The jewellery chain has agreed to pay AU$6 million to the Australian Tax Office (ATO) in what the directors of the company referred to as a “satisfactory and pragmatic outcome”.
As previously reported by Jeweller, the retailer moved its Michael Hill Jeweller System of Retailing – the intellectual property that was in question – from a New Zealand subsidiary as part of its relocation to Australia in late 2008.
The settlement with the ATO accepts the jewellery chain’s original valuation of the intellectual property – as revised by the company in 2010 – of NZ$274 million (AU$253.8 m), and leaves in place the availability of the deferred tax asset of NZ$50.2 million (AU$46.5 m).
The ATO initially argued that significantly lower deductions were available based on its own valuation of the intellectual property, with approximately NZ$40 million (AU$37.1 m) in tax benefit under dispute.
As part of the settlement Michael Hill will also “commit to returning franchise fee income from its non-Australian operations in the 2014 to 2018 tax years, consistent with the assumptions underlying the company’s intellectual property valuation”.
Chairman Sir Michael Hill said the company and the ATO both recognised that the valuation of intellectual property was “complex” and would be “both costly and time consuming to resolve through formal processes”.
The 2008 transfer also raised separate issues with the New Zealand Inland Revenue, which are still ongoing.
Michael Hill was founded in New Zealand in 1979 and currently has 252 stores across New Zealand, Australia, Canada and the United States. While it is listed on the New Zealand stock exchange, its head office is located in Brisbane, Australia.
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