find the latest legal job
Senior Associate - Litigation & Dispute Resolution
Category: Litigation and Dispute Resolution | Location: Melbourne CBD & Inner Suburbs Melbourne VIC
· Come work for a firm ranked in Lawyers Weekly Top 25 Attraction Firms
View details
Associate - Workplace Relations & Safety
Category: Industrial Relations and Employment Law | Location: Brisbane CBD & Inner Suburbs Brisbane QLD
· Employer of choice · Strong team culture
View details
Freelance Lawyers
Category: Banking and Finance Law | Location: All Perth WA
· Freelance opportunities through Vario from Pinsent Masons
View details
Freelance Lawyers
Category: Other | Location: All Adelaide SA
· • Qualified lawyer with a strong academic background
View details
Freelance Lawyers
Category: Other | Location: All Melbourne VIC
· • Qualified lawyer with a strong academic background
View details


In one of the first cases of its kind, the Federal Court has ruled that a company failed to pay income tax because it was poorly run, rejecting an argument by the Australian Taxation Office…

In one of the first cases of its kind, the Federal Court has ruled that a company failed to pay income tax because it was poorly run, rejecting an argument by the Australian Taxation Office (ATO) that it was artificially inflating prices.

SNF Australia, represented by Middletons in the decision, was targeted by the ATO after it failed to pay any income tax between 1998 to 2004 after it posted a series of trading losses. This was despite its parent company, the French based SNF Floerger, boasting profits of around 7.5 per cent during that period.

In a hearing before Judge John Middleton of the Federal Court last week, SNF Australia argued that it incurred a trading loss during the review period due to a combination of intense competition, poor management, excessive stock levels and a series of bad debts.

The ATO countered that the company was in fact "a successful and profitable entity during the relevant period", enjoying strong annual sales growth in Australia. It also argued that despite a strong performance in the Australian market and the fact that SNF Australia received significant equity subscriptions and loans from its parent company, it failed to record any profit.

"In our view, this is the first time a Fed Court case [has been heard] on transfer pricing, providing the interaction with the double tax agreement and discussions about what methods are relevant for determining the appropriate transfer price," said Philip Diviny, the head of Middletons' tax and revenue law group.

Diviny acted for SNF Australia in conjunction with fellow Middletons partner Paul Sinn, a commercial litigation specialist.

Transfer pricing is the price that is assumed to have been charged by one part of a company for products and services it provides to another part of the same company, in order to calculate each division's profit and loss separately.

Last year, the ATO was granted extra funding to enforce transfer pricing laws on companies trading over $250 million worth of goods per annum. It also recruited around an extra 60 staff to focus solely on transfer pricing issues.

Judge Middleton accepted that the company's losses were genuine. He found that there could be no inference drawn that the prices were artificially inflated, and that SNF Floerger offered price support to its Australian subsidiary, as it had adopted a long-term view of the company's operations and that initial losses were incurred in every country in which SNF operated.

"The victory SNF Australia has had here will give confidence to taxpayers that they shouldn't feel bulldozed by an aggressive tax office position," Sinn said. "They can go to Court and win."

Like this story? Read more:

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

The legal budget breakdown 2017

lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Oct 20 2017
Podcast: One of law’s most infamous alumni – in conversation with Julian Morrow
In this episode of The Lawyers Weekly Show, Melissa Coade is joined by The Chaser’s Julian Morrow....
Oct 20 2017
High Court overturns ‘excessive’ anti-protest legislation
Bob Brown’s recent victory in the High Court over the Tasmanian government was a win for fundament...
Oct 20 2017
Changes to Australian citizenship laws blocked
Attempts to beef up the requirements to obtain Australian citizenship were thwarted this week, after...
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...