CANBERRA: US oil major Chevron, which is in multiple disputes with the Australian Taxation Office over intercompany loans, has been hit by a new bill for its treatment of the loans in recent years. This is on top of a Federal Court ruling (which Chevron is appealing) that it pay $340 million for loans between 2003 and 2007 because of the high tax-deductible interest rates it has been charging itself on intercompany loans. Chevron Australia Holdings has reported a $US541m net loss for 2016, reversing a 2015 profit of $US165m. The loss came as its local unit was this year charged $US1.55 billion of interest by its parent on intercompany loans, accounts lodged with the Australian Securities and Investments Commission this month reveal.
Chevron Australia paid no income tax, and as previously flagged, no petroleum resource rent tax. The company said it had factored in new ATO assessments of previous years into its accounts. “Since December 31, 2016, the Australian Taxation Office has issued amended assessments to the group, denying a portion of interest deductions on inter-company loans between the group and its parent in relation to the financial years 2009 to 2013,” Chevron Australia director Derek Floreani said in the accounts. No figure was given for the new assessment, which appears to have been delivered as part of an ATO audit that Chevron recently told a Senate hearing was ongoing. In its latest accounts, Chevron Australia made a $US224m income tax expense adjustment for prior years. But it is unclear from the accounts which particular ATO tax dispute this relates to. Chevron also nearly doubled its provision for tax disputes, legal disputes and other non-rehabilitation expenses, raising it by $US276m to $US588m.
Chevron reported operating cash flow of $US749m as the huge $US60bn Gorgon LNG project on Western Australia’s Barrow Island ramped up. But it also spent $US5.2bn as it finished building Gorgon and the $US29bn Wheatstone LNG project at Onslow in WA. Intercompany loans and depreciation on its huge investments are why it is not paying income tax, while deductions on its huge capital spending on Gorgon and Wheatstone are why Chevron has previously said it expects to pay no PRRT The huge investments are why the local has taken on $US30.1bn of debt from its parent company, and on which its tax-deductible interest rate has drawn the ire of the ATO. The full Federal Court ruled Chevron was charging its wholly-owned Australian unit exorbitant tax-deductible interest on loans between 2003 and 2007. The $US224m tax adjustment contributed to a $US389m tax expense on the account, although no tax was paid.
Chevron made $US1.65bn of revenue in 2016, up from $US1.52m the previous year. It reported operating expenses of $US519m, depreciation and amortisation of $US757m and finance costs of $US587m. The rest of the $US1.55bn of interest costs were capitalised. A Chevron spokesman said the company paid tax in Australia. “Chevron Australia pays a substantial amount of tax in Australia, including royalties, payroll tax, fringe benefits tax, excise and interest withholding tax,” he said. “ Since 2009, we’ve paid more than $4.5 billion in federal and state taxes and royalties.” He said that Chevron expected to start paying PRRT some time between 2029 and 2035 and would pay between $60bn and $140bn of PRRT over the 40 year life of Gorgon and 30-year life of Wheatstone.
