Across the Tasman Qantas's New Zealand subsidiary Jetconnect continues to note a contingent liability in its books for NZ$10.3 million over a dispute with the Inland Revenue Department (IRD). The IRD is seeking to deny interest deductions on 220,763,477 redeemable convertible loan notes, used to fund what transpired to be an ill-fated code share agreement with Air New Zealand for trans-Tasman services, negotiated in April 2006. The notes were converted into 44, 152,695 ordinary shares in Air NZ in February 2007 but after the agreement fell apart, Qantas sold the shares in June 2007 with NZ$118.02 million and $21.5 million recognised as profit on the sale. The IRD claims the hybrid securities were a vehicle for companies to arrange equity and debt to minimise tax.
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