Grain storage, handling and marketing co-operative CBH Group is exploring new corporate structures that may require it to pay tax, despite a long battle with the government to protect its tax-exempt status.
Grain storage, handling and marketing co-operative CBH Group is exploring new corporate structures that may require it to pay tax, despite a long battle with the government to protect its tax-exempt status.
CBH, the nation’s biggest co-operative with revenues of more than $3.55 billion, is currently undergoing a review of its structure, aimed at implementing a more efficient operating model while “retaining co-operative principles”.
Three structures have been shortlisted for consideration by members, two of which involve changing from its current form to a tax-paying model.
In May this year, CBH won a Federal Court battle against the tax office over its tax status. The tax office is appealing that decision.
The first model proposed by CBH is a non-distributing co-op that would simply be an update on the existing structure and retains the firm’s current tax-exempt status.
A distributing co-op model would involve a form of share ownership and cash rebates for members, giving them greater access to downstream benefits, but forfeiting the tax-exempt status.
The third proposal is a mix of the two models, which would involve breaking the business into tax paying and non-tax paying entities.
CBH chief executive officer Dr Andrew Crane said findings from an extensive survey of growers showed about 85 per cent wanted to retain member ownership.
A new round of consultations with WA growers began last week.
The board will choose the preferred model and members will have a vote early next year.
However, this could be impacted by a Federal Court decision on the Australian Tax Office’s appeal against CBH’s tax-exempt status.
In March 2009, WA Business News revealed that the ATO was attempting to revoke the tax-exempt status of the co-operative.
In May this year, Federal Court Justice John Gilmour ruled that CBH could retain its status because “the fact that growers, who are also members, benefit from the activities of CBH, not because they are members but because they are growers, does not make CBH an association carried on for their individual profit or gain”.
Paying taxes would cost the co-operative about $15 million a year.
Earlier this year the structure of the CBH board came under attack by a group of minority grower-members who called for the appointment of two executive directors. Their push was defeated by a majority vote.
While changing structure of the group is open to consideration, CBH chairman Neil Wandel said retention of co-operative principles and member ownership was critical.
“From a strategic perspective, there is plenty of evidence that co-ops can be as successful as any corporate model, provided they are structured to their changing environment and to the needs of different members,” he said.
