Hong Kong companies to appeal $776m Tax Office ruling
Li Ka-shing, the chairman and founder of the Hong Kong-based conglomerate Hutchison Whampoa, is worth $US31 billion, ($33 billion) according to Forbes magazine. Two of his companies - Cheung Kong Infrastructure and its subsidiary Power Assets Holdings, were recently found to owe the Commonwealth of Australia $380.2 million and $395.8 million. The dispute relates to income tax dating from 2000 to 2009.
In the Federal Court of Australia, Justice Michelle Gordon said Cheung Kong and Power Assets were in default, and the court should enter judgment for the tax commissioner against them.
She added that the companies' failure to provide an address for service of legal documents was "continuing and occasioning unnecessary delay and prejudice" to the tax commissioner. The Tax Office filed its claim in June.
The companies were also ordered to pay the ATO's costs.
Hong Kong-based Cheung Kong Infrastructure and Power Assets could not be contacted by Fairfax Media on Wednesday. But a statement to Bloomberg said the ATO's claims were "without foundation", and the companies would defend against the lawsuit.
Cheung Kong Infrastructure owns substantial assets in Australia. These include electricity distributors CitiPower and Powercor, SA Power Networks, the renewable energy power transmission business Transmission Operations Australia, and the natural gas distribution company Envestra. Its results for the six months to June show a 1 per cent increase in Australian profit, to $HK587 million ($80.6 million).
In a recent report by the broker Citi, Cheung Kong Infrastructure was named as one of five "winners" in utilities.
It identified "further upward earnings potential as CKI has the financial resources ($HK5.1 billion cash on hand and only 14 per cent net debt to equity ration by end 2011) to make acquisitions."
Frequently Asked Questions about this Article…
A Federal Court judge ordered Cheung Kong Infrastructure (CKI) and its subsidiary Power Assets Holdings to pay about $776 million in unpaid income tax and penalties relating to the years 2000–2009. The amounts were split roughly as $380.2 million and $395.8 million, and the court also ordered the companies to pay the Australian Taxation Office’s (ATO) legal costs.
Yes. The two Hong Kong-based companies said they will appeal the court rulings. In a statement to Bloomberg they described the ATO’s claims as “without foundation” and said they would defend against the lawsuit.
Justice Michelle Gordon said the companies were in default because they failed to provide an address for service of legal documents, a failure the court said was “continuing and occasioning unnecessary delay and prejudice” to the ATO. The ATO filed its claim in June.
CKI owns substantial Australian assets including electricity distributors CitiPower and Powercor, SA Power Networks, the renewable power transmission business Transmission Operations Australia, and the natural gas distribution company Envestra.
The court judgment creates a large potential liability and adds legal costs, which investors should watch closely. The companies have said they will appeal, so outcomes could change. Everyday investors should monitor official company updates, the progress of the appeal and any financial disclosures about provisions or cash flow impacts.
CKI reported a 1% increase in Australian profit for the six months to June, to HK$587 million (about $80.6 million). The company also had HK$5.1 billion in cash on hand and a reported net debt-to-equity ratio of about 14% at the end of 2011.
Yes. Broker Citi named Cheung Kong Infrastructure as one of five “winners” in utilities, citing further upward earnings potential. Citi highlighted CKI’s financial resources (HK$5.1 billion cash and a low net debt-to-equity ratio) as giving it capacity to make acquisitions.
Li Ka‑shing is the chairman and founder of the Hong Kong conglomerate Hutchison Whampoa and is identified in the article as Asia’s richest person (Forbes estimated his worth at about US$31 billion). Two companies linked to him — Cheung Kong Infrastructure and Power Assets Holdings — are the entities involved in the Australian tax dispute.
Call 1300 880 160
Start a chat
Schedule a call
