In an important test case, Richard Branson’s Virgin has lost against the Australian Tax Office (ATO) over its attempt to avoid a tax payment on $A90m worth of dividends from the investment of two of his companies in Australian budget airline Virgin Blue.

The High Court of Australia ruled that Virgin Blue was liable to pay tax on the dividends before sending the money to the Swiss-based Virgin Group companies, Cricket SA and Virgin Holdings SA, in December 2005.

ATO argued the payment of a $A72.5m (₤31.1m) dividend to Cricket and $20.8m to Virgin Holdings via round-robin transactions to related companies were just a ruse to avoid paying Australian tax.

The case is an important test of the Tax Office's ability to challenge complex corporate financial transactions, Sydney paper Sydney Morning Herald reports. The tax has been kept in a bank, earning interest while the outcome of Virgin’s appeal was pending.

Further reading:

Aussie accountants call on Rudd for tax reform

Read the full story in Sydney Morning Herald