Singtel flags A$304M exposure after losing Australian tax case appeal

Singtel is facing A$304 million in net tax exposure, interest and penalties after the Federal Court of Australia rejected the Singaporean operator's appeal of a tax assessment by the Australian Taxation Office.

The original amount includes A$268 million in primary tax, A$58 million in interest and A$67 million in penalties based on amended assessments in 2016 and 2017 that the Australian Taxation Office gave to Singtel unit Singapore Telecom Australia Investments Pty. Ltd., or STAI, about financing for the 2001 acquisition of Singtel Optus Pty. Ltd., a Dec. 19 statement said. STAI's holding company, Singtel Australia Investments Ltd., is entitled to an A$89 million withholding tax refund.

As part of the Optus acquisition, STAI struck agreements to issue shares and loan notes to Singtel Australia Investments. The agreements set interest rates on loans between the two entities, prompting the Australian taxation commissioner in October 2016 to contest tax deductions claimed for interest paid on the loans in tax years ending March 31, 2010, 2011, 2012 and 2013.

STAI in December 2016 submitted objections to the amended tax assessments, but the taxation commissioner disallowed it in September 2019. This prompted STAI to appeal the Australian Taxation Office's assessments in court.

In dismissing the appeal, Federal Court Judge Mark Kranz Moshinsky said deals between two wholly owned Singtel subsidiaries are different from agreements "between independent enterprises dealing wholly independently with one another."

Singtel will decide on its next steps after checking the court ruling's details and assessing other options. The company said it is committed to complying with tax obligations in its markets of operation and will make provisions in its accounts to include the tax exposures if found to be probable.