Australian Taxation Office soar aluminium smelter dispute with Rio Tinto

ATO has escalated its transfer pricing probe into Rio Tinto's aluminium division, further complicating talks between the miner and the federal government in regards to a rescue package for Rio's three loss-making Australian smelters.

In February’20 a probe was advancing into Rio's aluminium division, and Rio confirmed on Wednesday, 8^th April’20, that the probe had escalated to a formal amended assessment in March’20.

The ATO accepts Rio’s Australian subsidiaries have charged an in-appropriate price for the aluminium they sold out to Rio’s arguable Singapore marketing hub between 2000 and 2016.

The ATO has ordered Rio to pay $86.1 million of unpaid taxes over the aluminium matter in a separate to Rio’s long-running $447 million dispute with the ATO over the transfer pricing of Australian iron ore.

On 8^th April’20, Rio said: “it would fight the ATO's aluminium claim, saying the issues in dispute were similar to those in the iron ore transfer pricing case.”

''In March 2020, the ATO issued amended assessments to our company for the 2010 through 2016 calendar years concerning the pricing of the sale of aluminium between Australia and our Singapore commercial centre," said Rio in a statement.

''We intend to object to the ATO assessments, which will give rise to an independent ATO review of the position.

''The amended assessments for both the iron ore and aluminium matters do not relate to any tax avoidance schemes as confirmed by the Australian Taxation Office, and no penalties have been levied by the Australian Taxation Office.”

''We are committed to paying the right amount of tax due in all countries in which we operate, and consider the pricing of our iron ore and aluminium transactions to be following the OECD guidelines and Australian and Singapore domestic tax laws.''

The timing of the ATO's probes came forth particularly in the time that is inconvenient for the aluminium producers, as they have approached state and federal governments over the past year seeking help to keep the loss-making aluminium smelters open.

Rio Tinto's Australasian smelters and refineries collectively lost $US137 million ($232 million) in 2019, and they appear unlikely to do better this year given aluminium prices have slumped since the coronavirus outbreak. Rio operates smelters in Tasmania, Queensland, and New South Wales and on the south island of New Zealand.

The aluminium declaration was included in Rio's "taxes paid" report, as the miner stated it paid $US4.24 billion in corporate income tax in Australia in 2019.

Once royalties and payroll taxes were included, Rio said it paid $US6.21 billion to Australian governments in the year.