Tax victory for Macquarie head

The semi-retired banker's win means he has avoided having to pay the original $450,000 bill, which dates back 17 years, as well as hefty interest and penalty payments.

Mr Clarke was hit with the bill after the Australian Tax Office insisted he pay tax on $2.3 million earned in a profit-share payment from the bank in 1991.

But after more than two years of legal wrangling, the case has been resolved in his favour.

Just two business days before it was due to be heard by a Federal Court judge, the court has ordered that the tax assessment should be set aside, a move agreed to by the Tax Office.

This means that Mr Clarke has avoided the glare that a court case examining his personal financial affairs would bring.

The dispute with the Tax Office stemmed from his role in getting the bank to bail out amateur rugby from financial troubles in the early 1990s.

The 66-year-old, who became executive chairman of Macquarie Bank when it was formed in 1985, was chairman of the NSW Rugby Union in 1989 when the bank stumped up a portion of a $19 million loan to rebuild its headquarters at Concord Oval.

The group was part of a syndicate that ultimately took a $14 million loss on the loan, and Mr Clarke subsequently agreed to repay part of the debt.

He earlier told the court in legal documents that he should not have to pay the tax because he had never received the $2.3 million. Rather it was diverted directly from his profit-sharing retirement account to repay part of the amount the bank lent the rugby union body.

Mr Clarke took home nearly $800,000 last financial year and $19 million the year before. He stepped down as executive chairman at the end of March.

A spokeswoman for the Tax Office said yesterday she was unable to comment on its decision to withdraw its defence to Mr Clarke's claims.

Mr Clarke did not return calls.