The Australian Prudential Regulation Authority (APRA) said that a report in yesterdays media highlighting an unresolved tax issue in United Medical Protections (UMP) 30 June 2002 accounts was a systemic issue for discretionary mutual funds.

APRA General Manager, Dr Darryl Roberts, said the issue would not prevent the UMP Group emerging from provisional liquidation later this year.

While UMP may or may not have a potential tax liability of up to $43 million for which it has not provisioned as has been disclosed in its public accounts, this is a manageable risk that was identified by the Provisional Liquidator as long ago as May 2002 and has been well known to APRA as regulator since then.

The issue is a complex technical matter that arises from UMPs mutual status and the fact that the parent mutual and its subsidiaries have been treated as a group for taxation purposes.

On current financial projections, UMP will still be able to manage a tax liability in the event of an Australia Tax Office (ATO) ruling to that effect, Dr Roberts said. 

APRA remains confident that the UMP group is on track to make a full recovery, he said.