How Irish stud Grey Swallow became an Australian tax dud
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