Hilton International Australia continues ATO battle over Sydney hotel sale
Hilton International Australia continues to contest Australian Taxation Office (ATO) allegations of tax avoidance.
Now, in a blow to the ATO, it has failed to secure a court-appointed legal expert.
Federal Court Judge Wendy Abraham dismissed the ATO’s application for the court to appoint a joint legal expert to give evidence on structuring hotel sales.
The dispute centres on whether $173 million should have been declared as assessable income by Hilton in 2015, following the sale of its Sydney hotel.
The ATO has struggled to find an independent expert since December 2021, citing commercial conflicts of interest among legal firms reluctant to oppose Hilton.
“That is, their firm does not wish to be briefed by a party adverse to the interests of Hilton, presumably at least so as not to lose Hilton’s potential business,” she said in her judgment.
Hilton has already enlisted its own legal expert, with plans to submit evidence by December 20.
The company argues that the appointment of a court-appointed expert would disadvantage them.
Justice Abraham’s decision stated “Hilton sold its Sydney hotel and related assets by transferring the hotel real estate and related assets to Admiral Holdings Australia Pty Ltd (AHA) at a price,” the judgment reads.
“(Then it sold) the shares in AHA to a third-party purchaser for approximately $450,000,000 (comprising $29,021,786 for the shares and $420,000,000 by way of repayment of intra-group debt owed by AHA).
“No assessable income was returned by Hilton. A net capital gain of $21,010,282.50 was returned in the assessable income of the non-resident shareholder of AHA (a Luxembourg entity and parent company to AHA and Hilton).”
The ATO posits alternative scenarios where Hilton could have reported a net capital gain of $173.3 million. The court must determine if Hilton's actions were primarily tax-driven or commercially justified.
The case is set to continue in court next year.
Jonathan Jackson, 5th December 2023
