Reference Number: Quirk Level 10, 111 Pacific Highway North NSW 2060 30 October 2015 Locked Bag 917 North Sydney NSW 2059 Telephone: +61 2 9464 1000 Facsimile: +61 2 9464 1111 Dr Kathleen Dermody, Committee Secretary Senate Economics References Committee PO Box 6100 Parliament House Canberra ACT 2600

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Dear Dr Dermody

Inquiry into corporate tax avoidance and minimisation This company' s name was changed from "Transfield Services Limited" to "Broadspectrum Limited" by the shareholders at our AGM on Wednesday 28 October 2015. Our response to your request for a submission to the Senate Inquiry into Corporate Tax Avoidance and Minimisation is attached. (For convenience, below we refer to ourselves as "Transfield".)

The content of the submission speaks for itself. At the same time, we highlight the following points for the committee:

• Transfield takes its obligations as a taxpayer and a responsible corporate citizen very seriously. Our objective in our tax affairs and dealings revolves around the principles of transparency, simplicity and doing what is right. • Transfield's current effective tax rate is 27 .5%. This is based on the Group's total profit and reported income tax expense for FY15. • While effective tax rates can move materially from time to time, we also observe that over the last 12 years the company has paid an average of 36% of Group profits in actual cash payments to the ATO . This payment of corporate income tax in cash is a useful statistic for the information of the committee. • Transfield stresses that it does not employ any tax structuring for the purposes of revenue or profit shifting that would serve to reduce tax payable in Australia. • Indeed, Transfield charges its foreign operations for management time and administrative costs, in keeping with OECD guidelines. This in fact increases Australian taxable income. • Although the company is returning to profitability, it should also be noted that a decline in corporate income tax remittances in recent years is a function of the Group incurring significant operating losses. It goes without saying that taxes are paid on profits.

Bro adspectrum Limited I ABN 69 000 484 417 Page I 1 •· '>'~··-J ~~i • j;.'Jl!l• . . ~··~,.;f··• · ~·-1:.,tj.~... •~BROADSPECTRUM

Transfield stands ready to assist the Committee, if required, in its important work.

Yours sincerely

Ben Quirk Group General Counsel For Broadspectrum Limited

Broadspectrum Limited I ABN 69 000 484 417 Page I 2 Broadspectrum Limited ("Transfield")

Submission to Senate Economics References Committee Inquiry into Corporate Tax Avoidance and Minimisation

Broadspectrum Limited (previously named "Transfield Services Limited") ("Transfield" or "the company") has been invited to make a submission to the Senate Economics References Committee inquiry into corporate tax avoidance and minimisation. Transfield welcomes this opportunity and wishes to emphasise that it takes its obligations as a taxpayer and a corporate citizen very seriously. Transfield accepts that tax evasion is a criminal act. Transfield does not engage in tax avoidance.

The company is taxable in the jurisdictions where its business operates and its revenue is earned and does not contrive to shift revenue or profits artificially by the use of entities established in tax havens for the purpose of tax avoidance. Transfield manages its tax liabilities transparently and within clear commercial and legal boundaries.

Executive Summary

l. The company is an Australian resident ASX listed company that has operations both in Australia and internationally. It operates through a number of subsidiary corporate entities and joint ventures resident in both Australia and foreign jurisdictions.

2. Transfield is a significant employer. The company employs more than 25,000 people globally. Approximately 19,000 of these employees live and work in Australia. The services provided by Transfield are tangible and significant to our clients. In many cases the company's staff are integrated into clients' operations.

3. As it derives its income from services performed both in Australia and overseas, Transfield must, and does, comply with applicable taxation laws in all the jurisdictions in which it operates. As a general principle of taxation law internationally, it must be understood that the first taxing jurisdiction is where the revenue from operations is earned. Due to the nature of the business being the provision of services by real people this means that the primary taxing point will be the location where those services are performed.

4. The company charges its overseas operations for the support provided by group in accordance with Australia's transfer pricing rules. This increases taxable income within Australia.

5. Transfield has no entities in recognised tax haven jurisdictions established for non-operational purposes. Transfield has not sought to deliberately lower its effective tax rate by establishing such entities in known tax havens.

6. Transfield has strong corporate governance in place, part of which is a strong tax governance framework.

7. Transfield has an open and co-operative relationship with the Australian Taxation Office.

1 8. Transfield's effective tax rate for the year ended 30 June 2015 was 27.5% and over the last 12 years the average Australian income tax paid in cash as a percentage of total group profit is 36.1%.

9. Transfield has paid more than $520M of income and state taxes since 2004 to Australian federal and state tax revenue authorities. It has also paid its foreign income and state taxes in accordance with t he tax laws in t he countries Transfield operates in.

Transfield's Business and Operations

Transfield is a publicly listed ASX 200 company that provides property, facilities and asset management services, infrastructure ma intenance, and commercial and industrial maintenance services across numerous sectors: in particular the Utilities, Telco, , Defence, Property, Socia l, Oil & Gas, Resources and Industrial sectors.

Transfield has an extensive geographic presence, and operates and provides services in countries including Australia, New Zealand, the United States, Canada, Chile, Nauru, Papua New Guinea, and the Philippines. It operates through a number of corporate entities and joint ventures resident in both Australia and foreign jurisdictions.

The demand for our services is driven by the ongoing trend towards outsourcing non-core activities in the private and public sectors. By outsourcing non-core activities to us, our clients are able to focus on their core businesses by realising productivity, efficiency and financia l benefits.

Transfield has more than 25,000 employees around the world, serving the needs of our clients wherever they operate.

History of Transfield

Transfield was founded in 1956 by Dr Franco Belgiorno-Nettis. It was incorporated in 1964 under the name Australian Cranes and Transport Limited and changed its name to Transfield Infrastructure (Holdings) Pty Limited in 1993.

The company took the name Transfield Services Lim ited in March 2001 and listed on the ASX in May that year. Since 2002, the company has significantly expanded its operations through acquisitions both within Australia and overseas.

The growth through acquisition has led both to an increase in the domestic and global reach of Transfield as well as number of domestic and foreign companies that are now part of the group.

At the Annua l General Meeting on 28 October 2015, the company's shareholders resolved to change its name from "Transfield Services Limited" to "Broadspectrum Limited" (similar to the name of some of its subsidiaries) and this was registered at ASIC on 29 October 2015.

2 Significant Acquisitions and Expansion:

1. Australia

A group of companies (including "Broadspectrum Australia Pty limited") was acquired in March 2005 and this group specialises in multi-disciplinary electrical, commissioning, mechanical and instrumentation services for the construction, , and energy markets. At the time of acquisition, they had a presence in South East Asia.

APP Corporation and related entities was acquired in April 2006 and provides a wide range of consulting, advisory and specialist technical services to the property and infrastructure industries across project management, urban planning, real estate and independent assurance.

ICD was acquired by Transfield in November 2009 and delivers engineering and design of maintenance and brownfield projects to the hydrocarbons, processing and related industries.

In 2010, Transfield entered into an agreement to acquire the Easternwell group of companies, a leading Australian services provider to the mining, oil & gas and infrastructure sectors.

In 2012 and 2014, Transfield was awarded government contracts to provide facilities management/ garrison services, logistics services, security services, and welfare support services to the Australian Department of Immigration and Border Protection at the offshore processing centres operated by the respective host governments in the Republic of Nauru and Manus Province (PNG). Transfield is currently negotiating the renewal of its contract with the Department of Immigration and Border Protection.

Transfield's growth in Australia is also the result of its participation in a number of joint ventures in the various fields in which it operates.

2. New Zealand

In 2004, Transfield doubled the size of its operations in New Zealand through the acquisition of Serco Group's New Zealand subsidiary (Serco NZ). In December 2004 Transfield acquired the New Zealand and Australian Electrical and Telecommunication Services business of AREVA Group, which provides infrastructure and industrial firms with outsourced engineering and maintenance services. In 2007, Transfield acquired McBreen Jenkins Construction Ltd, a New Zealand roads and water infrastructure services provider.

3. us

Transfield expanded into the North American market in June 2006 by acquiring US Maintenance Inc. (USM), a provider of outsourced management services in North America. In 2007, Transfield further expanded its holdings in the United States outsourced services market through the acquisition of:

• TIMEC Holdings, Inc. (TIMEC) whose customer base included ConocoPhillips, Chevron, ExxonMobil and Shell

Transfield Services No rth America - Transportation Infrastructure (formerly VMS Inc.), a provider of transport infrastructure services across North America

Horizon National Contract Services LLC, a North American facilities management company

3 Whelan International Co. Ltd, a provider of facilities maintenance services across North America

HRI Inc., a provider of specialised facilities maintenance services across North America

In 2011, Transfield sold USM to EMCOR Group, Inc in order to focus on the key sectors of resources and infrastructure services.

4. Canada

In 2006, Transfield reached an agreement with Flint Energy Services Ltd (now acquired by Aecom) to form Flint Transfield Services Limited (FT Services) as a 50/50 operations and maintenance joint venture. FT Services commenced asset management services in 2008 and has consolidated Transfield's presence in Canada's oil sands asset management industry.

5. Chile

Transfield acquired a 50 percent share in lnstrumentacion Y Servicios S.A., a Chile-based provider of mining maintenance and capital works in January 2008. The company was re-branded and operated as INSER Transfield Services S.A. Transfield has increased its ownership to 100% as of 2015.

6. India and Middle East

During the period 2004-2006 Transfield engaged in significant acquisition activity within these markets as it sought to establish itself as an operations and maintenance provider. While Transfield has now largely extracted itself completely from these markets, until 2014 Transfield was active as follows:

• In 2004, Transfield commenced work providing consolidated maintenance services for the liquefied natural gas facilities of RasGas Company Limited in Qatar. In 2006, Transfield purchased international services company lntergulf General Contracting LLC in Abu Dhabi through its Joint Venture company Tespec, providing a new platform for growth in the Gulf Region. lntergulf had more than 400 employees, and it provided maintenance and capital works services to the oil, gas and power industries in Abu Dhabi. The acquisition gave access to the opportunities in the oil and gas market.

• Acquisition of Hofincons lnfotech and Industrial Services Pty Ltd occurred in October 2006. The company was based in India, with more than 3,500 employees. Its main activities included: operations and maintenance services; shutdown support services; relocation, refurbishment, installation and commissioning support services; Asset Management consultancy services and Facilities Maintenance services. These activities were provided to the power, engineering, mining and process, hospitality, oil, gas and petrochemical industries.

The company notes it exited the region and ceased all India and Middle East activity in 2014.

4 7. South East Asia/Pacific

Transfield has been present in Malaysia, Singapore and China, through its acquisition of the Broadspectrum group. The presence was operational with commercial activities in Transfield's fields of expertise.

Currently Transfield continues providing services to Shell Corporation through the Philippines branch of its Malaysian joint venture company.

Transfield's joint venture operation in New Caledonia recently ceased.

Corporate Structure

As highlighted above, Transfield's corporate structure has developed as a result of its growth, both organic and via acquisition, over the years.

The increase in the number of corporate entities within Transfield's structure and their location has been the result of Transfield's international expansion of its business operations.

As previously mentioned, Transfield has not established entities in any jurisdiction for the purpose of revenue or profit shifting for the purposes of tax avoidance. The local structure is determined by operational, non-tax considerations such as regulatory and employment law requirements.

In other words, Transfield has no entities in recognised tax haven jurisdictions to which it artificially contrives to divert sources of income. Transfield Services has not sought to deliberately lower its effective tax rate by establishing such entities in known tax havens.

Elaborating on this point, the nature of Transfield's business is such that the first taxing jurisdiction is where the revenue from operations is earned. This is in accordance with international tax legislation and OECD tax principles. Transfield is bound by these rules, regardless of whether a jurisdiction has a higher or lower headline tax rate than Australia. This means that the primary taxing point will be the various locations where the services are performed as described above.

As Transfield is headquartered in Australia and its operations reach out globally, Transfield establishes which costs borne within Australia actually reflect support of its international operations. In accordance with tax law and OECD guidelines it charges its international affiliates for such costs, which is reflected as income in Australia. As an Australian based group, few if any costs are borne internationally that are charged back to Australia.

Similarly, as Transfield's intellectual property (in the form of trademarks, business processes and software technology that is used or is available for use by its international affiliates) is owned within Australia, any charges relating to the use of intellectual property constitute income paid to Australia under applicable OECD based Australian transfer pricing laws.

Transfield does not use marketing hubs, nor contrive to domicile its intellectual property outside Australia.

Loans between Australia and international affiliates are documented and interest charged on an arm's length and commercial basis. Financing structures are transparent and in common use .

5 Governance

Transfield is committed to corporate governance. It devotes significant time and resources to ensuring that the processes, policies and activities across its business reflect a high standard of governance. Furthermore, Transfield continuously monitors governance developments in Australia and internationally to ensure appropriate practices are in place to meet industry and market expectations. On 27 March 2014, the ASX Corporate Governance Council issued the 3rd edition of its Corporate Governance Principles and Recommendations (the Recommendations) which took effect on 1 July 2014. Transfield considers its governance practices are consistent with these Recommendations.

As part of the Corporate Governance framework, and in line with the ATO's guidelines in respect of tax risk management and governance, Transfield has a defined Tax Strategy Charter which operates to define, monitor and manage tax risk within the orga nisation. A cornerstone of the Tax Strategy Charter is to operate in accordance with the tax law in relation to all transactions, by paying the correct amounts of tax, meeting all tax obligations on a timely and accurate basis and cla iming all deductions or concessions to which Transfield is legally entitled to, domestically and globally. At a practical level a Tax Strategy Committee meets quarterly, and Tax Matters are reported to the Board quarterly.

In line with the Transfield's documented Tax Strategy Charter, Transfield is committed to open and co-operative relationships with the revenue authorit ies within all the jurisdictions in which it operates. Within Australia, enquiries and review requests are dealt with promptly and transparently.

Transfield has been the subject of two ATO reviews (concluding in 2011 and 2015) in connection with company income tax. Neither review resulted in any tax adjustment being required.

Terms of Reference: Response

General

(a ) The adequacy of Australia's current laws

Transfield considers that Australia's current tax laws are adequate and in fact are in line with those of all sophisticated international economies. The laws are robust and have carriage across the breadth of cross border transactions. That, coupled with Australia's anti-avoidance tax provisions, would suggest that significant corporate resources are devoted to compliance and reporting requirements.

(b) Any need for greater transparency to deter tax avoidance and provide assurance that all companies are complying fully with Australia's tax laws

Transfield is supportive of transparency and will always comply with such requirements. However, Transfield believes that any transparency reporting needs to be given appropriate context as to what is being reported and why, and the inter relationship between matters or numbers reported.

If this is not done, the transparency reporting can confuse and complicate matters rather than provide assurance.

6 (c) The opportunities to collaborate internationally to address the problem

As Transfield has compliance and reporting obligations across a number of jurisdictions, we consider international collaboration, and more importantly consistency as to approach and what is required, to be critical. This would reduce the cost to corporates of complying with the differing requirements of a number of jurisdictions.

While always ensuring that proper tax is paid to the correct jurisdiction, tax law and reporting requirements should not hamper growth and investment by complying businesses.

(d) The performance and capability of the Australian Taxation Office (ATO} to investigate and launch litigation, in the wake of drastic budget cuts to staffing numbers

Transfield has no comment to make beyond noting its relationship with the ATO has been co­ operative and professional on both sides.

(e) The role and performance of ASIC in working with corporations and supporting the ATO to protect public revenue

Transfield has no comment to make.

(f) Any relevant recommendations or issues arising from the Government's White Paper process on the "Reform of Australia's Tax System"

Transfield has no recommendations to make.

(g) Any other related matters

Transfield has no comment to make.

Specific

Transfield's tax arrangements, including its effective tax rate and its tax minimisation strategies

We reiterate that Transfield derives its income from services performed both in Australia and overseas. Accordingly Transfie ld must, and does, comply with applicable taxation laws in all the jurisdictions in which it operates. The company's current effective tax rate is 27.5%. While the company's reported effective tax rate has varied significantly in recent years, this has been a function of the company making losses in a challenged market. As also previously mentioned, corporate income tax paid in cash in Australia as a percentage of total Group profits made since 2004 stands at 36%.

Transfield ensures it complies with the tax laws of all relevant jurisdictions in which it operates, and closely monitors all its operations to ensure it meets its reporting obligations to those various taxing authorities.

Transfield is an Australian based global provider of services to a variety of industry sectors. Over the period of the last 10 years, Transfield has seen significant growth via acquisition and entry into foreign jurisdictions. Similarly Transfield has during that period also been affected by economic forces that have significant impact on business. These factors which are essentially part of the economic cycle

7 and have a significant impact on the ability to make profits, include amongst other things (i) reduction in client spending and (ii) the impact of industry restructuring. They indirectly impact the effective tax rate as it is determined for accounting purposes. Examples of more general matters which have a direct influence on the effective tax rate of the company in Australia are:

;;:.. Incorporated JVs are taxed at the entity level, not at the Transfield Group level. ;;;:,. Dividends from foreign subsidiaries are exempt from tax in Australia ;;:.. Deductions for various acquisition costs that are not treated as an accounting expense ;;;:,. Research and Development concessions };.- Impairments and write-downs that are not deductible for tax purposes ~ The use of capital losses against various capital gains ~ The use of carry forward tax losses from prior periods

Transfield has strong corporate and tax governance in place to identify and report tax risk to its Board. Transfield's appetite fo r tax risk is low, and it does not participate in the use of tax havens to artificially contrive a result. We reiterate that Transfield manages its tax responsibilities transparently within clear commercial and legal boundaries. The company engages with its legal and taxation advisers in all jurisdictions to ensure compliance. The company maintains open, co-operative and transparent relationships with all revenue authorities.

For completeness we note that Transfield has paid the following Australian taxes since 2004:

• $143M in corporate income taxes • $31M in Fringe Benefit Tax • $345M in payroll taxes • $1M in CNG excise tax.

In addition the company has remitted approximately $942M of net GST to the Australian Taxation Office over that period as a direct result of Group activities.

As a major Australian employer, indeed one of the largest employers, Transfield has provided jobs to Australian employees that have resulted in approximately $1.9 billion of PAYG taxes remitted to the ATO, and $0.Sbillion of contributions remitted to Australian superannuation funds. While the company is only remitting these funds on behalf of individual employees to discharge their own taxation responsibilities, Transfield emphasises that these significant contributions to public funding are also a direct result ofTransfield's operations.

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