In 2014, Billabong founder Gordon Merchant wanted to sell his bioplastics business. He also wanted to make sure he didn’t pay much tax. Now the advice he took from EY has led to a $50m tax bill.
ordon Merchant has always had an entrepreneurial spirit. In 1973, he and his then wife Rena started a surf clothing brand from their kitchen bench on the Gold Coast.
Merchant lost his appeal of the Tax Office’s assessment, which found he owed an extra $50 million in tax. But the emails make plain that from the very beginning, paying as little tax as possible from the sale of Plantic was Merchant and EY’s aim. By doing this, Merchant would “get a good ‘loss’ on paper so they reckon there will be zero tax payable on a lump sum payment, which is very good”.Merchant replied to McGrath that he was annoyed at EY for not alerting him to the need to pay taxes from his time in the United States.
Ahead of the sale of Plantic, Merchant’s family trust sold more than 10 million Billabong shares to another of his companies for a little more than $5.8 million, resulting in a capital loss of $56.6 million, in September 2014. This was considered by the Federal Court to be a wash sale. In 2020, the ATO issued new tax assessments to Merchant for the 2015 financial year following an audit of nine companies and trusts. The new notices increased Merchant’s personal tax bill by $30.6 million. Two of his firms were assessed to owe a further $12.9 million and were issued a $6.4 million penalty.
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