Fearing A$237 Million Back Tax Bill, Foster's Appeals ATO Decision

by Mary Swire, Tax-News.com, Hong Kong

01 June 2006

Foster’s Group, the international brewing company, has announced its intention to appeal a back tax claim by the Australian Tax Office (ATO) relating to the funding of a subsidiary in the 1980s and 1990s, warning that the decision leaves the company open to further claims potentially totalling A$237 million (US$178 million).

Foster’s explained in a statement that it has initiated its right to appeal in order to obtain certainty about the availability of tax losses arising from deduction claims in respect of the funding of the Elders Finance Group (EFG).

The company claimed that the subsidiary paid all tax in relation to this assessment in 2001.

However, while the disallowance is in respect of one subsidiary for the 2001 financial year, Foster's fears that the company's other subsidiaries are potentially exposed to the possibility of assessments relating to the utilisation of tax losses associated with the funding of EFG.

Potential assessments relate to the 1998 to 2004 income tax years and are estimated to total $237 million of primary tax, according to Foster's. An additional unquantified amount of penalties and interest charges may also be due, subject to the discretions available to the Commissioner of Taxation.

These tax losses are the subject of an ongoing audit by the ATO and the Commissioner of Taxation has yet to determine whether any additional assessments will be raised.

"Foster’s remains confident of the position it has adopted and, should the ATO issue assessments, Foster’s intends to vigorously defend the deduction claims," the company said.

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