Tourism Holdings expects up to $3m annual recurring benefit from US tax changes

Tourism Holdings says annual profit will be about 10 percent higher from new tax legislation passed in the US.

The Republican-controlled US House of Representatives gave final approval on Wednesday to the biggest overhaul of the US tax code in 30 years that includes tax cuts and a new deduction on business income.

Auckland-based Tourism Holdings expects that will boost net profit by between $2.3 million and $3 million based on the current distribution of its earnings across US states, current state tax rates, and exchange rates. The rental motorhome operator anticipates its total effective tax rate in the US will fall to about 27 percent from 40 percent.

While the new income tax rate is effective from Jan. 1, it said it is not clear whether there is an impact on the Tourism Holdings tax expense in the current financial year ended June 30, 2018, apart from a one-off deferred tax balance adjustment. The first full year in which the lower federal tax rate will apply to Tourism Holdings is expected to be the 2019 financial year.

In August, the company reported a 24 percent gain in annual net profit to $30.2 million. At the time it projected 2018 profit to be between $36 million and $39 million.

Overall, the legislation is a complex document and "late changes made up until the time of passing mean that a full definitive financial analysis of the impact on thl cannot be accurately quantified at this stage," chair Rob Campbell said in a statement.

Regarding the 100 percent deductibility for capital asset purchases, it said it understands the new qualifying assets include RVs and they will be subject to 100 percent deductibility in the year of purchase for tax years until 2022.

"The full deductibility of fleet asset purchases will have the effect of deferring tax cashflows, but will not impact income tax expense," Campbell said.

The company's Deferred Tax Balance (a liability) will reflect the tax rate change at the date of enactment, and result in a one-off positive adjustment to FY18 net profit, although it can't accurately predict that until it figures out how rates will be applied between now and FY19, Tourism Holdings said.

The shares rose 0.5 percent at $5.55 and have gained 49 percent so far this year,

(BusinessDesk)