Michael Hill International has settled a tax dispute in Australia and will pay $A6 million to the Australian Tax Office. However, a dispute with Inland Revenue in New Zealand continues.
The issue relates to the value of the jeweller's intellectual property when it transferred the IP from a New Zealand subsidiary to an Australian subsidiary.
The move happened in 2008 as part of the company's shift to Australia, and the transfer raised issues with the tax departments in both countries.
Michael Hill valued the intellectual property at $NZ274 million, based on an independent valuation, resulting in a deferred tax asset of $NZ50.2 million.
However, the Australian Tax Office did its own valuation of the intellectual property, and believes that significantly lower deductions should apply.
The amount in dispute is about $NZ40 million, so effectively the Australian Tax Office thinks about $NZ10 million should be what the deferred tax asset amounts to.
Michael Hill and the Tax Office have reached a Deed of Settlement where the office will accept the $NZ274 million intellectual property valuation, and the company will pay an aggregate $A6 million to settle tax for the years 2008 through to 2013.
The settlement also leaves in place the availability of the company to call on a $50.2 million deferred tax asset.
Michael Hill has still to settle with New Zealand Inland Revenue in relation to the 2008 restructure, where the amount in dispute is $NZ24.6 million.
