ING Property Trust's deferred tax liability is to rise by about $96.8 million following tax changes relating to the removal of depreciation of building structures announced in the budget in May.An announced reduction in the corporate tax rate would result
ING Property Trust's deferred tax liability is to rise by about $96.8 million following tax changes relating to the removal of depreciation of building structures announced in the budget in May.
An announced reduction in the corporate tax rate would result in a "slight" reduction in that figure, ING Property Trust said today.
A corresponding increase in deferred tax expense would be shown in profit and loss figures.
It was a non-cash adjustment and would not form part of the calculation of the distributions available to unitholders under the terms of the trust deed.
Because the budget announcement was made following the trust's financial year end of March 31, the deferred tax adjustment would be recognised within the current year financial results.
"It is important to note that this deferred tax adjustment does not affect the trust's bank loan covenants, nor under current legislation, would the liability created be required to be paid to the IRD," ING Property Trust said.
ING Property Trust manager Peter Mence also noted that an Inland Revenue review of tax rules affecting building fit-outs had lifted a great deal of uncertainty from the property sector.
IRD's policy advice division and the Treasury released a tax policy issues paper last week dealing with the tax treatment of non-residential building fit-outs, following the changes to the tax rules on depreciation of assets announced in the budget.
Since recommendations made by the Tax Working Group at the start of 2010, followed by the government budget announcement in May, commercial developers, property managers and investors had been raising their concerns about the long term and negative consequences of removing depreciation for buildings and possibly fit-outs, Mr Mence said.
The recommendations now being made by the IRD and the Treasury were a further step toward providing some clarification about the effect of policy changes on the treatment of property for taxation purposes.
