THE Australian Tax Office (ATO) has challenged CBH over its income tax exemption classification, a move that could delay for two years the current plans to restructure the co-operative.
The exemption status challenge is in CBH’s annual report, which was released last week ahead of the annual general meeting next month.
On page 80 it says: “The parent entity currently claims an exemption from income tax by virtue of Section 50-40 of the Income Tax Assessment Act.
“During the year, the Australian Taxation Office advised that they believe CBH is no longer entitled to claim this exemption. “At the date of signing, the company is actively defending the tax exemption status.
“The ATO has advised that should income tax be payable it will only be charged prospectively on income derived, at the earliest, from 1 November 2008.”
CBH’s tax exemption status has been applied to income tax years from November 1, 1971.
Outgoing CBH chairman Tony Critch said the company would find itself in an awkward position in five to 10 years if it did not keep pace with recent changes in the grains industry, including deregulation of wheat marketing.
Mr Critch said in future there may only be room for one or two storage and handling companies in Australia.
He said that placed greater emphasis on the need to come up with a workable structure that enabled CBH to raise capital and compete with its opposition.
Mr Critch said a high profile Queen’s Counsel, one of the best in Australia, had taken on the ATO case on CBH’s behalf.
He said the case would hinge on the bulk handler’s ability to argue and re-establish why it was still allowed or entitled to continue with the ATO exemption which applies to the storage and handling sides of the business.
Mr Critch said alarm bells started ringing at the ATO when CBH presented its structural proposal, resulting in the tax exemption challenge.
He said the ATO had also suggested CBH’s exemption had not been valid for some time.