Canterbury rugby posts $428,000 loss

The Canterbury Rugby Football Union has reported a $428,000 loss after settling a half-million-dollar taxation dispute and has been unable to pay its annual $300,000 discretionary grants to clubs.:eek:

Chief executive Hamish Riach said the deficit was reported to delegates at the annual meeting last week.

He said the tax bill meant the difference between "a significant loss" and a "modest profit" for the 2007 financial year.

However, it had been "a relief" to settle during the year "a long-standing taxation dispute" with the Inland Revenue Department.

The CRFU was forced to pay about $580,000 to settle the dispute, which Riach said was "related to the tax treatment of the manner in which (Canterbury's professional) players were paid" between 1998 and 2001.

The IRD began a tax audit of the union's books in October 2004, looking at restraint-of-trade payments to players over a five-year period from 1998. The payments were not taxed at the time.

Between 1998 and 2001, the rugby union paid compensation to its players for restraint of trade because the union insisted they give up opportunities to play for other teams and devote themselves exclusively to Canterbury.

The payments also covered commercial restraint -- the promotional opportunities they gave up because they were working for Canterbury.

The union's payments system was changed in 2001, when the players became direct employees of the union, rather than contractors.

Riach said yesterday the taxation dispute was a "one-off situation" and there would be no ongoing liability.

He said the CRFU had managed to fund "all our commitments to both the amateur and professional games" during the year, in terms of programmed and budgeted support.

"That's in the region of about $2.5 million (to community rugby). What it didn't enable us to do is pay them a discretionary grant at the end of the year, out of surplus earnings."

Riach said Canterbury's 47 affiliated clubs had received grants totalling $300,000, "on top of budgeted support", in the past few years.

"A big club, like Sydenham, gets more dollars than a little club, like Waiau, for example. It's not a flat payment, per club."

"There's no doubt there is a negative impact on clubs, for sure," Riach said. "That's disappointing. The Canterbury board felt that very keenly as they contemplated the final result for the year, but the money wasn't earned and the surplus wasn't there, so it's needs must."

He said the club delegates "would have preferred it to be different" but they had "understood the money wasn't there and why".

Riach said the CRFU was in a "financially sound" position after several good years.

"But we don't want to lose $400,000 year on year on year, and are doing everything we can to maximise our situation," he said.

He agreed the union faced "a couple of challenging years" due to playing in "half a stadium" during the AMI Stadium reconstruction.

Gate revenue dropped last year during the Air New Zealand Cup campaign, which coincided with the Rugby World Cup in France. Riach said "a bubble burst around rugby" after the All Blacks' early exit.

"We saw that with our semi-final crowd against Wellington, being around 8000".