Clive Palmer faces tax bill blowout over Queensland Nickel loans

Clive Palmer and his family are facing a massive tax bill arising from about $190m in loans from Queensland Nickel.

Clive Palmer on the Gold Coast this week. Picture: Lyndon Mechielsen

Clive Palmer and members of his family are facing a massive tax bill arising from about $190 million in loans from Queensland Nickel to the tycoon’s related parties since 2012.

The loans were made in ­circumstances which, according to tax experts, make the funds deemed dividends to Mr Palmer and other recipients, including his wife Anna, her father Alexandar Sokolov and a range of companies in the tycoon’s control.

An annual summary of the loan forgiveness shows they peaked on June 30, 2013, with $65.5m in loans from Mr Palmer’s collapsed refinery business being forgiven.

It was in the 2012-13 year that Mr Palmer pulled $43m in one day out of the Queensland Nickel accounts, transferring $US8m to his father-in-law Mr Sokolov, $US15m to himself, $US15m to a business account in French Polynesia, $4.5m to Zhenya Zang and the rest to other related parties.

The $43m in transfers ­occurred on November 29, 2012 — the day Mr Palmer announced there was a secret plot hatched by Campbell Newman’s Queensland government to imprison him and confiscate assets including the nickel refinery and coal leases. The plot claims were ­denied at the time as ridiculous and a fantasy.

In an unusual, unexpected ­interview with The Weekend ­Australian yesterday, Mr Palmer revealed he was already under “constant investigation” by the Australian Taxation Office and that its staff enjoyed “sandwiches and milkshakes” in his offices.

Asked about the transactions being investigated by Queensland Nickel’s voluntary administrator, FTI Consulting, which has alleged Corporations Act breaches, and a special liquidator ­appointed yesterday by the Turnbull government, Mr Palmer said: “All I can say is that’s what I was advised by (tax specialists) PricewaterhouseCoopers. Whether that’s right or wrong, it should be easy to check. It’s not a concern to us. We just follow the law.

“The tax office comes into my offices voluntarily — it’s a great service, you don’t have to pay anything for it. I have a permanent team — I get audited every year. The tax office is not a problem because I am under constant investigation and they know where I am at all times. But I think it’s wonderful that Malcolm Turnbull has got a special liquid­ator in just for me.”

Brisbane barrister Michael Henry, who specialises in advice and litigation on tax matters, ­examined the voluntary administrators’ findings and said there were clear taxation implications.

He said Division 7A of the ­Income Tax Assessment Act was “intended to prevent profits or ­assets being provided to shareholders or their associates tax free”.

“Where a private company forgives a debt owed by a shareholder or their associate, the debt amount may be treated as a Division 7A dividend,” he said.

“The Commissioner of Taxation is under a strict duty to carefully consider the report prepared by FTI Consulting and to make a determination as to whether there is any basis upon which further assessments of tax might be raised. It is something that one would expect the Commissioner of Taxation to investigate. As part of this process he will also consider whether he can apply penalties.”

Mr Henry said the effective tax rate on a deemed dividend could be as high as 62.55 per cent.

The Australian revealed last Monday that Mr Palmer was under tax office investigation over an unusual transaction relating to $US415m he received from the Chinese government-owned Citic Pacific a decade ago.

With FTI Consulting seeking to pursue recovery of losses ­suffered by soon-to-be-liquidated Queensland Nickel as a result of the series of huge transfers by Mr Palmer, Mr Henry said a tussle between the tax office and creditors was looming. “The Commissioner of Taxation is a seasoned and highly persistent litigant,’’ he said. “He has the benefit of a number of procedural and legislative advantages not enjoyed by ordinary citizens or other government agencies.”

Mr Palmer yesterday again criticised FTI Consulting’s findings as false and accused the voluntary administrators of trying to earn millions more from creditors.

“I haven’t been charged with anything, I haven’t been offered due process or natural justice. These are dangerous things for any citizen and it’s dangerous for our country,’’ he said.

The political fallout from the refinery’s collapse saw Labor’s ­employment spokesman Brendan O’Connor attack Townsville-based MP Ewen Jones as “path­etic” after the Liberal ­National Party politician wept on live television over the plight of sacked Queensland Nickel workers.

Claims will soon be made by the workers, who are owed $73m, on the government’s Fair Entitlements Guarantee scheme, triggering an action to target Mr Palmer’s personal assets.

Employment Minister Michaelia Cash said: “We should all be very clear on where responsibility lies for this mess. It lies fairly and squarely with Clive Palmer. If money has been improperly taken out of the company then it will be pursued. If individuals have broken the law then they will be pursued.”

Mr Jones, whose marginal electorate of Herbert faces the brunt of job losses at the refinery, struggled to maintain composure as Senator Cash confirmed the FEG money would flow to workers. Choking back tears, he said: “This is a tough day in Townsville because this says this is the end of the line for a lot of these people. Our city is better than Clive Palmer, it’s bigger than Clive Palmer and we’ll get over it.”

Mr O’Connor said it was “quite pathetic” to see Mr Jones “cry crocodile tears today because Ewen Jones, along with Malcolm Turnbull and Senator Cash, voted to cut the Fair Entitlements Guarantee down to 16 weeks … so they were seeking to rip off QNI workers”.

Additional reporting: Rowan Callick, Sarah Elks