Liberty Financial wins tax appeal

Liberty Financial, which owns Mike Pero Mortgages, and other entities associated with its 77% shareholder, Sherman Ma, won their appeal of tax charges, overturning an earlier decision in favour of the Australian Taxation Office (ATO).

Wednesday, March 20th 2024, 9:07AM

by Jenny Ruth

A full bench of the Federal Court of Australia ruled that complex internal treasury operations within the group did not amount to a contrived “scheme” aimed at obtaining a tax benefit, at least when it floated and listed on ASX in 2019, according to the Banking Day financial news organisation.

The entity appealing, Minerva Financial Group, invested in securitised trusts and warehouse trusts according to financial accounts for 2018 and 2019 filed with the ASX.

Minerva's trustee, Liberty Fiduciary, is the same entity responsible for the Liberty Financial Group Trust, which is stapled to the main Liberty Financial Group. Its ultimate parent is or was Quaker Partners LLC and the immediate parent is Vesta BV and Vesta is the entity through which Ma owns his stake in the group.

“Considerable profits” earned by Minerva between 2012 and 2015 and the tax payable on them were the subject of the legal action.

The court said the profits earned by Minerva were distributed to the trustee and then to Jupiter, an offshore-based entity owned by Ma and which appears to be no longer relevant to the present day operations of the Liberty group.

The ATO had argued that Minerva had sought to minimise its tax liability by structuring and financing its affairs in a manner that made it liable for withholding tax at a rate of 10% rather than company tax of 30%.

The lower court had concluded that the dominant purpose of the group's restructuring in 2007 was to reduce its tax impost.

But the full bench dismissed the lower court's reasoning, citing the evidence of Liberty's treasurer that the arrangements provided borrowing flexibility and better capital management for the Liberty group.

It found “nothing in the surrounding context objectively supports a conclusion that any party to any of the schemes either entered into or carried out any of the schemes for a dominant purpose of enabling the appellant to obtain a tax benefit.”

Tags: Liberty