Singapore Telecommunications (Singtel) may have to pay the Australian Tax Office (ATO) around A$304 million. Its Australian unit received "an unfavourable judgment" from the Federal Court of Australia in respect of its action against the Commissioner of Taxation, the telco says.

The court case relates to the acquisition financing of Singtel Optus Pty Limited in 2001. In what was then the largest acquisition by a Singapore company, Singtel paid A$17 billion for Optus, Australia's second largest telco after incumbent Telstra.

In 2016 and 2017, Singtel’s Australian unit, Singapore Telecom Australia Investments (STAI), received amended assessments from the ATO, comprising primary tax of A$268 million, interest of A$58 million and penalties of A$67 million, for a total of A$393 million.

Singtel says that STAI’s holding company, Singtel Australia Investment Ltd, would be entitled to a corresponding refund of withholding tax estimated at A$89 million.

As such, the net tax exposure and related interest and penalties amount to A$304 million.

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The potential tax bill was announced in Singtel’s 2021 annual report where it stated that no provision for this amount had been made as at Mar 31, 2021.

Singtel's annual report says that STAI’s objections to the amended assessments were disallowed by the ATO on September 27, 2019. Based on legal advice, STAI appealed the ATO’s objection decisions in the Federal Court of Australia on November 11, 2019.

Singtel then said that in accordance with the ATO administrative practice, STAI paid a minimum amount of 50% of the assessed primary tax on 21 November 2016. This payment continued to be recognised as a receivable as at March 31. 2021.

"After seeking to settle this matter with the ATO in good faith and failing to reach an agreement as to the application of the law, STAI sought clarity from the court process.”

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Singtel says it is committed to complying with tax obligations in markets where it has operations. "STAI, as the head tax entity of the Optus group, continues to be a significant taxpayer in Australia.

"The Singtel Group will consider the details of the judgment, explore available options and determine next steps. If the above tax exposures are assessed to be probable, provisions shall be made in the accounts," states the company on Dec 19.

The telco will "explore available options and determine next steps. It will also ensure material updates are provided to investors on a timely basis”.

Singtel’s share price closed at $2.37 on Dec 17, up 2.6% this year. In 1HFY2021, for the six months to Sept 30, Singtel reported revenue of $7.65 billion, up 3.3% y-o-y, and net profit more than doubled to $954 million. Optus recorded a 3.5% y-o-y decline in revenue to A$3.9 billion, while Ebit more than doubled to A$145 million.

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