Federal Treasurer Peter Costello says the stand-off between James Hardie and the Australian Taxation Office (ATO) is likely to be resolved soon.

The two parties resumed talks last week, hoping to reach a conclusion over the taxation of James Hardie’s $1.6 billion compensation fund for victims of its asbestos products.

Mr Costello says the ATO is unlikely to change its stance but new calculations show the expected bill for James Hardie could be much lower than the company first estimated.

He believes James Hardie would pay less than $100 million over the fund’s 40-year lifespan. The company had earlier feared tax charges of more than $700 million.

Mr Costello reiterated that every dollar spent on compensating victims would be tax deductible, as would all James Hardie contributions to the fund. But any interest earned by the fund would be subject to the usual taxation arrangements.

The only way to avoid that would be to turn the fund into an authorised charitable institution. “If the money is not in a charity it can no more accumulate money tax free than you can or I can, or any other company can,” the Treasurer said in an interview with Sky News.