The Australian Taxation Office (ATO) has given James Hardie a favorable ruling on its asbestos compensation fund, removing an obstacle that has affected the company for three years.

Earlier this year, the ATO refused to grant tax-exempt charity status to the special fund set up by James Hardie to compensate asbestos victims.

The latest ruling means the fund will not be taxed on its earnings. Under an earlier ruling, the $1.5 billion in payments will be tax deductible to the group, headquartered in the Netherlands.

Federal Treasurer Peter Costello has welcomed the announcement, saying it is good news for victims.

“I would say this is as bad corporate conduct as I have seen in Australia,” he said. “I hope that James Hardie from now on, whatever it does do, recognises that it can’t avoid its obligations under Australian law.”