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APN reaches tax settlement with IRD

NZ NewswireNZ Newswire 23/06/2016

Australian publisher APN News & Media has reached a $36.3 million agreement with the Inland Revenue Department to settle its alleged tax avoidance case and other disputed tax issues.

The move comes ahead of its planned demerger of New Zealand-based NZME, which would have retained the New Zealand tax risk.

The cost of the settlement is being shared by APN and NZME on a "near equal" basis, the company said in a statement to the ASX.

The settlement amount will be funded by existing debt facilities of both APN and NZME and will be paid after the demerger.

"A protracted litigation and disputes process with the IRD would be costly and the ongoing uncertainty regarding the quantum of potential IRD claims and future liabilities could adversely impact APN and NZME management and shareholders," the company said.

The settlement allows APN and its subsidiaries to use $56 million of deferred tax assets that will be written off for accounting purposes after the demerger.

One of the tax wrangles concerned APN's High Court challenge to an IRD finding that it avoided paying tax through mandatory convertible notes in arrangements with its New Zealand subsidiary.

The case was one of a string involving the use of convertible notes to finance trans-Tasman acquisitions in the 2000s, most of which have been either lost or settled before they got to court.

Another dispute related to non-resident withholding tax and thin capitalisation rules following an audit of certain transactions to finance the acquisition of mastheads by a New Zealand branch of an APN Australian entity.

The demerger of NZME, which has newspaper, online, and commercial radio assets, has gained shareholder and regulatory approvals.

APN has also sold its Australian regional newspaper titles to News Corp for $A36.6 million ($NZ38.46 million), retaining a still-profitable Australian commercial radio network and outdoor advertising business.

NZME and rival publisher Fairfax Media are in talks over creating a merged media group from their New Zealand assets.

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