Wealth management group IOOF has incurred a $63 million deferred tax liability as a result of changes in the income tax regulations for consolidated groups.
The deferred tax liability will not result in cash outflow, but instead will be offset against the amortisation of the group's intangible assets.
The liability is related to the acquisition of Australian Wealth Management (AWM) and Skandia Australia, now named IOOF Global One (IGO), in 2009.
"We had the purchase of AWM and Skandia about three and a half years ago. We assigned an accounting value and a tax value for the intangible assets that were roughly similar," IOOF chief financial officer David Coulter told InvestorDaily.
"With the recent changes in regulations that tax value is now zero going forward, which means in effect that we have a $210 million accounting valuation but a zero tax valuation, which is gives us a prima facie capital gain.
"And if you have a capital gain, you've got an embedded capital gain tax liability and that is what that $63 million is; it is just 30 per cent of the accounting value of the intangible assets."
The liability will be excluded from IOOF's underlying profit after tax for the financial year 2011-12, because the rule only came into effect on 27 June this year.
IOOF said the deferred tax liability would not impact the group's dividend payout-ratio.#
At the same time, IOOF also confirmed that it will retain a $7 million cash refund from the Australian Taxation Officer relating to IOOF's amended 2010 income tax return.#
The refund was previously deemed uncertain, but will now be credited to profit as an income tax benefit in the 2012 financial year.
