhorn warned that it is not open slather for every business with a tax debt or dispute to negotiate a settlement.

“The ATO will only agree to a settlement after careful consideration of the risk to revenue, precedential value of the dispute, and likelihood of success in litigation,” he said.

“When settling disputes with taxpayers in the large market, we also seek to ‘lock in’ future compliance outcomes based on our ‘safe zones’ to secure revenue and create certainty for the future.

Mr Hirschhorn also said that the ATO “does not settle matters at any cost or give favourable settlements to the large end of town”.

“In fact, the evidence clearly shows that settlements with public and multinational businesses are consistently tougher than in any other market,” he said.

 

BHP settles tax bill with ATO for $529m
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