State Treasury launches investigation into foreign takeovers

The Australian Treasury is currently reviewing overseas takeover cases involving consulting firm PricewaterhouseCoopers (PwC).

Working with the Australian Taxation Office (ATO), the Federal Department of Finance is examining documentation to determine whether overseas investment applications involving PwC were based on false or misleading information.

He was the first to report this story Sydney Morning Heraldwhich listed at least four PwC clients taken over by foreign groups, including surfwear group Billabong International, which was acquired by Boardriders in 2018.

According to the interim financial report dated December 31, 2017, PwC was the independent auditor for Billabong International at the time, and the surfwear group owned several brands at the time, including Billabong, Von Zipper and Element.

The document also details the acquisition of Boardriders, which was valued at $380 million.

It is not clear whether PwC was involved in the takeover, however a disclosure brochure was issued to shareholders in February 2018 which indicated that Grant Samuel & Associates Pty Ltd acted as independent expert.

Rag Dealer reached out to Boardriders and its parent company Authentic Brands Group for further comment.

The investigation into PwC was launched during a general review of advice provided in relation to applications to the Foreign Investment Review Board (FIRB) and the development of a plan to reform and renew Australia’s foreign investment framework.

Foreign direct and portfolio investment in Australia was expected to reach about $3.5 trillion in 2023, according to Treasury.

Labor senator Deborah O’Neill has investigated PwC’s involvement in overseas takeovers, triggering a Senate parliamentary inquiry.

In questions to Treasury, O’Neill requested information on what steps the FIRB had taken to determine whether PwC may have engaged in practices that were “likely to mislead or compromise the ATO”.

In response, Treasury said it assesses the risks of each proposed overseas investment on a case-by-case basis and any risks to tax revenues are considered in consultation with the ATO.

“These assessments take into account the validity and completeness of the information provided by investors in their submissions. The consultation process complements the ATO’s work by providing the ATO with insight into the structure of proposed foreign investor activities that may create tax risks.

“This enables the ATO to take proactive steps to develop and recommend conditions to be imposed under the Foreign Takeovers and Transfer of Undertakings Act 1975, which then requires investors to provide specified information and co-operate with the ATO throughout the life of the investment.”

The Ministry of Finance also confirmed that it was currently reviewing its records and working with the ATO to determine whether overseas investment applications involving PwC were based on false or misleading information.

“These investigations were initiated following the ATO’s response to this Committee’s inquiry into the notification referred to above. Subject to the findings of those investigations, Treasury will consider what further action or response may be appropriate to take.”