The Australian Taxation Office (ATO) has thwarted Singapore Telecommunications' (SingTel) efforts to deduct nearly $895 million from its taxable income. 

The money stems from interest paid on loans between two subsidiaries related to the 2001 acquisition of Optus..

Deputy Tax Office Commissioner Rebecca Saint says the ruling is a crucial success for the ATO's Tax Avoidance Taskforce.

“This decision is another win for the tax avoidance taskforce towards maintaining the integrity of the Australian tax system and holding multinationals to account,” Saint said.

The case revolved around SingTel's claim for tax deductions for interest payments made between 2010 and 2013, related to its complex corporate structure involving the Australian-based Singapore Telecom Australia Investments (STAI) and SingTel Australia Investments, incorporated in the British Virgin Islands. 

The court's decision related to the “arm’s length” principle for multinational companies, ensuring transactions between group companies resemble those that would occur between independent parties.

This ruling is not just a standalone event but part of the ATO's broader strategy to combat tax avoidance. 

With the Taskforce's intervention leading to increased tax revenues being taxable in Australia, Saint says that an estimated $45 billion of past and future interest deductions have been removed from the tax system, culminating in billions of additional tax dollars collected in Australia. 

Just last year, the Taskforce generated an extra $7.6 billion in tax revenue, with significant contributions from public and multinational businesses, including early interventions in the oil and gas sector amounting to about $4.4 billion.

“Taxpayers that set excessive prices for their related party dealings to shift their profits to low-tax jurisdictions should be on notice,” Saint said.