Shell Reveals $223M Tax Dispute With Australian Tax Office

Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.

By Murray Griffin

Shell Australia says A$295 million ($222.7 million) is at stake in a dispute with the Australian Taxation Office over related-party financing arrangements.

The Senate Economics Committee inquiry into corporate tax avoidance June 8 advised it had received additional statements from several oil and gas companies in response to “questions on notice” put to them by senators represented on the committee.

They include a response from Shell Australia, received June 2 by the committee, which reveals the amount under dispute.

According to Shell, the ATO has issued amended assessments for the years 2009 to 2013 “to the value of approximately A$295 million.”

“Shell disagrees with the amended assessments,” the company’s response said. “Shell is involved in discussions with the ATO, with a view to cooperatively resolving differences in the technical interpretation of the law.”

In response to the committee’s questions about whether Shell agrees with the ATO on thin capitalization, when a company is financed through a high level of debt instead of equity, Shell said it is “not aware of the ATO having any concerns with Shell’s compliance with the thin capitalization limits.”

Chevron Australia Pty Ltd

The amount Shell is disputing is far less than the amount that Chevron Australia Pty Ltd. last month revealed to the committee was at stake in its disputes with the ATO.

“Chevron Australia and the ATO disagree on how the law applies to determine the interest rate to apply to Chevron Australia’s financing arrangements,” Chevron’s response to the committee said. “The total difference in primary tax on all years currently in dispute is A$1.062 billion.”

BP Australia Group

BP Australia Group’s response to the committee’s questions, also made public by the committee on June 8, states that the ATO is auditing its financing arrangements.

“The ATO has not indicated that our existing pricing is a concern,” BP’s response states.

“BP Australia Group has not received an amended assessment from ATO regarding pricing of intra group loans,” it said. “BP Australia Group is not involved in settlement discussions with the ATO regarding related party financing. We continue to fully cooperate with the ATO’s audit activity by responding to information requests.”

The company also confirmed that it has discussions with the ATO over its thin capitalization limits. It added that the ATO reviews thin capitalization calculations via BP’s “Pre-compliance Review.”

BP didn’t indicate whether it agreed with the ATO regarding the thin capitalization limits but added that the tax authority “is reviewing BP’s last lodged thin capitalization calculation (for the taxation year ended 31 December 2015, lodged in June 2016).”

BHP Billiton

BHP’s response to the questions, also made public by the committee on June 8, states it has no current disputes with the ATO regarding related party loans and financing arrangements.

“BHP has not received any amended assessments from the ATO in respect of related party financing and BHP is not involved in any settlement discussions with the ATO as a result of compliance activity in respect of related party financing,” it said.

ExxonMobil Australia

ExxonMobil Australia confirmed that the ATO has had discussion with it on related-party financing agreements.

Without indicating whether or not it agrees with the ATO on the pricing of related party loans and other financing arrangements, the company said that it has responded to the ATO’s position paper on the matter.

“ExxonMobil Australia has responded with additional information to facilitate further discussion with the ATO. We believe that on the basis of this information the ATO will revise its position,” it said in response to the committee.

It also confirmed that it has had discussions with the ATO on thin capitalization limits.

“The ATO plans to commence a review of ExxonMobil Australia’s thin capitalisation Position,” the company revealed.

Woodside

Australian oil and gas company Woodside said the ATO hasn’t raised any concerns about its related party financing arrangements.

To contact the reporter on this story: Murray Griffin in Melbourne at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

The additional responses received by the Economics Committee Inquiry Into Corporate Tax Avoidance are available at http://www.aph.gov.au/sitecore/content/Home/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th/Additional_Documents

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax