Keybridge, with the assistance of its tax adviser, has undertaken a review of the lodged ITRs for the years 2008 to 2010. The scope of the review was to determine whether the treatment of recognition of foreign exchange (FX) fluctuations was correctly recorded for both foreign currency denominated investments and borrowings.

In 2008, after writing-off all seven of its investments in US Securitisation (USSEC) investments to nil in its financial accounts, the Company claimed as a bad debt deduction five of its USSEC investments. Two investments were incorrectly excluded as deductions in the 2008 ITR.

Accordingly, Keybridge submitted an amended 2008 ITR in December 2012, and included the previously excluded USSEC bad debt deductions, as well as an adjustment to realised FX gains and losses on an asset by asset basis.

Keybridge received a payment from the ATO of $5.13 million on 26 March 2013, being the refund entitlement of $4.35 million plus $0.78 million interest.

Per the terms of the Company's Debt Facility, the full amount received is required to be used to reduce the level of debt outreduced to USD19.5 million.

As Keybridge has previously distributed all of its available franking credits, this refund has placed the Company in an interim franking deficit position of $4.35 million. Subject to any variation in the Company's franking position, this may result in a franking deficit tax liability of up to $4.35 million as at 30 June 2013.

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