Fonterra recently increased the 2019/20 season forecast to $7.30 per kgMS. This is a considerable increase from the final 2018/19 season payout of $6.35. The dividend forecast is still uncertain. From a tax and cashflow point of view, the timing of the advance and deferred payments is critical. The current payout profile is as follows:
*These are derived from the base advance rate plus the capacity adjustment and will vary slightly across farms.
As it currently stands, the 2019/20 payout is $0.67 higher than the 2018/19 season and $0.38 higher than the 2017/18 season including the dividend or $0.68 higher than the 2017/18 season excluding the dividend. As such, we expect that many farmers will be profitable in the 2018/19 season and even more so for the 2019/20 season.
Provisional tax is a topic we will cover with you at your annual accounts interview and on an as needed basis throughout the year. With the current IRD use of money interest rules, in many cases it is advisable to pay the default amounts for the first two instalments with a wash up at the third instalment if required. If we have completed your 2018/19 accounts you will already have a plan for provisional tax and in the event we are still to do your 2018/19 accounts, any provisional tax will be based on the 2017/18 year where the tax year payout was lower than the current forecast so the defaults are likely to be relatively close. If you are at all concerned about upcoming tax payments, please touch base with us.