James Hardie finally had a taxation win
last night with the ATO allowing it to claim a tax deduction for payments to
its new asbestos compensation fund. But that doesn’t resolve the compo problem as the fund would still pay tax
on what it receives from Hardie.

Obscured by the PR campaign and various
threats and denigrations is an underlying implication about the way James
Hardie has tried to structure the compo fund – it looks like the board doesn’t
have much faith in the company’s future.

The desire quickly to alienate large chunks
of James Hardie’s capital in a compo fund (instead of retaining it to grow the
business and just make compensation payments as required) seems a little
strange.

If the board has faith in the company’s future,
you might think it would believe James Hardie could outperform the pedestrian
“safe” earnings that the compo fund could expect.

Or could James Hardie suspect the final
cost of asbestos compensation will be greater than the amount it’s publicly
admitting? That would explain the urge to load up the compo fund and put the
width of the world between it and what eventually happens – which is what some
sceptical souls thought the company was doing in the first place.

In either case, it really doesn’t look
good. But James Hardie is used to that.

Australia’s other major asbestos miner, CSR, has been able to pay
compensation as it falls due. Maybe it’s a better company.