The jewellery chain relocated to Australia in late 2008, transferring for $293 million the intellectual property of its Michael Hill Jeweller System of Retailing from its Michael Hill & Co unit to its Australian subsidiary, Michael Hill Franchise.
The Australian Tax Office (ATO) is disputing around $40 million of the $50.2 million deferred tax asset raised as a result of that transfer.
Michael Hill is also in dispute with the New Zealand Inland Revenue Department (IRD) over $NZ17.9 million of tax deductions claimed as a result of the sale of assets within the group.
The valuation of the Intellectual Property was provided by UK based Valuation Consulting but was amended to $274 million after the ATO initiated its own valuation, however Sir Michael Hill claimed in the company’s annual report that the ATO’s position was based on a series of errors.
“The group does not accept the ATO's position and believes the ATO's views are based on a number of factual, legal and technical valuation errors," Hill said.
He believes both the ATO matter and the IRD matter can be resolved by agreement, but warned the company was prepared to follow further formal legal processes if a common ground can not be found with either party.
While the company’s head office is in its home market and is listed on the New Zealand stock exchange, Australia represents the largest market for Michael Hill, with around 150 stores. The company also operates in the US and Canada bringing to 240 the total number of stores.