Effect of imputation credits on net dividend gain.

[forest]

Effect of imputation credits on net gain of dividend.


Imputation credits
Without With
Cents Cents
Earnings per share before tax 22 22
33% Tax 7 7 Net profit after tax 15 15
Imputation credits 0 7 Taxable dividend to share holder 15 22

Tax at 33% 5 7
Dividend received after tax 10 15

With imputation credits one gains 50% more dividend after tax. That’s is a big difference.
NZ companies will normally pass their imputation credits on if they are available.
Aus companies I understand can only pass imputation credits on if they made part of there
profits in NZ(and they may not necessarily do so). I seems to me that for a NZ investor in AUS shares
it makes quite a difference if the imputation credits are getting past on too the NZ share holder or not.

Does anybody know if there is a list of AUS companies who pass imputation credits to NZ investors?

[forest]

This shows my lack of computer skills. I had a nice little table in the above post but it was obvious not in the right format. Can anybody help me out??.

[forest]

Ok this attachment should make it easier to understand.

[macduffy]

This subject was discussed recently on a thread titled. " Tax: Australian companies with NZ imputation credits" - or something very close to that.
I don't think anyone threw up a list of such companies and I'd be surprised ( but interested!) if one existed. One problem is that NZ earnings and tax for such companies fluctuate, another is that it seems too hard, or maybe expensive, for many companies to order their affairs in order to pay NZ imputation tax credits.
NAB is one that has paid NZ imp credits occasionally in the past.

[hiawatha]

This subject was discussed recently on a thread titled. " Tax: Australian companies with NZ imputation credits" - or something very close to that.
I don't think anyone threw up a list of such companies and I'd be surprised ( but interested!) if one existed. One problem is that NZ earnings and tax for such companies fluctuate, another is that it seems too hard, or maybe expensive, for many companies to order their affairs in order to pay NZ imputation tax credits.
NAB is one that has paid NZ imp credits occasionally in the past.

Not any more possibly after the recent IRD case.
hiawatha

[Steve]

It is not necessarily in the best interest of shareholders for companies to pay dividends when they have no imputation credits, yet some do so as that is what is 'expected' of them...

[macduffy]

It is not necessarily in the best interest of shareholders for companies to pay dividends when they have no imputation credits, yet some do so as that is what is 'expected' of them...

True, but we're talking about Australian companies here who typically have a preponderance of Australian shareholders, Aust tax paid and Aust franking credits. The fact that they have no, or insufficient NZ imputation credits for their NZ shareholders is unlikely to be a factor in deciding whether or not to pay a dividend.

[macduffy]

Not any more possibly after the recent IRD case.
hiawatha

Hhmm.

But on the other hand, NAB might be only too happy to have their NZ shareholders claw back something from the nasty taxman.

;)

[forest]

Thanks macduffy and others, found the tread but did not gain much from it. I am surprised that so many NZ investors accept to loose out on such a big part of there dividend. There is obviously no easy way around this. I would like to encourge anybody who find out about an AUS company giving NZ investers there imputation credits or perhaps an complimentary dividend for foreigners to share this info. This is for the benifit of us all.

First possible candidate seem to be NAB (could be imp credits for a while)

[macduffy]

forest, it might repay a bit of research into what Australian companies might be in a position to pay significant NZ tax to have NZ imputation credits to distribute. Bear in mind that the tax credits have to be spread amongst all shareholders - I think I'm right on that but happy to be corrected if not. (eg dividends paid with Aust franking credits to NZ taxpayers whether we can use them or not. I assume the reverse applies.)
Ideally, we are looking for Aust companies with significant NZ business as a proportion of their total. Apart from the banks it's hard to think of many. AWE and PPP might qualify due to their Tui oil revenues. Maybe AMP, Lion Nathan? Woolworths might one day once they tune up their NZ operation.

[digger]

forest, it might repay a bit of research into what Australian companies might be in a position to pay significant NZ tax to have NZ imputation credits to distribute. Bear in mind that the tax credits have to be spread amongst all shareholders - I think I'm right on that but happy to be corrected if not. (eg dividends paid with Aust franking credits to NZ taxpayers whether we can use them or not. I assume the reverse applies.)
Ideally, we are looking for Aust companies with significant NZ business as a proportion of their total. Apart from the banks it's hard to think of many. AWE and PPP might qualify due to their Tui oil revenues. Maybe AMP, Lion Nathan? Woolworths might one day once they tune up their NZ operation.


Well PPP certainly payed it's recent dividend with attached imputation credits. But i believe that as well as earning money in NZ the company must also have a NZX registration as PPP has. I have never found this out for sure but for some reason believe it to be the case. So do we have any AUS companies paying imputations credits in NZ that are not registred with the NZX? I think not

[Ish]

Well PPP certainly payed it's recent dividend with attached imputation credits. But i believe that as well as earning money in NZ the company must also have a NZX registration as PPP has. I have never found this out for sure but for some reason believe it to be the case. So do we have any AUS companies paying imputations credits in NZ that are not registred with the NZX? I think not

Digger, not sure if I am misunderstanding your post.. but being registered on the NZX has nothing to do with attaching imputation credits to New Zealand dividends.

If a company pays tax in New Zealand it gets imputation credits to attach to it's dividends if it so chooses, regardless of whether it's a one man band or a huge multinational's local branch.

Most foreign companies looking to operate in NZ set up local branches or subsidaries registered as NZ companies in any case.

Personally I wouldnt buy shares in any Australian company that pays dividends as the loss of franking credits hugely disadvantages New Zealand shareholders.. however there are plenty of great growth shares on the ASX that dont pay dividends, and therefore New Zealand shareholders aren't disadvantaged in this situation.

Infact we are possibly more advantaged than Australians when purchasing australian growth (smallcap) shares. Because for non traders there is no capital gains tax. Australians do have some form of capital gains tax on shares I believe.

Talks are on going between the NZ and Australian government regarding the mutual recognition of imputation credits and franking credits, but I expect there wont be anything for a while, as the aussies arent as keen.

[macduffy]

Talks are on going between the NZ and Australian government regarding the mutual recognition of imputation credits and franking credits, but I expect there wont be anything for a while, as the aussies arent as keen.
QUOTE.

Yes, there have been plenty of talks in the past but they never seem to get anywhere.

Too much loss of tax revenue, on both sides, I suspect.

;)

[macduffy]

Personally I wouldnt buy shares in any Australian company that pays dividends as the loss of franking credits hugely disadvantages New Zealand shareholders.. however there are plenty of great growth shares on the ASX that dont pay dividends, and therefore New Zealand shareholders aren't disadvantaged in this situation.
QUOTE.

I don't like not being able to take advantage of Aust franking credits either but I don't let it become an issue in deciding what to invest in. Well, ok, maybe in marginal cases. But I'd rather wear the loss than miss out on some great Aussie buys over the years.

;)

[forest]

Ok 2 on the list of AUS companies who may pass there imputation credits.
NAB
PPP

[Ish]

Personally I wouldnt buy shares in any Australian company that pays dividends as the loss of franking credits hugely disadvantages New Zealand shareholders.. however there are plenty of great growth shares on the ASX that dont pay dividends, and therefore New Zealand shareholders aren't disadvantaged in this situation.
QUOTE.

I don't like not being able to take advantage of Aust franking credits either but I don't let it become an issue in deciding what to invest in. Well, ok, maybe in marginal cases. But I'd rather wear the loss than miss out on some great Aussie buys over the years.

;)

True, but if you dont mind buying at the smaller end of town that isnt an issue and you still get exposure to Aus' diverse range of companys especially resource/commodity sector.