Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Qantas ring-fences $10.3M for potential penalty in IRD case

Qantas ring-fences $10.3M to cover potential penalty in NZ tax dispute

By Paul McBeth

Jan. 8 (BusinessDesk) - Qantas Airways, Australia's dominant airline, has ring-fenced $10.3 million of tax losses to cover any penalties in its disputed tax case with the Inland Revenue Department over interest deductions claimed on convertible notes.

The airline's New Zealand subsidiary Jetconnect, which manages the group's trans-Tasman passenger schedule, elected to use "tax losses within the Qantas Group against the shortfall penalties assessment" imposed by the IRD, according to financial statements lodged with the Companies Office. New Zealand's tax department is seeking to deny interest deductions claimed on the notes which were used to fund Qantas's former interest in rival carrier Air New Zealand.

"In the event the optional convertible notes dispute is found in favour of the company, the losses utilised against the above mentioned shortfall penalties will be reinstated to the group," the company said.

The IRD contends the hybrid securities, which let companies juggle equity and debt to provide a tax advantage, were structured purely to minimise tax. The tax department has previously won a High Court ruling in favour of its assessment of the notes against Western Australia's Alesco Corp, and is waiting on a Court of Appeal decision after a hearing last year.

Qantas's decision to use the tax assets to cover the penalties comes in a year when the Australian airline posted its first annual trading loss since being privatised in 1995.

The New Zealand subsidiary reported a 6.2 percent fall in profit to $10.6 million in the 12 months ended June 30, on a 3.3 percent decline in revenue to $75.1 million, the financial statements show. The local unit paid an $88 million dividend to its Australian parent in the 2011 year, though no return was made in the latest period.

Sister New Zealand unit, Jetstar Airways, which employs and hires cabin and technical crew for budget brand Jetstar Airways Pty Ltd, made a profit of $1.9 million in the June year, from $1.4 million a year earlier, according to separate financial statements. Operating income, which is derived from the wider Jetstar unit, climbed 31 percent to $21.3 million. Spending on manpower and staff increased to $18.7 million from $14.4 million.

Jetstar was the stand-out performer for Qantas in 2012, delivering record underlying earnings of A$203 million on sales of A$3.08 billion.

Shares in Qantas gained 1.6 percent to A$1.575 on the ASX yesterday, and have rallied 41 percent in the past six months. The stock is rated an average 'outperform' based on 13 analyst recommendations compiled by Reuters, with a median target price of A$1.50.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Banks: Westpac Keeps Core Government Transactions Contract

The local arm of Westpac Banking Corp has kept its contract with the New Zealand government to provide core transactions, but will have to share peripheral services with its rivals. More>>


Science Investment Plan: Universities Welcome Statement

Universities New Zealand has welcomed the National Statement of Science Investment released by the Government today... this is a critical document as it sets out the Government’s ten-year strategic direction that will guide future investment in New Zealand’s science system. More>>


Scouring: Cavalier Merger Would Extract 'Monopoly Rents' - Godfrey Hirst

A merger of Cavalier Wool Holdings and New Zealand Wool Services International's two wool scouring operations would create a monopoly, says carpet maker Godfrey Hirst. The Commerce Commission on Friday released its second draft determination on the merger, maintaining its view that the public benefits would outweigh the loss of competition. More>>


Scoop Review Of Books: She Means Business

As Foreman says in her conclusion, this is a business book. It opens with a brief biographical section followed by a collection of interesting tips for entrepreneurs... More>>


Hourly Wage Gap Grows: Gender Pay Gap Still Fixed At Fourteen Percent

“The totally unchanged pay gap is a slap in the face for women, families and the economy,” says Coalition spokesperson, Angela McLeod. Even worse, Māori and Pacific women face an outrageous pay gap of 28% and 33% when compared with the pay packets of Pākehā men. More>>


Housing: English On Housing Affordability And The Economy

"Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle. And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed. The resulting excess supply could produce a price crash..." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news