By Andrew Starke
The Foster’s Group will consider paying a special dividend to shareholders after resolving a long-running dispute with the Australian Tax Office (ATO).
The brewer expects to receive $390 million in the settlement and is reviewing its dividend policy as a result.
In early May, Foster’s won an appeal against the ATO relating to disputed tax assessments in the financing of the Elders Finance Group during the 1980s and 1990s but details of the payments have only now been released.
The Ashwick tax litigation is related to tax deductions and losses associated with the funding of this group over that period.
To date Foster’s has received progress payments of $317 million from the Commissioner.
The total cash refund and interest now anticipated to be received from the tax office in relation to Ashwick is approximately $390 million.
Foster's has also considered the implications of the decision in the Ashwick tax litigation on its carried forward tax losses and tax payable in 2012 and future years.
“The total cash to be received comprises the refund of amounts previously paid to the Commissioner and interest on that amount of approximately $136 million, substantially all of which is expected to be received before the end of August 2011,” said the company in a statement.
”To date Foster's has received progress payments of $317 million from the Commissioner.”
The tax refund received will be applied against the receivable of $256.7 million carried on Foster's balance sheet.
Ashwick tax losses are therefore expected to be utilised to reduce tax payable in the 2012 financial year and subsequent years until the losses are fully utilised.
”Foster's expects to book a deferred tax asset of $447.5 million in relation to the carried forward Ashwick tax losses as a material item in its financial statements for the year ended 30 June 2011,” said the statement.
“The combination of reduced income tax payments in future years, in addition to the cash received and receivable from the Commissioner in relation to Ashwick, will result in a total cash benefit to Foster's of in excess of $835 million.”
The Foster's Board is currently reviewing its dividend policy and capital management options in light of the successful Ashwick outcome.
Foster's will provide a further update on this at the release of its 2011 full year result on August 23, 2011.
Shares in the brewer firmed slightly on the news and were trading at $5.10 at midday today, up from $5.07 on Monday (July 18).