The Australian Taxation Office is locked in a high-stakes dispute with Chinese lithium giant Tianqi that could prevent the company and its joint venture partner IGO from accessing the Federal Government's $17.6 billion critical minerals production tax credit scheme.
Tax Battle Over Joint Venture Structure
The conflict stems from Tianqi's 2020 joint venture agreement with Perth-based IGO that created Tianqi Lithium Energy Australia (TLEA), with Tianqi holding 51% and IGO 49% of the venture. TLEA owns the struggling Kwinana lithium hydroxide refinery outright and holds a 51% stake in the highly profitable Greenbushes lithium mine in Western Australia's South West region.
According to documents lodged by one of Tianqi's Australian subsidiaries, the ATO is examining whether the corporate restructure enabled a tax-free exit from Australian investments. The tax office could apply Part IVA of the Income Tax Assessment Act 1936 to the transaction, which might result in substantial tax liabilities and penalties for the Chinese company.
Conflicting Positions on Tax Dispute
While IGO has reassured investors in its annual report that it doesn't expect direct financial impact from the dispute, and TLEA remains confident no adjustments will be needed to its tax returns, Tianqi is preparing for potential negative outcomes.
"The outcome and timing are uncertain at this stage," Tianqi stated in its filings, acknowledging that if the ATO pursues its current focus, it could have "a significant impact on the financial results."
Critical Minerals Credits at Risk
The protracted tax battle comes at a crucial time, with TLEA's Kwinana refinery positioned to benefit from the government's $17.6 billion production tax credit package for downstream critical minerals processors starting July 1, 2027.
Shadow Resources Minister Susan McDonald has called for resolution of the tax dispute before any credits are paid. "Given the very long lead time for the introduction of the production tax credit, it is entirely reasonable that this company should have resolved the dispute with the ATO before they apply to benefit from the scheme," she told The West Australian.
A spokesman for Treasurer Jim Chalmers declined to comment specifically on the Tianqi matter but confirmed the Treasurer is developing specific rules for accessing the production credits. Recipients will need to demonstrate transparency and compliance in their tax affairs management to qualify for the substantial incentives.
Joint Venture Tensions Compound Problems
Compounding Tianqi's tax challenges are escalating tensions with its joint venture partner. IGO boss Ivan Vella recently declared the Kwinana refinery a financial failure, even if it reaches full production capacity and lithium prices improve.
IGO has written down the value of its 49% stake to zero and wants the $1.2 billion processing plant mothballed. In contrast, Tianqi wants to keep the refinery operational because it supports downstream operations in its supply chain.
The combination of internal partnership conflicts and external tax pressures creates significant uncertainty for one of Australia's most prominent critical minerals ventures at a time when the government is pushing to expand downstream processing capacity.
