Brisbane company Super Cheap Auto is facing an estimated $490,000 stamp duty bill on its purchase of car parts retailer Marlows after the State Administrative Tribunal ruled on its dispute with the Commissioner of State Revenue.
Brisbane company Super Cheap Auto is facing an estimated $490,000 stamp duty bill on its purchase of car parts retailer Marlows after the State Administrative Tribunal ruled on its dispute with the Commissioner of State Revenue.
Commissioner Bill Sullivan decided in July 2003 that Super Cheap would have to pay just more than $97,000 in stamp duty, but two weeks later issued a revised assessment that found the correct amount should have been $652,000.
Super Cheap took the matter to the tribunal, which has largely but not entirely agreed with the revised assessment.
The case revolved around the value of goodwill and turned on expert evidence from accounting firm KPMG, which concluded that the Marlows brand had “little or no value”.
Super Cheap paid a total of $25.3 million for the Marlows business, which was established in WA and operated in three states.
In documents submitted to the tribunal, Super Cheap’s adviser, Ernst & Young, said the only amounts subject to stamp duty in WA were goodwill, which it said was worth $1.4 million, and fixtures worth $491,000.
E&Y asserted that the Marlows brand name was worth $6.4 million in WA but was not subject to duty.
The commissioner initially agreed with E&Y but later challenged its conclusions and also claimed that the allocation of goodwill between the states was “totally unjustifiable”, with too much allocated to the poorly performing Victorian business.
The commissioner concluded that the total dutiable amount was nearly $12 million.
Judge John Chaney brought down a judgement earlier this month that contained good news and bad news for both Super Cheap and the commissioner.
Judge Chaney concluded that the dutiable amount was $8.6 million, less the value of trademarks, which he said would be “a relatively low figure”.
On this basis, Super Cheap’s stamp duty bill will be up to approximately $490,000.
Notably, Judge Chaney concluded that “the brands had no separate value” after accepting evidence from KPMG Forensic’s Sydney partner, John McGuiness.
This was based on the finding that Marlows did not have the capacity to pay a notional royalty for the use of the brands.
It followed that the whole amount allocated to intangible assets in WA represented goodwill (less the value of trademarks) and was therefore subject to stamp duty.
Judge Chaney rejected the commissioner’s contention that the allocation of goodwill between states was unsound.
“In my view, there is no basis which justifies the commissioner reallocating the consideration which the parties have, at arms length, agreed to pay for the various assets,” Judge Chaney said.
“To accept the commissioner’s reasoning amounts to a conclusion that…the Victorian transaction was, in effect, a sham.”
Super Cheap chief executive Peter Birtles said he was pleased the tribunal had provided some clarity surrounding the tax assessment, which would qualify the company for a refund.
He said it was too early to calculate the value of the trademarks, which would determine the final tax bill.
The tribunal’s ruling that trademarks were not subject to duty was contrary to assertions by the commissioner.
