The ruling ends a long-running dispute between the Australian Taxation Office and BHP over the Anglo-Australian company’s use of the offshore trading hub to buy and sell commodities, such as iron ore, mined in Australia.

It is expected to set a legal precedent for other multinational companies that have also used offshore marketing structures to lower the amount of tax they pay in Australia.

"Australians can now have full confidence that BHP, as one of Australia’s largest companies, is paying full tax on its profits from the sale of Australian commodities," said Rebecca Saint, ATO deputy commissioner.

The ATO said the precedent set by the High Court decision provided clear guidance that would help the tax office in its efforts to ensure that other multinationals paid their fair share of tax.

BHP is one of at least 15 multinational groups including Glencore and Rio Tinto that have been investigated by the ATO in relation to possible tax avoidance facilitated by sales and marketing hub arrangements in Singapore.

These investigations prompted Glencore to announce in 2015 that it would stop funnelling Australian coal sales through Singapore, while in 2017 Rio said it would fight a $370m tax demand from the ATO over its use of Singapore as a marketing hub.

BHP’s High Court appeal centred on the company’s dual listing in Australia and the UK, and profits funnelled through its marketing hub in Singapore.

BHP had claimed it should not pay tax on some of the income generated by the marketing hub in the city state, as it was not an associate of its Australian arm. The ATO argued they were “associate companies” and that the Australian arm was liable for tax.

The High Court dismissed BHP’s appeal in a unanimous verdict.

BHP said the verdict provided clarity on a technical area of tax law and meant the mining group would pay about $87m in extra tax for income generated between 2006 and 2018.

(Published by Financial Times, March 11, 2020)
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