Corporate tax profile

Overview

Transurban delivers significant benefits to governments by funding critical infrastructure that connects communities to drive economic growth. This requires heavy upfront investment and risk-taking by Transurban and its partners to deliver long-term infrastructure projects. This is optimally achieved through a holding structure that enables the delivery of benefits to shareholders whilst complying with accounting and tax rules. This leads to a point of tax capture at the shareholder level which would not otherwise be available under a single company structure.

Transurban has always been and continues to be committed to full compliance with both tax policy and tax laws. Our emphasis on ensuring compliance with the law is reflected in a Board-approved tax risk policy and long-standing co-operative relationship with the Australian Taxation Office (ATO). The ATO’s view under its risk differentiation framework is that Transurban has a low risk of non-compliance. To that end, Transurban does not:

  • have any entities located in tax havens;
  • engage in transfer pricing to shift profits to low-tax jurisdictions;
  • have artificial related party debt or foreign hybrid arrangements; or
  • engage in transactions where the tax outcomes do not align with the economic outcomes.

Transurban is structured as a stapled group comprising of two corporate entities and a trust because the initial heavy capital investment and associated debt funding required for its infrastructure investments leads to accounting losses being generated for the initial years, which prevents a company from paying dividends. A trust allows distributions to be made in the early years to investors who are then taxed on the distributions. In this way, the ATO collects tax earlier than would be the case under a corporate structure. Transurban’s structure is therefore not designed to avoid tax.

Transurban is an infrastructure business responsible for the ownership, funding, development and management of significant road networks, which are held as limited life road concessions. More than 90 per cent of these assets are located in Australia. Transurban's networks increase the productivity of the cities where they operate, by billions of dollars every year, through lower congestion, improved safety, improved travel time reliability and more sustainable transport.

The significant capital invested to develop Transurban's existing networks leading to concession ownership is amortised over the life of the asset, typically a period of up to 40 years, in line with Australian accounting rules and taxation law. In addition, interest costs associated with the funding of the development of the network is treated as an expense and deductible for taxation purposes. These amortisation and interest charges, together with initial lower traffic volumes and lower toll charges, give rise to accounting and tax losses through the early period of the concessions held by the business. This results in a lower effective tax rate in the early stages of the infrastructure project operation.

Transurban's submission to the Senate Economics References Committee inquiry provides a comprehensive overview of factors influencing the current tax position.
 

SIGNIFICANT INVESTMENT
TCL's network has required more than
$23B1
of investment to develop
  • Infrastructure assets require billions of dollars in upfront capital investment, leading to accounting and tax losses in early years
  • International and Australian accounting and tax principles require amortisation of capital investment
  • Funding costs are deductible but subject to tax in lender's hands

 

STAPLED STRUCTURE
TCL estimates investors have paid more than
$800M
in tax since 20022
  • Critical to investment appeal and ability to fund long term infrastructure projects
  • Enables payment of distributions to security holders
  • Distributions are ultimately taxed in the hands of investors

 

TAX INTEGRITY
Prudent gearing of
35-45%
consistent with listed infrastructure assets
  • Transurban3 rated 'low risk' by the Australian Tax Office
  • Fully compliant with Australian and international tax law
  • No entities located in tax havens
  • No artificial transfer pricing to shift profits overseas

1.This does not include ongoing costs for operations and maintenance.
2.Based on assumed security holder profile.
3.Transurban Limited Holdings Consolidated Tax Group.