bbi vs. ato, page-12

BBi is miles away from paying any tax. Anything that gets adjusted will most likely go against current losses carried forward.

Dargie, I hope someone with a strong accounting background can get involved and clarify some of the issues (I have a basic knowledge from studying some units years ago). However, I really think what you are saying is wrong.

You may be correct that profits from the sale of DBCT are not treated as capital gains, but as ordinary income, but in a sense that is irrelevant to the issue at hand. If the court rules in favour of the ATO, then the tax liability doesn't get dumped in with losses and get resolved in the future when we are profitable again. Carry forward losses are a BEFORE TAX item. If at the end of the day you don't make a profit, you don't pay tax and the loss gets carried forward. But an amended assessment is an AFTER TAX issue. In this case BBI was making a profit (for the years 2002 to 2007), but the amount of tax it paid was less than it should have paid, because, according to the ATO, it wrongly classified some lease payments as an expense, rather than as a capital cost.

If the court rules in the ATOs favour, then this is an immediate liability. The tax office will jump to the head of the queue in regards to debt repayments.

The amount at issue of $102M of primary tax and I'm sure the paper today said that penalty interest was now $45M. Apparently BBI has already paid about $50M to the ATO in order to mitigate interest accruing, but BBI treats that $50M as an asset on its books.

If anyone has access to today's The Australian, could the please post the article. It was only a short piece.

What I am still confused about is why there was no announcement from BBI if the article is true. It acknowledged in last years annual report that the adjustment could be material.

This is from last years annual report...

Babcock & Brown Infrastructure operates in many countries, each with separate taxation authorities and differing regulations which results in significant complexity. Babcock & Brown Infrastructure is involved in discussions with taxation authorities in numerous jurisdictions at any given time and is currently involved in a dispute with the Australian Taxation Office (ATO) which may result in material taxation liabilities.

This dispute involves the deductibility of certain payments made in relation to the long term lease of DBCT. Some of the payments in dispute are ongoing. The ATO has issued amended assessments to Babcock & Brown Infrastructure for the years ended 30 June 2002 to 2007 and is expected to issue an amended assessment for the year ended 30 June 2008 when the income tax return is lodged. The amended assessments are for primary tax of $101.9 million plus interest of $41.9 million (calculated to 31 December 2008). Based on the projected tax loss of the Babcock & Brown Infrastructure Limited tax consolidated group, no additional primary tax payable would arise in respect of the period ending 31 December 2008 if the ATO’s position were upheld.

Babcock & Brown Infrastructure has paid 50% of the primary tax and interest in order to mitigate interest accruing on the disputed liability. Babcock & Brown Infrastructure is confident that its position will be upheld in the Federal Court. If this is the case the amount deposited will be refunded with interest. This deposit is recognised as a financial asset.

http://www.babcockbrown.com/media/406627/appendix%204d.pdf