How Irish stud Grey Swal­low be­came an Aus­tralian tax dud

Sunday Independent (Ireland) - Business & Appointments - - FRONT PAGE - Nick Le­naghan

THE former chair­man of Aus­tralian firm Toll Hold­ings has come a crop­per with his tax claims over an Irish thor­ough­bred used for stud breed­ing.

Once rated the ninth-best race­horse in the world, the former Irish Derby win­ner that Pe­ter Row­sthorn bought for $US4M (€3.5m) and then put to stud has turned out to be a costly tax dud.

Prov­ing that the rac­ing game can be even more per­ilous off the track than it is on the course, Mr Row­sthorn is now su­ing his ac­coun­tants af­ter the prom­i­nent busi­ness­man was hit with a hefty tax bill over the horse, Grey Swal­low.

The Aus­tralian Tax­a­tion Of­fice did not agree with claims Row­sthorn had made for de­duc­tions against the race­horse as a de­pre­ci­at­ing as­set dur­ing four years the horse spent at stud in Vic­to­ria.

At is­sue are a se­ries of “ad­di­tional in­come tax” as­sess­ments served on Row­sthorn, amount­ing to A$857,087 in re­spect of the Irish stal­lion. Also de­tailed in his Supreme Court of Vic­to­ria dam­ages claim is the A$98,624.60 Row­sthorn spent fight­ing un­suc­cess­fully to over­turn the as­sess­ments in a case be­fore the Ad­min­is­tra­tive Ap­peals Tri­bunal last year.

It’s a com­plex case in­volv­ing the am­bi­tions of one of the coun­try’s most suc­cess­ful cor­po­rate fig­ures, the in­tri­ca­cies of tax law and trust struc­tures, the un­cer­tain out­comes of horse- breed­ing and the need to keep good records.

The story be­gan with the ar­rival of Grey Swal­low in Aus­tralia in mid-2006. The thor­ough­bred ar­rived with plenty of pedi­gree, sired by Day­lami, out of Style of Life. The young stal­lion, bred in Ire­land by Mar­guerite Weld, the mother of the trainer Der­mot Weld, had early suc­cess: win­ning the Irish Derby in 2004 and the Tat­ter­salls Gold Cup in 2005. But Grey Swal­low raced in only one race in Aus­tralia, the Cox Plate at Moonee Val­ley, plac­ing last af­ter an in­jury. He re­tired to stud the next year. Then be­gan the next phase of his ca­reer as an in­te­gral part of Row­sthorn’s grand plan to cre­ate a rac­ing in­dus­try em­pire un­der the name Wad­ham Park, in­clud­ing the Wood­side Park Stud, near Wood­end in cen­tral Vic­to­ria.

In the 2007 breed­ing sea­son, Grey Swal­low’s stud fee was A$16,500. But by early 2009 the fee had fallen to A$9000. Mean­while, be­tween 2008 and 2011, Row­sthorn was claim­ing hefty de­duc­tions against the de­clin­ing value of the Irish Derby win­ner, rang­ing from A$512,146 to A$314,522.

Where Row­sthorn came a crop­per, how­ever, was the fail­ure to show any in­come or ex­penses re­lat­ing to Grey Swal­low, a cru­cial el­e­ment to mak­ing a de­pre­ci­a­tion claim.

Ac­cord­ing to the AAT, it didn’t mat­ter whether the stal­lion pro­duced any as­sess­able in­come but it did mat­ter that Row­sthorn or his ac­coun­tant had no records for it. “Well, un­for­tu­nately peo­ple of my sort of de­meanour are a bit broad-brush and rely on oth­ers to di­vide, if you like, the in­come streams. But in gen­eral terms I ex­pected the thing to be prof­itable for Pe­ter Row­sthorn,” the former Toll chair told the tri­bunal last year.

And that is the nub of the is­sue, ac­cord­ing to the writ Row­sthorn’s lawyers have filed in the Supreme Court of Vic­to­ria against Nexus Ac­coun­tants, which is vig­or­ously de­fend­ing the claim. Row­sthorn’s writ al­leges he of­fered the stal­lion to Wood­side Park with­out any fee, but his ac­coun­tants should have known and told him he needed to de­rive in­come from the horse to show that he was us­ing Grey Swal­low for a tax­able pur­pose. The Age

Grey Swal­low won only one race in Aus­tralia be­fore re­tir­ing to stud in Vic­to­ria

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