Australia pursues TPG for $628m in Myers sale taxes and penalties

The authority has reportedly decided to pursue TPG for the full, allegedly unpaid, amount. A state court reportedly issued an order freezing TPG’s local bank accounts, but the money had already left the country.

TPG sold its stake in Myers last month, after the group went public in the largest Australian IPO for two years. The flotation valued the company at AUS$2.4bn ($2.2bn).

The case hinges on whether private equity profits should be taxed as capital gains or as business income, and whether TPG intentionally ran its Myers stake through tax havens to avoid the exit charges.

The Australian Taxation Office alleges that TPG arranged its organisational structure of Myers in a way that was intended to avoid paying taxes, with ownership arranged through a web of companies based in The Netherlands, Luxembourg and Cayman Islands. 

The decision by the ATO to aggressively pursue the case has reportedly caused concern amongst foreign investors, and could be seen as a test of how welcoming the country is to overseas private equity investment. The outcome could also have implications for Australian private equity firms in terms of their ability to raise funds from foreign sources.

The move is at odds with legislation introduced in 2006 to encourage overseas investment into the country by narrowing the range of assets investors would need to pay capital gains tax on to real estate and the business assets of foreign residents’ permanent Australian establishments.

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