In its ruling yesterday, the Federal Court in Sydney said the ATO’s assessments with respect to tax deductions claimed by News Limited were excessive, and should be set aside.
The company claimed deductions of A$629.7 million in 2001 and A$1.42 billion in 2002.
News Limited said the deductions were linked to losses incurred as a result of devaluation of the Australian dollar when it made repayments to US subsidiary, News Publishers Investments Pty, following a global group restructuring which began in 1989.
Although no cash or bank deposits were exchanged, the court said the taxpayer incurred a loss from an exchange of liabilities due to exchange rate fluctuations, and this was sufficient to justify the deduction claims.
“The determinative matter is the breadth of the definition of ‘currency exchange loss’ in section 82V(1). All that it requires is a loss attributable to a fluctuation in a rate. It does not require an exchange of anything,” the ruling said.
The losses were shared among 18 News Corp companies, though the court has left it to the ATO to re-determine News Corp’s liability, since it is still unclear when the currency conversions took place and this could affect the final calculations of the correct amount owed.
The ATO now has the option to take the case to the Federal Court of Appeal or accept the judgment.
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