Mining giant BHP has settled its long-running $1 billion-plus tax battle with the Australian Tax Office.
The dispute centres on the amount of tax payable from the sale of BHP’s commodities to the company’s marketing business in Singapore. BHP was hit with revised tax bills of $661 million which amounted to more than $1 billion, including interest and penalties, for the years 2003 to 2013.
As part of the settlement deal revealed on Monday, BHP, the world’s largest miner, will change the ownership structure of its Singapore business and will pay $529 million in additional taxes on income for 2003 to 2018, the company said in a statement. BHP said it had already paid $328 million of that amount.
The settlement included no admission of tax avoidance and provided “certainty” in relation to future tax treatment, the company said.
“This is an important agreement and we are pleased to resolve this long-standing matter,” BHP chief financial officer Peter Beaven said.
“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.”
BHP said its Australian business would increase its ownership of its main Singapore marketing business to fully acquire it, meaning Australian taxes would apply to 100 per cent of BHP profits earned in Singapore from commodities mined in Australia.
The Australian Tax Office said its action against BHP should send a “strong signal” to other companies.
“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.”
Mr Hirschhorn said the tax office had a significant focus on marketing-hub arrangements, to “ensure profits generated in Australia are taxed in Australia”.