Lion Nathan has received a sizeable tax demand, following an audit at one of its subsidiaries.

The trans-Tasman beer and wine group informed the Australian Stock Exchange earlier this week that the Australian Tax Office recently concluded an audit of its Lion Nathan Finance (Australia) Pty Ltd., in relation to the deductability of bad debts incurred funding Australian subsidiaries of the group.

Lion has subsequently been stung by a demand for A$19.7m in primary tax, plus an interest charge of A$11.3m. The total sum - which is A$27.6m (US$21.6m) net - is payable next month.

"The net cost of A$27.6m was fully provided for in prior financial years," Lion told the ASX, "and will have no impact on the company's current operating profit guidance for 2007."

Indeed, the company concluded that it will be able to release a "provision surplus" of A$9.5m this year.