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ING Property says $96.8m depreciation hit won't hurt pay-out

Monday 16th August 2010

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ING Property Trust, the listed property investor managed by ANZ-owned fund manager ING, says the $96.8 million hit to its bottom line from the government’s changes to depreciation tax rules won’t affect distributions to unit-holders.

The property investor will recognise a one-off non-cash adjustment to its deferred tax liability, which will be partially offset by the cut in corporate tax, after the government removed companies’ ability to claim depreciation buildings in the May budget. The trust said the adjustment won’t affect its bank loan covenants, nor will the liability created be paid to the Inland Revenue Department.  

“Concerns around the deferred tax liabilities adjustment have been addressed to the international accounting standards authorities and we hope to get further clarity and an amendment of the IFRS, so as to remove the requirement to have a deferred tax liability adjustment made that will not crystallise into a tax payment,” said Peter Mence, who manages the trust.

Commercial property investors aired their concern about the government’s changes to depreciation before the budget, saying residential investors, for whom the proposals were meant to be targeted, only make up about a quarter of depreciation claims.

Listed property trusts have had a turgid year as the recession sapped demand for office space and saw tenants exit the major cities’ central business districts.

AMP New Zealand Office Trust, which reported a 2.5% increase in distributable earnings earlier this month, expects the tax changes will reduce its net cash distributions by between 7% and 9%, and will face further downside if claims on building fit-outs are removed.

Shares in ING rose 1 cent to 69 cents in trading on Friday, and have tumbled 15% this year.

The trust welcomed the IRD’s review on the tax treatment of building fit-outs, which includes a proposal to clarify claims for spending on non-residential fit-outs.

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