Critical Case Study - Citylink
Critical Case Analysis
Case: "City Link Melbourne vs Commissioner of Taxation of the Commonwealth of Australia",
July 2006
Précis
Case Background
The City Link Melbourne Company formerly known as the Transurburban City Link Limited', was a roads and infrastructure development corporation. It was contracted by the Victorian government, through a competitive bid, to develop a system of roads to connect Melbourne's freeway system in 1995. Specific contractual documents of particular relevance to this project' were the Concession Deeds', which outlined their rights to design, construct, commission and operate a tollway (para 100), along with other contractual stipulations. The deeds outlined that a Concessionary' payment was agreed upon, payable in arrears of at least $95.6million from 1996-2034, $45.2m for the subsequent nine years, and $1million for the remainder of the contractual period. At the end of this period, full ownership of the toll would be given to the government. This concessionary payment was consideration for government approval to develop infrastructure, utilise the land necessary to develop the tollway, and to operate the profit-making entity; raising issues concerning the capital or revenue nature of these payments.
In consideration for this liability, the company issued a series of concession notes', long-term bills which entitled payment to the government under specific stipulations. These included City Link meeting specific financial objectives such as achieving equity returns of over 10%, and no payment necessary until the company achieves revenue objectives (para 109). These financial stipulations in effect entitled the company not to pay the government any of the accrued liabilities till 2034, also leading to the valuation of the concession notes at nil. City-Link thus incorporated these accrued concessionary costs as being incurred for the periods...
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