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Former Optus owner Cable & Wireless loses bid for $452 million tax refund from ATO

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The British company that sold Optus to its Singaporean owner, Singtel, has lost its bid to get a half-a-million dollar refund from the tax man.

Cable & Wireless is the British company that sold Optus to current owners Singtel in 2001 as part of a deal that valued the telco at $17 billion. 

In a 56-page judgment on Monday, the Full Federal Court dismissed C&W's appeal and ordered it to pay the ATO's costs. In a 56-page judgment on Monday, the Full Federal Court dismissed C&W’s appeal and ordered it to pay the ATO’s costs.  Photo: Chris Ratcliffe

Singtel bought Optus by offering shareholders a share buyback. C&W sold 82 per cent of its block for $6.2 billion, while paying $586.9 million in tax.

In 2015 C&W took the ATO to the Federal Court claiming that it should have paid just $134.5 million in tax. The company demanded a $452.45 million refund, along with legal costs. 

In a 56-page judgment on Monday, the Full Federal Court dismissed C&W’s appeal and ordered it to pay the ATO’s costs. 

The company was unable to satisfy the court that it was entitled to request a refund of dividend withholding tax withheld from the buy-back consideration.

The decision may have implications for other companies entering into off-market share buyback transactions.

An ATO spokesman told Fairfax Media the ATO’s view has been that the proportion of the buyback consideration debited to Optus’s share buyback reserve should have been treated as a dividend, and therefore subject to a withholding tax obligation.

“Today’s decision confirms that withholding tax was payable, and tax was correctly withheld by the ATO,” he said.

The ATO is separately chasing Singtel over its payment of tax during the same transaction. Singtel has said it will “vigorously defend” the $326 million tax bill it received from the ATO late last last year.

Tax Commissioner Chris Jordan has already hit seven companies with tax bills of about $2.9 billion, and intends to raise liabilities worth $4 billion against large companies in the coming year.

A number of multinationals including tech giant Google and social media star Facebook have been restructuring their tax affairs in response to the federal government’s tougher anti-avoidance measures, including the Multinational Anti-avoidance Law (MAAL) and the Diverted Profits Tax.

On Friday Google confirmed it has been hit with an amended tax bill by the ATO following audits of its affairs, and said it “will lodge an objection” against the assessment.

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