PERTH (miningweekly.com) – The Australian Taxation Office (ATO) has reached a settlement with mining major Rio Tinto resolving a disagreement relating to interest on an isolated borrowing used to pay an intragroup dividend in 2015.

The agreement also separately resolves the pricing of certain transactions between Rio Tinto entities based in Australia and the group’s commercial centre in Singapore from 2010 to 2021 and provides certainty for a further five-year period.

Rio Tinto reached a separate agreement with the Inland Revenue Authority of Singapore (IRAS) in relation to transfer pricing for the same periods.

Rio was issued amended assessments in respect of iron-ore marketing in 2017, which amounted to A$447-million for the 2010 to 2013 years, for aluminium marketing in 2020, amounting to A$86-million for the 2010 to 2016 years, and for the intragroup dividend financing matter in 2021, amounting to A$738-million for the 2015 to 2018 years.

The miner said on Wednesday that the agreements separately reached with the ATO and IRAS cover the transfer pricing related to the marketing of all products between Australia and Singapore, including iron-ore and aluminium, for all historical years from 2010 to 2021 and the future period to 2026.

As part of this agreement, Rio Tinto will pay to the ATO additional tax of A$613-million for the twelve historical years. This is in addition to the A$378-million of tax paid in respect of the original amended assessments issued by the ATO. Over this period, Rio Tinto paid nearly A$80-billion in tax and royalties in Australia.

The ATO settlement payment also includes A$55-million of interest and A$22-million of penalties.

The ATO said on Wednesday that the settlement brings an end to all tax disputes including long-standing disputes in relation to Rio’s Singapore marketing hub, and brought Rio’s total payment in relation to the disputes to almost A$1-billion.

Deputy Commissioner Rebecca Saint said that the settlement represented one of the largest settlements in Australia’s tax history.

“This settlement is a very good outcome for the Australian tax system,” Saint said.

“Even prior to this settlement, Rio has been one of Australia’s largest payers of income tax for many years, with a strong track record of engaging with the ATO in relation to its tax affairs, albeit with some areas of dispute.   

“Rio have announced that the settlement agreed to has secured approximately A$1-billion for the Australian community for past years, over and above their tax returns originally filed. Perhaps more importantly, the settlement locks in future tax outcomes, providing certainty going forward. This means that additional profits from the sale of Rio’s Australian owned commodities will be taxed in Australia in the years to come.

“The resolution of these matters means that ordinary Australians can have confidence that even the biggest companies are held to account to pay their tax due,” Saint said.

Rio Tinto CFO Peter Cunningham said that the company was glad to have resolved these longstanding disputes and to have gained certainty over future tax outcomes relating to its Singapore marketing arrangements. 

“Rio Tinto remains committed to our commercial activities in Singapore and the valuable role played by our centralised commercial team,” he added.

The Rio settlement follows the announcement by fellow diversified miner BHP in November 2018 that it had settled its marketing hub dispute with the ATO.

“These announcements provide confidence that Australia’s largest iron-ore exporters are meeting their income tax obligations and that profit is being retained in Australia,” Saint said.

As of 30 April 2022, the Tax Avoidance Taskforce has helped the ATO raise $26.3-billion in tax liabilities and collect $14.9-billion in cash.

“Australia has one of the best tax performance rates in the world overall, but in particular in the large market. The success of the Tax Avoidance Taskforce has helped us ensure that compliance rates in the large market have reached 92% of tax paid voluntarily, and 96% after compliance activities.” Saint said.