Tax consolidation – Adelaide Bank merger
Bendigo and Adelaide Bank (BEN) has announced the completion of further aspects of the tax consolidation process relating to the merger of Bendigo Bank and Adelaide Bank in 2007.
This will result in a contribution of approximately $34 million to BEN's statutory net profit as at December 31, 20101. It will also provide a boost of approximately 13 basis points to the group's Tier One capital ratio.
BEN continues to progress remaining merger-related tax issues with the Australian Taxation Office, and is hopeful that these may also be resolved in the bank's favour.
BEN is scheduled to release its interim results on February 14, 2011.
1 Under tax consolidation, BEN was required to reset the tax value of certain Adelaide Bank assets to the appropriate market value of those assets. The valuation and calculation process of Adelaide Bank's assets was triggered on 30 November 2007 when consolidation for accounting and tax purposes occurred. Given the complexity of this process and recent tax consolidation law changes, aspects of the tax consolidation outcomes have recently been finalised and agreed with the ATO.
The main impact is from Adelaide Bank interest rate derivative contracts which were assessed as having a market value, at the time of tax consolidation, higher than their original value. Pending the determination of the tax consolidation outcomes with the ATO, Bendigo and Adelaide Bank's accounting for the merger had factored in tax on this increase in value.