The ATO has secured an agreement for Rio Tinto to pay a nearly $1 billion tax avoidance settlement. 

The multinational mining giant has settled its decade-long tax dispute with the Australian Taxation Office (ATO), in one of the largest settlements in Australian history. 

Rio Tinto will pay about $1 billion over and above its original tax filings - an additional $613 million for unpaid tax between 2010 and 2021, in addition to $378 million it has paid back on amended assessments issued by the ATO, including interest and penalties. 

THe deal comes after the ATO's Tax Avoidance Taskforce investigated Rio’s practice of using Singapore as a ‘marketing hub’ for its products, including aluminium and iron ore.

Essentially, the company would sell resources mined in Australia to its own Singaporean arm, and then on to the rest of the world, allowing it to avoid Australian taxes on profits. The practice is known as ‘transfer pricing’.

Many question the use of overseas hubs by multinational companies, especially when they are used to mark up the price of commodities when sold between Australia and Singapore within the same company.

Rio Tinto has reached agreement with the Inland Revenue Authority of Singapore (IRAS) in relation to transfer pricing for the same periods.

Settling with both tax authorities ensures Rio Tinto is not subject to double taxation.

ATO Deputy Commissioner Rebecca Saint said the settlement locks in future tax flows to Australia going forward.

“This means that additional profits from the sale of Rio's Australian-owned commodities will be taxed in Australia in the years to come,” Ms Saint said on Wednesday.

Rio Tinto’s Chief Financial Officer Peter Cunningham says the company is glad to have gained certainty over future tax outcomes.

An investigation by the same ATO taskforce led to settlement of a similar matter with BHP in 2018. The task force has helped the ATO raise over $26.3 billion in tax liabilities and collect $14.9 billion in cash since its formation. Big multinationals including Google, BHP, Apple, ResMed and Microsoft have recently settled tax bills with the ATO too.