THE appeal by Singtel’s Australian subsidiary against the commissioner of taxation was dismissed by the Full Federal Court of Australia on Friday (Mar 8).

This was the second time the appeal by the subsidiary, Singapore Telecom Australia Investments (STAI), has been dismissed. The case is related to Singtel’s intra-group cross-border financing to acquire Optus in 2001.

After the acquisition, domestically incorporated STAI issued shares and loan notes under a loan-note issuance agreement to British Virgin Islands-registered subsidiary, Singtel Australia Investments (SAI). STAI then became a unit under SAI in 2002, issuing loans and later paying interest to SAI, which is a tax resident in Singapore.

Both entities are entirely owned by Singtel.

The loan agreements put in place during the purchase process set interest rates due on loans between the two entities.

The Australian Tax Office (ATO) took issue with the agreements in 2016, when STAI received amended assessments from ATO, comprising primary tax of A$268 million (S$236.8 million), interest of A$58 million and penalties of A$67 million.

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This assessment meant STAI would owe nearly A$895 million in additional taxable income. In December 2016, STAI lodged objections to the amended assessments, which the commissioner disallowed in 2019.

Singtel said STAI’s holding company, SAI, would be entitled to a corresponding refund of withholding tax, estimated at A$89 million, in relation to the amended assessments.

The telco giant also noted that STAI paid a minimum amount of 50 per cent of the assessed primary tax in November 2016, in accordance with ATO administrative practice.

“STAI will review the details of the judgement, explore available options and determine its next steps...

“STAI will also review and consider its position on applying for relief as to the penalties,” said Singtel, adding that the net tax exposure and related interest and penalties have been fully provided in its financial statements.

Shares of Singtel closed S$0.01 or 0.4 per cent higher at S$2.38 on Friday.