Seeka packhouse

New Zealand-based kiwifruit handler Seeka has followed in the footsteps of fresh produce cooperative Satara in issuing a warning on the potential impact of government changes to corporate tax and tax deductibility of depreciation for buildings on its yearly net profit.

In its budget announcement, the government said that it would reduce the corporate tax rate from 30 per cent to 28 per cent, and that it was removing the tax deductibility of depreciation for buildings with a life of 50 years or more.

In a statement, Seeka chief executive Michael Franks said that the group had taken advice on both of these governmental alterations.

'As a result of that advice and based upon the requirements of International Financial Reporting Standards, Seeka advises that the impact of these changes at 31 March 2010 would be to make a one-off change to increase the group consolidated deferred tax liability, and reduce the reported net profit after tax by an estimated NZ$4.5m (US$3.1m, €2.5m),' he said. 'The equivalent amounts will be recorded in the accounts of Seeka in the yearended 31 March 2011.

'In making its announcements, the government indicated it will review thedefinition of 'building structure' for tax purposes and this is relevant to Seeka with a number of packhouses and coolstores in its asset mix,' Mr Franks added. 'Accordingly there may need to be further adjustment to Seeka's deferred tax liability once the outcome of that review has been announced.'

Mr Franks confirmed that the deferred tax adjustment would be a one-off, non-cash accounting entry that had no impact on the underlying profitability, cashflow or dividend policy of the group.