During the course of due diligence into the Transaction Network Solutions (TNS) business prior to the sale to Telstra, uncertainties were identified in relation to the tax law applicable to tax loss transfers completed between Keycorp group companies in 2001 and 2002. Keycorp requested a private ruling from the ATO.
The ATO has notified Keycorp that it does not agree with its position, so under advice fom its accountant Ernst & Young, Keycorp will appeal the ATO ruling, claiming that the ATO has not fully considered the key issues contained in its request for private ruling.
Under current tax legislation, if a business with revenues of more than $100 million changes ownership, tax losses can not be tranferred. Under previous legislation, businesses that could demonstrate that they were carrying on essentially the same business under different owners were exempt.
If Keycorp fails in its bid to have the ATO reconsider its position, the company could incur an additional income tax liability of up to $4.4 million.