Gunns hit with $42m tax bill

STRUGGLING Tasmanian forestry group Gunns has been hit with a tax bill of $42.5 million over a 2007 deal involving its woodchipping equipment. Source: Brisbane Times
In a statement issued to the stock exchange late yesterday, Gunns said it sold and leased back the equipment ”for the purpose of raising approximately $100 million of funding for its business”.
It said it would seek to negotiate a part-payment of the tax bill before fighting the assessment.
BusinessDay was unable to find a company announcement disclosing the deal, but a company spokeswoman pointed to a line in then-executive chairman John Gay’s half-year review, issued in February 2007, stating that ”short-term finance facilities increased in the period with the reclassification of maturing finance facilities prior to completion of group refinancing subsequent to year end”.
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Mr Gay was charged with insider trading late last year, but the charges, to which he has pleaded not guilty, relate to a later period than 2007.
A company spokeswoman was unable to say whether the equipment was sold to an unrelated party.
Gunns said the ATO had hit it with two bills, one for $42.5 million denying it tax relief for ploughing back into the business the capital gain reaped from the sale, and the other, for $22.4 million, denying it tax deductions for rent it subsequently paid to use the equipment.
”Gunns considers that these assessments are alternatives and cannot both be correct,” the company told the ASX.
Gunns received the tax assessment on Friday.