Federal Court Disagrees with SingTel Australia that Interest Paid to British Virgin Islands Company Was Arm’s Length

Abstract

In Singapore Telecom Australia Investments Pty Ltd v. Commissioner of Taxation, Moshinsky J has agreed with the Commissioner that SingTel Australia paid excessive interest on an AUD 5.2 billion loan from its British Virgin Islands holding company. Moshinsky J therefore upheld amended assessments disallowing interest deductions of AUD 894 million. However, the simplicity of the result belies the complexity of the Australian transfer pricing provisions and his Honour’s lengthy and careful reasoning. The authors examine the decision in detail and conclude that, despite the Commissioner's success, the transfer pricing landscape in Australia remains uncertain and unpredictable – especially given the taxpayer’s recent (2021) win in Commissioner of Taxation v. Glencore Investment Pty Ltd. All transfer pricing matters clearly need to be considered separately on a case-by-case basis.