Fonterra Payout – September 2020

With the first provisional tax installment coming up for May balance date clients on 28th October 2020, it is timely to look at how the payout is compared between tax years.

Fonterra recently announced the final payout for the 2019/20 season at $7.14. They also announced a final dividend for 2019/20 of $0.05 and a forecast dividend for 2020/21 of $0.20-$0.35.

The current payout for the 2020/21 season of $6.40 per kgMS is a reduction on the 2019/20 payout of $7.14 and comparable to the final 2018/19 payout of $6.35. From a tax and cashflow point of view, allowing for the final dividend of $0.05 for 2019/20 and an interim dividend of $0.10 for the 2021/21 year, the payout profile is as follows:

*These are derived from the base advance rate plus the capacity adjustment and will vary slightly across farms.

With the payout having lifted over the last few years, many clients are now paying provisional tax. If we have not yet completed your 2020 accounts, the default provisional tax payments due on 28th October 2020 will be based on the 2018/19 year. As the table above shows, the payout profile between these years is similar so in many cases, the default tax will be appropriate. When completing your 2020 Accounts, we will discuss provisional tax for 2021 taking into account the payout is currently $0.46 down (or $0.61 if the dividends are excluded) on the 2019/20 year but we are still early on in the season and the payout could still move significantly over the coming months.

As noted in earlier newsletters, IRD interest generally only applies from the final instalment date (being 28th June 2021) so we generally will encourage you to pay based on the default installments at P1 and P2 to limit your exposure to UOMI.

Please do not hesitate to contact your client manager if you have any queries regarding your provisional tax installments.