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Māori organisations
Nga whakahaere Māori
Māori authority credits: How the credit system works

What is a Māori authority credit?

A Māori authority credit is similar to a company imputation credit. It is income tax paid by the Māori authority that may be passed on to a member by attaching it to a distribution, for the benefit of the member.

These credits are added to the distribution to calculate gross income to the member. The member receiving the distribution may then claim the Māori authority credits against their income tax liability.

This system helps stop the double taxation of a Māori authorities distributions by effectively taxing the distribution once - in the Māori authority's income tax return.

How the credit system works

Māori authorities were previously subject to a dividend withholding tax system that applies up to the end of the 2003-04 income tax year.

The credit system applies to all income tax paid from the 2004-05 income tax year onwards.

The following example shows how the credit system works.

Example    
Tax on Māori authority
Māori authority profit $1,000
Tax at 17.5% $175
After-tax profit $825
Distribution paid to members $825
Retained earnings Nil
Tax on shareholder
Distribution received $825
Māori authority credit $175
Taxable amount $1,000
Tax at (for example) 17.5% $175
Less Māori authority credit $175
Tax payable by member Nil
Result for member
Cash distribution received $825
Less tax payable Nil
Net distribution after tax $825

 


Date published: 30 Mar 2011

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