Australian companies are set to benefit from landmark tax cuts in the US
AUSTRALIAN companies are set to benefit from landmark tax cuts in the US which will boost the US economy with increased household spending and higher company profits.
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AUSTRALIAN companies are set to benefit from landmark tax cuts in the US which will boost the US economy with increased household spending and higher company profits.
The US house of representatives has voted to approve a package of tax reform, including slashing the corporate tax rate from 35 per cent to 21 per cent.
BluesScope Steel was among the first Australian companies to address the issues as part of a revised profit forecast yesterday.
Shares in the company peaked at $15.73, their highest level since January 2010. They closed at $15.10, up 4.3 per cent in the session.
BlueScope increased its forecast profit for the six months to December 2017 from $420 million to $460 million, however, this was largely due to higher steel and coke prices.
BlueScope’s incoming managing director Mark Vassella, however, also forecast higher profits ahead because of the new US tax cuts.
“BlueScope expects its US earnings will benefit through a lower federal tax rate, with an anticipated 7 per cent decrease in 2018 and 11 per cent decrease thereafter,” Mr Vassella said.
Computershare issued a statement to the Australian Securities Exchange about the impact of the US tax restructuring which will be both positive and negative for the company.
“While the Act reduces the US corporate tax rate from 35 per cent to 21 per cent it also eliminates or reduces certain tax deductions currently available to Computershare,” the statement said.
“Our preliminary assessment of the implications for Computershare is that there will be a one-time statutory net profit after-tax benefit associated with the reduction.”
However, the company said it was still working through other parts of the restructure including the impact from anti-base erosion rules, anti-hybrid rules and new interest expensive limitation rules.
Shareholders of medical glove and condom maker Ansell were also advised to expect a boost to profit.
“Ansell presently anticipates that this will create an estimated benefit to profit after-tax by financial year 2019 of around $US3-5 million per annum.”
As well as direct benefits from the tax cuts, Australian companies are also expected to benefit from increased sales and a forecast boost to the US economy.
AMP economist Shane Oliver said the median US family net income was expected to increase by $2059 a year because of cuts to individual tax rates.
“So many households will get a positive surprise and this will likely further boost already strong consumer spending next year,” he said.
The combination of tax changes was forecast to boost the US gross domestic product by 1 per cent.
President Donald Trump is expected to sign the bill into law as early as this week.