Implications Of Singtel-Australia Tax Case On Transfer Pricing

Australia Tax Office (ATO) won a landmark court ruling against Singapore Telecommunications (Singtel) on 17 December 2021, marking a victory in only the second substantive Australian transfer pricing case on cross border intra-company financing. Below is a timeline of the events leading up to the landmark ruling.

Timeline of events leading up to the case


Singtel purchased Cable and Wireless Optus Ltd (also known as Optus) through Singtel Australia Investment Ltd (SAI), which operated one of Australia’s largest telecommunications businesses.


SAI sold 100% of the issued capital of Optus to SingTel Limited’s Australian subsidiary, Singapore Telecom Australia Investments Pte Ltd (STAI), in consideration for approximately $14.2 billion. The consideration comprised $9 billion in ordinary shares to SAI and $5.2 billion in loan notes under a Loan Note Issuance Agreement (LNIA) to SAI.

As a result, STAI became a wholly-owned subsidiary of SAI and the holding company of a group of companies including Optus which operated in Australia. STAI began issuing loans and later paying interest to SAI, which is a tax resident in Singapore. Both entities (STAI and SAI) have been entirely owned by the parent company Singtel of Singapore.

The loan agreements put in place during this purchase process set interest rates due on loans between the two entities.


Almost 15 years later, the Australian Tax Office (ATO) took issue with that. In October 2016, the Australian Tax Commissioner contested tax deductions claimed for interest paid on the loans in the tax years ending 31 March 2010, 2011, 2012, and 2013.

The Commissioner made transfer pricing determinations and gave amended assessments to STAI. The amended assessments meant that STAI had fewer losses to carry forward for tax purposes from 2010, ultimately meaning it would see an increased taxable income.

In December 2016, STAI lodged objections to the amended assessment.


The Commissioner disallowed STAI’s objections in 2019.


STAI’s appeal against the Commissioner’s decisions was heard in court on 17 December 2021, which the court dismissed, ruling in favour of the Commissioner.

Implications of the decision

In the aftermath of the decision, multinational companies should expect greater scrutiny on intra-group financing that does not appear to have taken place at arm’s length – as if it were done between two unrelated parties.

Because of the increased scrutiny, a transfer pricing audit poses huge risk to corporations and organisations from both the tax planning and compliance perspective. More transfer pricing disputes over potential adjustments to income are likely to occur from now on, which may develop into long drawn-out legal battles like in the case of Singtel.

This is because transfer pricing provisions often require highly specialized factual knowledge and voluminous documentation especially if a regulator reviews transactions years after they actually take place.


Transfer pricing documentation is undoubtedly important in keeping evidence of the history of the transactions that occur between related companies. Especially these days when transfer pricing aggression is on the rise, it is quite necessary for companies to keep track of their related party transactions. In doing so, it is less likely to run into any trouble during reviews or investigations by the tax authorities.

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