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Title loophole stays for Fairfax takeover

By John Drinnan

Friday 16th May 2003

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Finance Minister Michael Cullen says there are no plans to retrospectively change the tax loophole that underpins Fairfax's proposed sale and leaseback of INL titles.

Mr Cullen has said Inland Revenue and the Treasury would take a "preliminary look" but declined to comment whether or how it might affect the tax benefits or operation of the proposed Fairfax structure.

The loophole is already being utilised by Tony O'Reilly's APN News over the Wilson & Horton titles, so the government's timing is unusual in the middle of the INL purchase.

It is understood APN has indemnity from O'Reilly's Independent News for changes affecting the structure. Both Fairfax and INL declined to comment at print time.

Fairfax chief executive Fred Hilmer and the head of New Zealand operations, Brian Evans, made a courtesy call to Dr Cullen two weeks ago so it would be unusual if it came as a surprise to them.

The Fairfax-owned Australian Financial Review has reported Fairfax could sell the mastheads for $400 million a year and lease them back at $100 million a year over five years. A full tax deduction would then be allowed on the $100 million.

An Australian media analyst said he was not surprised Dr Cullen was looking at a change. New Zealand was the only country where such arrangements were possible on newspaper mastheads.

The analyst, who asked not to be named, said Dr Cullen's comments had been noted across the Tasman, but he would be surprised if it had any material effect on the deal going through and Fairfax taking over as planned on July 1.

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