NZ Tax on Australian Shares

[tobo]

quoting IRD
"Trans-Tasman imputation for New Zealand shareholders
"Some Australian companies may elect to pass on credit for any New Zealand tax paid to their New Zealand shareholders. You will be able to recognise the credits from the notices you receive with the payment of each dividend. If the company in which you hold shares has elected in, these credits will show on your dividend certificates as 'NZ imputation credits'.
...
"Please note - this legislation does not change the current rules regarding 'Australian franking credits'. Shareholders in receipt Australian dividends cannot claim 'franking credits' in their New Zealand tax returns."

I have never seen any of these mythical 'NZ imputation credits'. Has anyone seen any in any particualr companies? Can anyone confirm if you still lose the Franking portion anyway? (so even if I do find such a company it's still a waste of time.)

I understand that $70 + $30 franking means I only get $70 cheque and then I have to pay $20 tax leaving me $50
This makes me disinclined to invest in Australian yield companies.

ToBo

[POSSUM THE CAT]

TOBO I have had Fletcher give me Australian franking credits for its shares when I resided in Australia but never the other way round. A lot of the high yeilding australian shares are trusts and they do not pay tax so they have no franking credits but you may pay australian withholding tax and this is claimable in NZ

[macduffy]

NAB have in the past paid a small NZ tax credit on occasions, but not on every dividend and from memory, not recently.

[kura]

RCR have partial NZ imputation credits.
Received a dividend a week or 2 ago.
Geez, I didn't even know they had operations in NZ, shows how detailed my analysis is !!

[tobo]

...partial NZ imputation credits....

Is that credit part of the franking, or separate and additional to the franking?

that is, do you still lose the full franking amount or only part of it. (what %?)

ToBo

[kura]

Is that credit part of the franking, or separate and additional to the franking?

that is, do you still lose the full franking amount or only part of it. (what %?)

ToBo

You loose all franking credits, simple as that. That's the tax rules as they stand, NZers cannot claim Aust franking credits.

The partial NZ imputation credits were in addition to the Aust Franking credits.

There was an explanatory note on my dividend statement for NZ shareholders, I will use the figures straight from my dividend statement as an example

Dividend cheque received $675 (AUD)
Franking Credit $289.29 (AUD)
Dividend for NZ tax purposes $825.05
Plus NZ Imputation $118.13
Total Gross Dividend $943.18

Without the NZ imputation I would have paid tax @30% on $825.05 (=$247.51)
With imputation I pay tax at 30% on $943.18, then deduct the imputation credit of $118.13 (943.18*.3 -118.13= $164.82 )

By recieving the NZ imputation credit I am $82.69 better off than I would have been otherwise.

You can work through same principle for varying personal tax rates, my holdings are through a company, that is why I picked the 30% tax rate.

Your comment re being a dissincentive to invest in yield type plays is correct, as they are essentially being taxed twice.

[tobo]

Thanks, kura, you have made that very clear.

When I first realised the Aus Franking couldn't be claimed I couldn't believe it because I had the pre-conception that the NZ IRD had tax credit arrangements with certain countries to avoid double-taxing in general, and felt sure that they would have an arrangement with our closest neighbour (CER and all that) for dividends...but alas, this is just more hard lessons you learn when you try to work the system.

Cheers.
I'm not bitter, really.
ToBo

[macduffy]

Yes, we hear a lot of brave words from politicians on both sides of the Tasman, mainly this side, about the need to "harmonise" taxes and how iniquitous ( not their word! ) the current system is. But when push comes to shove, no-one is prepared to forgo the revenue to make things fairer.
Expect to hear more hot air on the subject during the election campaign.

:rolleyes:

[shasta]

Yes, we hear a lot of brave words from politicians on both sides of the Tasman, mainly this side, about the need to "harmonise" taxes and how iniquitous ( not their word! ) the current system is. But when push comes to shove, no-one is prepared to forgo the revenue to make things fairer.
Expect to hear more hot air on the subject during the election campaign.

:rolleyes:

It would benefit a great number of people across both sides of the ditch...

For me it's a no brainer, but it will need a National Govt (with ACT's prompting to get this done)

As an aside i've emailed Bill English asking to implement the same SMSF idea in NZ. (not with the employers 9% contribution though!)

Given National want to change Kiwisaver in it's current form, i would urge all interestd parties to email thru your idea's to the National party.

As an Accountant this is an area i'd like to see cleared up, & don't see it as a difficult proposition (isn't this what CER is meant to be about?)