Tax Law Change = Telecom Tax Increase
Tax law changes increase Telecom’s tax Government tax legislation changes are expected to increase Telecom’s tax expense by approximately $38m in FY10 and $20m to $30m in FY11. FY10 Changes The 2010 Budget, and subsequent Taxation (Budget Measures) Act 2010, contained two provisions which will have a material effect on tax expense:
Removal of the ability to claim tax depreciation on Telecom’s buildings with effect from Telecom’s FY12 year; and
A decrease in income tax rate from 30% to 28% with effect from Telecom’s FY12 year. The net accounting effect of these items in FY10 is an increase in Telecom’s tax expense of approximately $38m. As a result of these changes, FY10 Guidance for taxation and Net Earnings is now:
Adjusted effective tax rate of around 30% (previously around 25%)
Adjusted Group Net Earnings NZ$362m to $402m, expected to be near the lower end of the range (previously $400m to $440m and expected to be near the lower end of the range). FY11 Changes We now expect the Taxation (Annual Rates, Trans-Tasman Savings Portability, Kiwisaver and Remedial Matters) Bill, which is currently before parliament, to be enacted in FY11. This will probably result in an additional one off $20-$30 million tax payment and tax charge in FY11, resulting in an effective tax rate of around 37%. “Naturally Telecom’s shareholders will not welcome the impact of these tax law changes” said Telecom CFO, Russ Houlden.
Contact: For media queries, please contact: Ian Bonnar Corporate Communications Manager +64 (0) 272 157 564 For investor relations queries, please contact: Mark Laing GM Investor Relations +64 (0) 272 275 89
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