Extended Background

Australia’s prosperous mining sector heavily features resource giants like Rio Tinto, which established a Singapore marketing hub for selling locally mined ore. The hub centralized sales, marketing, and logistics for Asian and global buyers—a legitimate business model, but one with TP challenges on profit allocation.

Detailed Arguments

Taxpayer

• Asserted that the Singapore hub provided genuine value through market proximity and logistics.

• Defended its TP by arguing the profitability of the hub matched commercial, arm’s-length conditions.

ATO (Australian Taxation Office)

• Countered that most value was produced in Australia itself and that the Singapore hub therefore deserved less profit.

• Emphasized substance over paper functions in profit attribution.

Outcome

• Settlement (not court) resolved the matter, with Rio Tinto agreeing to pay nearly A$1 billion in tax, interest, and penalties.

Procedural Journey

• Began as a high-profile ATO audit and expanded into industry-wide scrutiny.

• Did not proceed to court; matter closed through a settlement reviewed by Federal Court judges.

Implications Beyond the Case

• Marked shift in resource sector: marketing hubs must demonstrate operational substance or see profit clawed back to the source country.

• Compliance lesson: robust documentation of real functions, not just contracts, is vital for outbound hubs.

Original Case Link:

ATO media release