Michael Hill reaches A$6M settlement with Australian Tax Office over 2008 IP transfer
April 1 (BusinessDesk) - Michael Hill International, the jewellery chain that bears the name of its founder, has reached
an A$6 million settlement with the Australian Tax Office over the 2008 transfer of intellectual property to an
Australian subsidiary.
The ATO had questioned the value the retailer had attributed to the IP, on which it determined the level of its tax
deductions. Brisbane-based Michael Hill had put a $274 million value on the IP, generating a deferred tax asset of $50.2
million. The ATO said “significantly lower” deductions were available, based on its own valuation.
The company’s own valuation was based on the assumed levels of franchise fee income generated within the group by
licensing its IP to its retail subsidiaries in Australia and New Zealand, it said.
The settlement “is a satisfactory and pragmatic outcome,” chairman Michael Hill said in a statement. “It confirms and
leaves in place the company’s original valuation and also leaves in place the availability of the deferred tax asset of
NZ$50,197,000.”
The tax issues arose from the company’s decision in 2008 to move more of its business to Australia, including its head
office, in a transaction where Australian subsidiary, Michael Hill Franchise Pty, bought Michael Hill Jeweller System
for NZ$293 million. At the time, profits were being squeezed by tight retail margins and it was looking for ways to
improve its performance.
Talks with the Inland Revenue Department on the same issue are ongoing, it said today.
Shares of Michael Hill have declined 1.5 percent on the NZX in the past 12 months, while the NZX 50 Index gained about
17 percent. The shares are rated a ‘buy’ based on the consensus of six analysts polled by Reuters, with a median price
target of $2.79.
(BusinessDesk)