NRMANRMA revamp to win $15m tax gain

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    http://www.smh.com.au/articles/2002/06/09/1022982797513.html
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    NRMA revamp to win $15m tax gainBy Anthony HughesJune 10 2002
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    The National Roads and Motorists Association is believed to be budgeting on a tax windfall of as much as $15 million from a corporate restructure that would underpin a big improvement in future operating results.
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    Under the restructure the road service group would place a holding company in between the mutual parent and newly created operating entities to deliver a benefit of $15 million to the group in 2002-03, mainly from tax savings.
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    Still, the main reason cited for the change is management concern that there may be confusion between its advocacy and commercial operations provided to two million members.
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    While the chief entity will maintain the advocacy functions, the various commercial operations, including the road service, will be housed in operating subsidiaries.
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    It is unclear whether the changes will diminish the ability of the current board to oversee the operations of NRMA, as external directors could be appointed to the subsidiary boards.
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    NRMA is also planning to reduce its dependence on Insurance Australia Group by developing its own information technology system.
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    While the membership fee increases outlined last month will deliver $7 million in 2002-03, the extra revenue alone will not be enough to achieve this.
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    On May 30 chief executive Rob Carter said the budget for 2002-03 would bring a $22.3 million improvement in NRMA's position to a $14.8 million operating loss.
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    But the group has provided little detail on how it will do this, apart from charging the higher fees and putting in place some commercial initiatives.
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    It also detailed large spending initiatives, including a $10 million computer-aided dispatch system, but claimed that operating expenses from the "core road service business" would be held to just 1 per cent in 2002-03.
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    However NRMA has been concerned about rising expenses in other areas, particularly the cost of litigation relating mainly to its fractured board.
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    The board itself is understood to cost close to $4 million a year, including support staff and payments to directors.
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    It is also understood that NRMA will spend about $4 million in marketing costs to promote the fee changes, which come into effect in November.
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    Some directors have criticised the fee increases as back-tracking on promises made at the demutualisation of NRMA Insurance that road service fees would not rise except in line with inflation.
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    The NRMA budget also indicates that the mutual is increasingly distancing itself from the demutualised insurance company, Insurance Australia Group.
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    Mr Carter said last week that there were synergies between the two but it was "not necessary to share services".
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