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Aurizon Holdings Limited and the Meaning of “Share Capital”

TBA member Mark Gioskos discusses the Federal Court's recent decision in Aurizon Holdings Limited, which considered the meaning of “share capital”. A PDF copy of this article is available to download below.

View Mark's profile here.



The Federal Court has granted declaratory relief in favour of an applicant taxpayer under section 39B of the Judiciary Act 1903 (Cth) and section 21 of the Federal Court of Australia Act 1976 (Cth), giving effect to the recent decision in Aurizon Holdings Limited v Commissioner of Taxation [2022] FCA 368. A contribution was made to a company by its sole shareholder, for nil consideration and without further shares being issued. The Court found that the contribution was an amount of “share capital”, and the company’s account to which the contribution was credited as a “share capital account” for the purpose of section 975-300(1) of the Income Tax Assessment Act 1997 (Cth).

The Court also decided not to decline declaratory relief on discretionary grounds, over the objections of the Commissioner who had submitted that a private ruling was an alternative and more appropriate remedy.


QR Limited (later, Aurizon Operations Limited) was the head of the “QR Group” or “Queensland Rail” corporate group, and wholly owned by the State of Queensland.[1] Debt facilities (QTC Facilities) were made available to Operations by another state-owned corporation, Queensland Treasury Corporation (QTC) [10].

A series of steps were taken to affect the State’s objective of disposing of 60% to 75% of its interest in Operations’ coal and freight network, via an IPO [14], [17]. A number of the transaction steps were done pursuant to directions issued under the Infrastructure Investment (Asset Restructuring and Disposal) Act 2009 [23], [32], [37], [51]. Relevantly, in a direction made on 16 November 2010, the relevant Minister “designated” the transfer of the Receivable to be a contribution by the State and to be adjusted against the contributed equity of Aurizon [41].

  1. Aurizon Holdings Limited (previously, QR National Limited) was registered on 14 September 2010. It issued 2 ordinary shares at $1 each, and was wholly owned by the State. It credited the subscription price to a share capital account, named “Authorised Capital” [22].

  2. All issued shares in Operations were transferred from the State to Aurizon in consideration for which Aurizon issued 98 fully paid ordinary shares to the State [23], [26].

  3. The 100 shares issued in Aurizon were “split” or converted into 2,440,000,000 ordinary shares [32], [34].

  4. Operations’ aggregate indebtedness under the QTC Facilities was fixed at $4,388,252,244 (QR Debt) [38].

  5. Operations’ debt to QTC was transferred to the State, so that the State became indebted to QTC rather than Operations. Operations instead began to owe the State an amount equal to the QR Debt (creating the Receivable in favour of the State) [39].

  6. The State’s right, title and interest in the Receivable was then transferred to Aurizon (the State Contribution) [40]. Aurizon credited the amount of the Receivable to a separate “Capital Distribution” account [49].

  7. The Receivable was discharged by Aurizon subscribing for 5.2 billion additional shares in Operations and the Receivable then owing being set off against the subscription amount [50].

The IPO was then completed, and Aurizon’s shares were listed on the ASX [52].


The Court found that the State Contribution was intended to be, and is properly characterised as, share capital [100]. The term “share capital” may refer to capital contributed to a company in exchange for shares, this is not an exhaustive definition [7].

The Court inferred that the word “designate” in the November direction was used by reason of AASB Interpretation 1038, which described a transfer as a contribution by owners where, relevantly, its equity nature was evidenced by being “designated” by the transferor as forming part of the transferee’s contributed equity [45], [99].

The Court also had regard to the following:

  • That as originally planned, the State Contribution would be made in exchange for shares, and that the transaction steps were altered simply to ensure that the correct number of shares were issued at the time of issuing an “Offer Document” [101] (1).

  • That the Offer Document contemplated, in a consolidated balance sheet, an increase to “contributed equity” by $4.007b (the balance sheet also contemplated a $4.226b reduction in liabilities, but the amount of the increase to “contributed equity” was adjusted by other proposed transactions) [36], [101] (2).

  • That if the State Contribution was not share capital, it would not be subject to the limitations in Part 2J.1 of the Corporations Act 2001 (Cth). The evidence did not suggest that this was intended [101] (3).

  • That no good or proper reason for intending the State Contribution to be something other than share capital was disclosed by the evidence or common-sense [101] (4).

The Court also found that there was nothing unusual about crediting the contribution to a separate account, nor about describing the contribution in Aurizon’s half-year financial report as a “capital contribution” rather than under a separate note entitled “movements in ordinary share capital”, given the “unusual” or “peculiar” circumstances [102]-[103]. It noted that an entity can have more than one share capital account,[2] and whether a separate account is a “share capital account” depends on the proper characterisation of the relevant contribution [102].

Finally, the Court did not decline to give declaratory relief on the basis of the Commissioner’s argument that a private ruling was an alternative and more appropriate remedy [104]-[105], [108]. It noted, having regard to the observations in Futuris,[3] that there was no assessment being challenged, as well as referring to the difficulty in identifying the relevant facts in the case, and that a private ruling would not be binding on the Commissioner in relation to third parties, such as Aurizon’s shareholders [106]-[108].

By Mark Gioskos, Barrister

Liability limited by a scheme approved under Professional Standards Legislation



[1] Shares in Operations and Aurizon were held by State Ministers in that capacity: [10], [22]-[23], [26].

[2] Also see section 975-300(2).

[3] Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32.

20220601 M Gioskos - Aurizon and Share Capital
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