ATO slaps huge bill in a latest tax dispute with Rio Tinto

Global mining and metal giant Rio Tinto has been slapped with a $406.5 million bill as part of its latest dispute with the Australian Taxation Office.

Jakob Stausholm, the new CEO of Rio Tinto was in Melbourne lately, as the mining company is trying to remodel its reputation in the wake of the Juukan Gorge caves incident last May and now the new ATO row is another blow.

With totalling almost $939 million, Rio and the ATO are now in dispute on three matters. While in the latest row, the ATO has issued the mining giant with amended assessments of $359.4 million in primary tax and $47.1 million in interest over money paid by its Australian entity to its United Kingdom entity.

The assessments relate to the denial of interest deductions on an isolated borrowing used to pay an intra-group dividend in 2015. This borrowing was repaid in 2018.

Rio said: “The ATO claim for an additional $406.5 million was on top of more than $8.4 billion of Australian income tax paid during the relevant period and that borrowing to fund the payment of a dividend was a normal commercial practice.”

“Rio Tinto is confident of its position and will dispute the assessments,” the company communicated to the ASX late on 2^nd Mach 2021.

“Following the usual practice, Rio Tinto will pay 50% of the primary tax up-front as part of the objections process.”

Rio and the ATO are already in disagreement over two other matters that are now the subject of talks between Australian and Singapore tax authorities.

The ATO said: “Rio’s Australian subsidiaries did not charge an appropriate price for the aluminium they sold to Rio’s controversial Singapore marketing hub between 2010 and 2016.”

The ATO demanded Rio Tinto to pay $86.1 million of unpaid taxes over the aluminium matter, which is separate from Rio’s long-running $447 million dispute with the ATO over the transfer pricing of Australian iron ore.

Australian and Singapore tax authorities have been in discussions since last year over Rio’s tax arrangements. The discussion initiated after the company asked the two nations to resolve which of them could claim tax on profits made by the Singapore marketing hub.

The ATO accorded to hold talks with Singapore’s Inland Revenue Authority to see if the two government agencies can reach a deal over Rio’s affairs.

In July’20, Rio Tinto said: “The Australian and Singaporean tax authorities have accepted our request for them to resolve these matters through negotiation under the Australia-Singapore double tax treaty.”