Author Archives: Miranda Stewart

About Miranda Stewart

Professor Miranda Stewart teaches and researches in the areas of tax law and policy including taxation of business and investment entities, tax and development, not-for-profits, and tax reform in the context of globalisation. She has many years experience in tax law in Australia and overseas, and has published on a wide range of tax law and policy topics, applying a critical perspective.

Tax and Power in the High Court: The Capital Cost of an Electricity Monopoly: Ausnet Transmission Group Pty Ltd v Federal Commissioner of Taxation

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By Professor Miranda Stewart

Ausnet Case Page

State governments are keen to raise funds by privatising electricity networks, as has just been legislated in New South Wales, but a privatisation agenda can also cause an election loss, as shown in this year’s Queensland election. Electricity privatisation is controversial and the costs and benefits are hard to understand.

One of the less visible aspects of electricity privatisation is the tax treatment of the asset purchase for the private buyer. This year, one of the few High Court cases on income tax is about the privatisation of Victoria’s electricity transmission networks in the late 1990s. This is the case of AusNet Transmission Group Pty Ltd v Federal Commissioner of Taxation [2015] HCA 25.

AusNet is a listed electricity transmission company that, in its own words, is Victoria’s ‘largest energy delivery service’. According to its website, AusNet owns and operates $11 billion of electricity and gas distribution assets that connect to more than 1.3 million Victorian users in a network of ‘49 terminal stations, 13,000 towers and 6,500 kilometres of high-voltage powerlines’. It’s not surprising that when AusNet has a tax issue, it is similarly large.

AusNet loses case on tax deductibility

AusNet (at that time called SPI Powernet) paid more than $2.5 billion for electricity transmission assets that it purchased in 1997 from a Victorian State-owned company. The asset purchase was just one element in the massive exercise of electricity privatisation (for more, see the first instance decision). The purchase price included the physical assets and the electricity transmission licence which would permit AusNet to operate the network. The contract also required AusNet to pay charges under the Electricity Supply Act 1993 (Vic) of $177.5 million in the 1999, 2000 and 2001 tax years, as the new owner of the transmission licence.

AusNet sought to deduct these charges as current expenses under the general income tax deduction rule (s 8-1 of Income Tax Assessment Act 1997 (Cth)). The Commissioner denied the deduction, arguing that the charges were instead capital in nature. It took more than a decade for this argument, arising out of a complex tax audit, to make its way to the High Court, where AusNet lost.

Applying Australia’s 30 per cent company tax rate, the deduction of $177.5 million was worth about $53 million to AusNet. With interest expense on unpaid tax, AusNet owed a total of $91 million to the Tax Office, of which it had previously paid $30 million. AusNet lost the case in the High Court and announced its ‘disappointment’ to the market in an ASX release. Continue reading →

News: Your Right to be on the Electoral Roll and Rowe’s Case

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By Professor Miranda Stewart

The electoral roll closes by 8pm today, Monday 12 August 2013, seven days after the election writs were issued. If you have not registered by this time, you will not be eligible to vote in the forthcoming election on 7 September.

It seems appropriate to commemorate today the victory in Rowe’s Case [2010] HCA 46 in which the High Court struck down as unconstitutional, a law by which the electoral roll was closed on the day of issue of the electoral writ (usually, the day that the election is announced). The Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth), passed under the Howard government, had amended the Electoral Act 1918 (Cth), resulting in the electoral roll being closed on the day on which the electoral writ is issued for new or re-enrolling voters, and three days after the writ is issued for voters updating enrolment details. Previously, the electoral roll remained open for a period of seven days after the issue of the writ.

The victory reinstated the previous deadline for closure of the roll, and the High Court heard the case urgently and issued its decision within a record time, to enable an estimated 100,000 voters who were not on the roll, including many young people voting for the first time, to register to vote in the 2010 election. The plaintiff, Shannen Rowe, had turned 18 just a month before the 2010 election was called by then-Prime Minister Julia Gillard. Of course, she had not been old enough to vote in any previous election. Continue reading →

How a Major Bank Succeeded in International Tax Planning, Got Cheap Capital and Paid Less Tax: Mills v Commissioner of Taxation

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By Professor Miranda Stewart

Mills v Commissioner of Taxation Case Page

There has been a lot in the news lately about the low tax paid by some multinational corporations, including Starbucks and Google. But these multinationals say that they are complying with the tax law of all countries. How do they do it?

The recent Australian High Court case of Mills v Commissioner of Taxation [2012] HCA 51 is an example of successful international tax planning by a major multinational bank. It concerned a financial transaction by the Commonwealth Bank, one of Australia’s ‘big four’ banks and the second largest corporate group listed on the Australian Securities Exchange. Continue reading →