Relations between the Murdoch and Packer camps are still clearly quite strained after The Australian went for the jugular with a page one story today suggesting that Australia’s richest man was pushing the tax envelope. The implication is clear in the opening paragraph:
James Packer may have sealed the deal of a lifetime with last week’s $5.5 billion reshaping of Australia’s largest listed media group Publishing & Broadcasting, but it has now also emerged that he has followed his father’s knack of paying minimal tax.
James appeared proud of himself when declaring that $30 million was the maximum capital gains tax payable, but PBL later went into damage control and released this statement to the media:
In response to a question at today’s PBL AGM, Executive Chairman Mr James Packer made comments about the potential capital gains tax outcome of the PBL Media transaction announced last week.
PBL’s assessment of the tax result is based upon a number of factors including:
1. the cost base of the assets
2. accumulated capital tax losses
3. PBL is selling a 50% economic interest for a total consideration of $982 million
4. A large portion of the cash proceeds received by PBL represents moneys borrowed by PBL Media to repay existing inter-company debt.
So, when trumpeting the deal to the market last week, PBL gloated it was receiving $4.52 billion in net cash. But when it comes to the taxman, the sale price is just $982 million because PBL Media has been loaded up with debt.
One thing’s for sure. Jane Schulze’s story in The Australian on 18 October was dead wrong. The headline screamed: “Media move could trigger $1 billion tax bill”.
There really should be a decent public debate about this issue. What on earth are the “accumulated capital tax losses” in PBL Media, given the huge profits ACP and Channel Nine have churned out over the years?
Whilst James agreed that the Nine assets were subject to capital gains tax, it is not so clear what the situation is with ACP, given that the Packer family has controlled the business for many decades.
It is very rare for a public company to specify a capital gains tax bill like this on a huge deal, so there are now enough facts on the table for a decent debate. Maybe Alan Jones could ask the PM what he thinks next time he’s on 2GB.