Funding Symond's Point Piper mansion shaped Aussie's restructure

John Kavanagh
When John Symond started discussions with advisers about a restructure of his business, Aussie Home Loans, in 2002, he was motivated by a desire to unlock equity in the business. He felt that changing from the existing trust structure to a corporation would make it easier to list or sell the company.

But his planning was dominated by one other big concern, according to a judgement handed down in a breach of contract case in the Supreme Court of New South Wales last week. He wanted to be able to continue borrowing money from the business without paying tax on the borrowings.
Aussie_profit_table_23July2013 copy

Aussie_profit_table_23July2013 copy


The money that was used to build Symond's home in Point Piper in Sydney, which cost A$57 million, came from borrowings from Aussie.

However, the structure that was put in place did not meet the second of his goals and Symond ended up paying a large tax penalty.

Aussie Home Loans was started in 1992 and ran at a loss until 1994. For the financial years 1995 to 1999, the business made a taxable profit of around $5 million a year.

The business lost money in the years from 2000 to 2002 and it also made a loss of $6.7 million in 2004/05.

After that it reported a series of strong results, starting with a net profit of $19.2 million in 2005/06 and rising to a net profit of $51.5 million in 2010/11, before falling to $33 million in 2011/12.

Symond purchased land at Point Piper in 1998, and by 2002 had approval to build a new home. He budgeted for the job to take three years and cost $50 million. The house was completed in November 2006 at a cost of $57 million.

Symond drew down a total of A$57 million in loans from Aussie during 2004, 2005 and 2006. The ultimate source of those funds was ANZ, Aussie's lender.

From 1998, ANZ was the only external lender providing finance to the business for its operating needs and to Symond personally. ANZ was aware of the borrowing arrangements between Aussie and Symond. He guaranteed the loans and ANZ held security over his assets, including the Point Piper land.

The loans from Aussie were on interest-free terms.

From 2002, Symond obtained legal advice from Gadens Lawyers. The partner principally responsible for providing the advice was Ross Seller, an expert in taxation law. The subject of the advice concerned the tax consequences of a revised ownership structure of the business.

At various times Symond had considered selling his stake in the business, by way of an initial public offering or sale to an investor. He conducted negotiations with a number of potential investors.

One issue that came up in discussions was Aussie's structure. The business had been set up in 1992 as a trust, with Aussie Home Loans Ltd operating as trustee for AHL Unit Trust. Symond owned all the units in AHL Unit Trust. Symond was concerned that the trust structure might be an obstacle for a buyer or investor.

In 2002, Symond was working simultaneously on a plan for an IPO and to change the business from a trust to a corporation.

One aspect of Seller's advice was directed to the means by which Symond could continue to borrow funds from the business.

A restructure was undertaken in 2003 and 2004. Included in this restructure was a mechanism that would allow Symond to withdraw funds from Aussie by redeeming preference shares issued by the new corporate vehicle.

When the Australian Taxation Office investigated Symond's affairs, it ruled that money paid to Symond through the redemption of preference shares was a taxable dividend. In 2008, he agreed to a large settlement.

Two months later, in October 2008, Symond sold one-third of his interest in Aussie to Commonwealth Bank.