Chevron Australia Holdings Pty Ltd v Commissioner of Taxation (No 4)

[2015] FCA 1092

Robertson J

SUMMARY

In accordance with the practice of the Court in some cases that have attracted publicity, particularly in the case of lengthy reasons for judgment, the Court has prepared a summary of the judgment. The only authoritative statement of the Court’s reasons is that contained in the published reasons for judgment. The summary has no legal status as part of, or in explanation of, the reasons for judgment themselves. What follows is such a summary.

These 16 tax appeals, and an application under s 39B of the Judiciary Act, concern the financial years 2004-2008.

Central to the proceedings is a Credit Facility Agreement dated 6 June 2003 under which the applicant taxpayer Chevron Australia Holdings Pty Ltd (CAHPL) borrowed the equivalent in AUD of USD 2.5 billion from a United States based subsidiary of CAHPL, ChevronTexaco Funding Corporation (CFC).

The case does not involve the general anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936 nor does the case involve any allegation that the Credit Facility Agreement was a sham.

The proceedings do involve: under the Income Tax Assessment Act 1936, the issue of arm’s length consideration where a taxpayer, here CAHPL, has acquired property under an international agreement; under the Income Tax Assessment Act 1997, the cross-border transfer pricing rules; and the transfer pricing rules in Australia’s double tax agreements, particularly the Convention between the Government of Australia and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion (the United States convention).

I have decided that CAHPL’s challenges to the amended assessments under Division 13 of the Income Tax Assessment Act 1936 fail and, in the alternative, that CAHPL’s challenges to the amended assessments under Division 815 of the Income Tax Assessment Act 1997 fail.

I have also held that CAHPL’s challenge to the constitutional validity of Subdivision 815-A, in particular ss 815-10 to 815-30 of the Income Tax Assessment Act 1997, as introduced by the Tax Laws Amendment (Cross-Border Transfer Pricing) Act (No. 1) 2012, and when read with s 815-1 of the Income Tax (Transitional Provisions) Act 1997, should be dismissed.

I have also found the penalty to be 25% of the scheme shortfall amount, pursuant to s 284-160(a)(ii) in Schedule 1 to the Taxation Administration Act 1953.

The published reasons for judgment and this summary will be available on the Internet at www.fedcourt.gov.au.

Justice Robertson

23 October 2015