Fonterra Payout – March 2021

As you will be aware, Fonterra lifted their forecast payout by $0.40 on the 5th of March 2021. With $0.35 of this increase falling prior to 31st May, it is timely to look at how the payout is compared between tax years.

The current payout for the 2020/21 season of $7.60 per kgMS is an increase on the 2019/20 payout of $7.14. 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 2020/21 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.

The increased 2020/21 season payout will have an impact on provisional tax. As the table above shows, the 2020/21 season is currently forecast to be $0.54 higher than the 2019/20 year. Earlier in the season the forecast was expected to be similar so in some cases we will have discussed leaving your provisional tax on the IRD standard calculation. In other cases, we are likely to have reviewed your provisional tax based on a lower payout. Either way, we will be reviewing provisional tax in May/June and will be in touch if we think your payments may need to be increased.

We also remind you that Fixed Milk Price Contracts can have a significant impact on your taxable profit. For more information, please refer to this article from our December 2020 newsletter. If you have taken up fixed milk price contracts for the 2020/21 season and have not already advised us please make contact so we can consider the impact on provisional tax.

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