Grain exporter CBH Group has had a major win over the Australian Tax Office, with the Federal Court upholding its May ruling that enshrined the co-operative's tax-exempt status today.
Grain exporter CBH Group has had a major win over the Australian Tax Office, with the Federal Court upholding its May ruling that enshrined the co-operative's tax-exempt status today.
The tax office had appealed Justice John Gilmour's ruling in May which found that CBH could retain its tax-exempt status because it remained a co-operative that acted in the collective interests of its member growers.
In particular, Justice Gilmour then ruled that "growers, who are also members, benefit from the activities of CBH, not because they are members but because they are growers, does not make CBH an association carried on for their individual profit or gain".
Justice Gilmour's ruling was today upheld by a majority of two to one. Justices John Mansfield and Neil McKerracher ruled, while Justice Antony Siopis gave a dissenting opinion.
CBH's victory is significant in that losing its tax-exempt status would have cost it at least an extra $15 million a year. The group is Australia's biggest co-operative with revenues of over $1.5 billion last year.
Irrespective of the court's decision, the group has for some time been investigating a possible corporate restructure that would result in a more efficient operating structure.
Three alternative structures, two of which would involve it becoming a tax-paying entity, were shortlisted in September for consideration by members. The CBH board plans to choose the preferred model and put it to a vote of members early next year
The first model shortlisted by CBH was a non-distributing co-op that would simply be an update on the existing structure and retain its current tax-exempt status.
The second, a distributing co-op model, would involve a form of share ownership and cash rebates for members, giving them greater access to downstream benefits, but forfeiting the tax-exempt status.
The third proposal would involve breaking the business into tax paying and non-tax paying entities.
Had today's ruling favoured the the tax office, CBH's would have had less flexibility to pursue the option of its choice.
CBH chairman Neil Wandel welcomed today's ruling as one that would enable CBH to retain millions of dollars for reinvestment in WA's grain storage and handling network.
"This is why we have fought so strongly to keep our tax-exempt status," Mr Wandel said.
"We strongly believe the tax exemption is valid ... because of the role CBH plays in promoting the development of the grain industry and agricultural resources."
Mr Wandel said the ruling also provided important clarity as CBH considers its restructuring options.
He said the CBH board was still working towards sharing a decision on the preferred model with CBH's grower members in early 2011 before going to members for a formal vote on the future structure in the second half of 2011.
