Aurizon Ltd succeeded in its application for declarations to the effect that a $4.3 billion contribution made by the Queensland Government in 2010 immediately prior to Aurizon’s IPO was an amount of “share capital” for the purposes of the tax legislation.
A copy of the decision is available here.
The decision has implications on Aurizon’s future capital management.
Chris Peadon of New Chambers, led by Mark Richmond SC (recently appointed a Judge of the NSW Supreme Court), and instructed by King & Wood Mallesons, acted for the taxpayer.
The decision is noteworthy for two reasons.
First, the Court held that in the particular circumstances of the case that the contribution was share capital notwithstanding that no shares were issued in direct consideration for the contribution. It was a contribution made by Aurizon’s sole shareholder in that capacity pursuant to a statutory direction and was treated as share capital. Not critical to the outcome of the case but interestingly the Court rejected the argument that an amount contributed by a shareholder in that capacity that is not a loan or gift must be share capital.
Second, the Court determined that this was an appropriate matter in which to exercise its discretion to grant declaratory relief. The Commissioner argued that the Court should decline to do so because the taxpayer could have sought a private ruling and appealed any decision not to issue a favourable ruling. The Court recognised that the private ruling regime was not an appropriate vehicle to resolve this issue.
The Commissioner will have 28 days in which to appeal once final orders are made.
Chris Peadon is widely recognised as one of Australia’s leading tax counsel and is consistently acknowledged as such in client surveys including Chambers and Partners and the Legal 500. His practice encompasses both income tax and state taxes. He has appeared in numerous recent appellate matters including Harding (residency), Resource Capital Fund (TARP), Healius (capital / revenue) and Virgin (FBT). Recent first instance matters include SingTel (transfer pricing) and La Mancha (Harman obligation and tax administration) and YWCA (charitable exemptions).
