~$1bn
What Rio Tinto agreed to pay the ATO to settle its Singapore marketing hub dispute
How to move a profit offshore: the 9% loan and the Singapore hub
Two real cases, one decided in court and one settled with the tax office for about $1 billion, show how multinationals can shrink an Australian tax bill. Follow the money, step by step.
Aussie Outrage · · 5 min read
When a multinational pays little tax in Australia, the money usually hasn't disappeared. It has moved, legally or not, to a related company in another country. Here are two cases where the trail ended up in front of a judge or the tax office.
Trail one: the 9% loan
In 2003, Chevron's Australian arm, which develops the giant Gorgon and Wheatstone gas projects in Western Australia, needed money.
| Step | What happened |
|---|---|
| 1 | Chevron Australia set up its own subsidiary in the United States, which raised money in the US commercial paper market at about 1.2% |
| 2 | Under a credit agreement signed on 6 June 2003, the subsidiary lent Chevron Australia the Australian-dollar equivalent of up to US$2.5 billion, at about 9% a year |
| 3 | Chevron Australia paid the interest to its US subsidiary and claimed it as a deduction in Australia, reducing its Australian taxable profit |
| 4 | The ATO said the interest rate was far higher than unrelated parties would have agreed, and issued amended assessments |
| 5 | The Federal Court sided with the ATO in 2015. In 2017 the Full Federal Court unanimously dismissed Chevron's appeal |
| 6 | In August 2017 Chevron dropped its bid to go to the High Court and settled with the ATO, reportedly for about A$340 million including tax, penalties and interest |
9%
Borrow cheap, lend dear: the same money, two interest rates
Approximate annual interest rates, 2003
What Chevron's US subsidiary paid to borrow it
1.2%What it charged Chevron Australia
9%
The two rates are in different currencies: the US subsidiary borrowed in US dollars and lent in Australian dollars, when Australian interest rates were higher. Part of the gap reflects that; the court found the 9% was still more than an arm's length rate.
Source: Chevron Australia Holdings v Commissioner of Taxation [2017] FCAFC 62
Show the data
| Item | Value |
|---|---|
| What Chevron's US subsidiary paid to borrow it | 1.2% |
| What it charged Chevron Australia | 9% |
The key test is called arm's length: would two unrelated companies have agreed to this price? The Full Federal Court found the 9% did not reflect an arm's length price: a borrower in Chevron Australia's position, backed by its parent's credit strength, could have borrowed more cheaply. The case is now widely cited as the leading Australian ruling on loans between related companies.
Trail two: the Singapore hub
Rio Tinto digs iron ore in Western Australia and sells it mostly to Asian steelmakers. For years the sales went through a Rio Tinto marketing company in Singapore.
| Step | What happened |
|---|---|
| 1 | Rio's Australian mining companies sold ore to the related Singapore marketing hub |
| 2 | The Singapore hub sold it on to customers and was paid a margin for its work |
| 3 | Profit booked in Singapore is taxed at a lower rate: Singapore's headline company tax rate is 17%, against Australia's 30% |
| 4 | The ATO disputed how much profit should sit in Singapore rather than Australia, for years from 2010 |
| 5 | In July 2022, Rio agreed to pay A$613 million in extra tax for 2010 to 2021 (including $55 million in interest and $22 million in penalties), on top of A$378 million it had already paid on amended assessments: close to $1 billion in all |
| 6 | The deal ended all of Rio's tax disputes with the ATO, and set how profit on sales through Singapore (iron ore, aluminium and other products) is split with Australia up to 2026 |
How Rio Tinto's ~$1 billion settlement adds up
Tax paid to the ATO over the Singapore hub dispute, 2010 to 2021, millions of dollars
- Additional tax agreed in 2022$613m(62%)
- Already paid on amended assessments$378m(38%)
The additional $613m includes $55m in interest and $22m in penalties.
Source: Rio Tinto statement, 20 July 2022
Show the data
| Part | Value | Share |
|---|---|---|
| Additional tax agreed in 2022 | $613m | 62% |
| Already paid on amended assessments | $378m | 38% |
A settlement like this resolves a dispute about how profit should be split between countries; it isn't a court finding against the company. The ATO had been seeking about $1.2 billion.
The tricks the ATO is watching now
The same patterns turn up again and again. In October 2026 the ATO said it was focused on:
- Related-party loans (the Chevron pattern)
- Offshore marketing hubs (the Rio pattern)
- Royalties paid to an overseas sister company for brands, software or patents
- Data centres, cloud and AI firms making big payments to related companies offshore
None of these is illegal in itself. What matters is the price. When a company sets the price of a loan, a sale or a royalty with its own sister company, there's nobody on the other side of the table pushing back. That's the job the ATO is left to do, one audit at a time.
Why it matters
The ATO's Tax Avoidance Taskforce, set up in 2016, has collected $36 billion in extra tax. That money was only collected because someone checked.
Australians who earn a wage can't book their income in Singapore. Their tax comes out of every pay packet before they see it.
This story is part of Follow the Money. See also: 1,149 of Australia's biggest companies paid no income tax last year.
Top photo: Singapore's financial district across Marina Bay, August 2023. Photo: Daniel Case, CC BY-SA 4.0, via Wikimedia Commons.
Sources
- Chevron Australia Holdings Pty Ltd v Commissioner of Taxation [2017] FCAFC 62 (Full Federal Court) (opens in a new tab)
- Chevron Australia Holdings Pty Ltd v Commissioner of Taxation (No 4) [2015] FCA 1092 (opens in a new tab)
- Deloitte: Court cases shaping transfer pricing (Chevron facts, settlement) (opens in a new tab)
- Rio Tinto: Rio Tinto settles all tax disputes with Australian Tax Office (statement, 20 Jul 2022, SEC filing) (opens in a new tab)
- The New Daily: Rio Tinto ends decade-long dispute by settling $1 billion tax bill with ATO (20 Jul 2022) (opens in a new tab)
- Investor Daily: Rio Tinto settles ATO dispute for almost $1bn (opens in a new tab)
- ABC News: ATO says 1,149 large companies paid no tax as it scrutinises AI firms (1 Oct 2026) (opens in a new tab)
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