Private equity sector worried as ATO renews tax chase over Myer float

The private equity industry has expressed fears that a renewed hunt by the Australian Taxation Office against Myer investor TPG over gains made during its 2009 float will once again make foreign investors nervous about putting money into Australian companies.

The fears echo those made two years ago when the ATO first started investigating the company over an alleged tax bill. Now the Tax Office has received permission from the Federal Court to serve the business with a wind-up notice.

Katherine Woodthorpe, head of the Australian Private Equity and Venture Capital Association says she is surprised by the way the ATO is acting.

“The way private equity gains are distributed back to the investors is direct and immediate. The ATO has this idea that it is sitting there waiting for them to come and get it. But they know private equity gains are sent and distributed back to investors.”

“I just don’t know what the ATO is thinking. But my concern is that it raises the fears of investors.”

The warning also comes as capital investment is picking up in Australia. In the last year US-based Accel Partners has made three significant investments in Australian companies, while others based in Europe have invested locally as well.

“Investors may believe there is a risk of Australian investment, that there is an uncertainty around the tax treatment of the gains.”

The expression of fear comes as the ATO was given orders by the Federal Court yesterday to serve demands for $739 million in unpaid taxes and interest on TPG Capital Australia managing director Ben Gray.

In a statement a TPG spokesperson said the company believes it has adhered to all the appropriate legal requirements.

“TPG strongly believes it has met all of its Australian tax obligations in connection with the investment in Myer Department Stores and its other investment activities in Australia and at all times has complied with Australian taxation laws and will continue to do so in the future.”

While investors are hurting over the disappointing performance in Myer shares, the ATO is still persisting with a two-year battle to get the money back. Documents reportedly released by the court show the ATO wants both TPG Newbridge Myer and NB Queen SARL to pay penalties and interest on the tax bill for a total of $739 million.

TPG sold its stake in the company during the 2009 float. At the time, it said it believed it had met its Australian tax obligations.

While it is understood the ATO is not optimistic of receiving the bill, having said pursuing overseas liabilities is notoriously difficult, it is reportedly willing to push the boundaries on how far it can chase these entities.