Michael Hill reaches $A6m settlement with Australian Tax Office over 2008 IP transfer

A Michael Hill store in Auckland
Michael Hill International 12-month price history (NZX.com)

Free audio stream, including stories that are padlocked on our site. Listen on any device, anywhere. Updated twice daily. The audio stream takes several seconds to start on Android devices.

Launch Radio player

Michael Hill International [NZX: MHI], 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)


This article is tagged with the following keywords. Find out more about MyNBR Tags

NZ Market Snapshot

Forex

Sym Price Change
USD 0.7536 -0.0001 -0.01%
AUD 0.9578 -0.0037 -0.38%
EUR 0.6774 0.0010 0.15%
GBP 0.4985 0.0000 0.00%
HKD 5.8419 -0.0013 -0.02%
JPY 90.5030 -0.0080 -0.01%

Commods

Commodity Price Change Time
Gold Index 1188.1 13.580 2015-05-04T00:
Oil Brent 67.8 0.050 2015-05-04T00:
Oil Nymex 60.2 -0.200 2015-05-04T00:
Silver Index 16.4 0.310 2015-05-04T00:

Indices

Symbol Open High Last %
NZX 50 5767.1 5790.4 5767.1 0.28%
NASDAQ 5018.4 5043.6 5005.4 0.23%
DAX 11506.8 11656.9 11454.4 1.44%
DJI 18026.0 18133.8 18024.1 0.26%
FTSE 6960.6 6995.4 6960.6 0.36%
HKSE 28295.7 28316.6 28123.8 -0.99%
NI225 19510.8 19549.4 19520.0 0.06%