Page 17 - BHP Economic Contribution Report 2020

Our approach

Our payments

Guernsey insurance company The BHP companies that provide this intra-group financing Our contribution
BHP has an internal self-insurance company incorporated in are tax resident in the United Kingdom, the United States
Guernsey (Stein Insurance Company Limited), which provides or Australia. Consequently, income received by the BHP
insurance to our global portfolio of operated assets and our financing companies, is subject to tax in the United Kingdom,
Sales and Marketing business. The risks insured are primarily the United States or Australia at normal corporate tax rates.
property related. We choose to self-insure these risks because Our approach to the pricing of these intra-group financing Additional information
it makes economic sense to do so. The insurance company arrangements is to ensure consistency with the arm’s length
is located in Guernsey because of the expertise available, lower principle as set out in the OECD Guidelines.
capital requirements and strong regulatory rules compared with We are transparent with our key tax authorities on our funding
other jurisdictions. Our Assets and Sales and Marketing business arrangements. For example, we have engaged with the ATO
pay annual premiums to the insurance company and receive as part of the Key Taxpayer Engagement (KTE) and Justified
insurance monies for insured losses suffered. Premiums are Trust approaches. We have no disputes with any tax authorities
priced in accordance with the arm’s length principle as set out in relation to the Group’s financing arrangements.
in the OECD Guidelines.
The profits of Stein vary significantly year-on-year depending Intra-group administration and technology
on insurance events that occur. For example, in FY2020, Stein BHP is a globally integrated group, with people frequently
made a profit of US$166 million whereas in FY2019, it made a working together across teams and geographies. For example,
loss of US$96 million. The loss in FY2019 was due to the we have globalised functions such as External Affairs, Finance,
occurrence of several insured events, including the impact of a Human Resources and Technology that provide support to our
leak in an acid processing plant at Olympic Dam, a fire in the assets and our Sales and Marketing business. We also have
smelter building at Nickel West in Kalgoorlie and the derailment regional functions that provide localised support to our assets
of a train in our iron ore operations in Western Australia, on exploration, health, safety and environment, projects,
whereas the profit in FY2020 reflects the occurrence of one engineering and integrated operations.
insured event during the period. The insurance proceeds Typically, a fee is charged for services that are provided across
payable by Stein to our Australian assets for these insured different entities and/or jurisdictions within the BHP Group.
events will be reflected in the relevant Australian income tax For example, when our Group functions in Australia provide
return(s) and subject to Australian tax at the normal corporate support to our assets, the assets are charged a service fee.
tax rate of 30 per cent.
Our key jurisdictions that charge these service fees are
Financing Australia, the United States, Chile, the United Kingdom,
BHP obtains funding from a number of external sources. Malaysia, the Philippines and Singapore. A significant portion
For example, designated Treasury companies obtain debt of the fees paid to and by Australian members of the Group
funding from the external market and our Sales and Marketing are with companies in the United States and United Kingdom.
business and our Assets receive proceeds from the sale of our These fees are the subject of agreements between the
products to customers. These funds may be deployed in relevant tax authorities i.e. between Australia and each
different ways, including capital investment in our operations, of the United States and the United Kingdom (refer to the
operating expenditure or returns (including dividends) to our Tax agreements section).
shareholders. We achieve efficient and effective cash flow
management and concentrate our excess cash reserves
through loans and deposits between BHP entities. These
transactions usually happen in the same jurisdiction, but can
cross multiple jurisdictions.

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