Maori authority credits: How the credit system works
What is a Maori authority credit?
A Maori authority credit is similar to a company imputation credit. It is income tax paid by the Maori 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 Maori authority credits against their income tax liability.
This system helps stop the double taxation of a Maori authorities distributions by effectively taxing the distribution once - in the Maori authority's income tax return.
How the credit system works
Maori 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.
| Example | ||
|---|---|---|
| Tax on Maori authority | ||
| Maori authority profit | $1,000 | |
| Tax at 19.5% | $ 195 | |
| After-tax profit | $ 805 | |
| Distribution paid to members | $ 805 | |
| Retained earnings | Nil | |
| Tax on shareholder | ||
| Distribution received | $ 805 | |
| Maori authority credit | $ 195 | |
| Taxable amount | $1,000 | |
| Tax at (for example) 19.5% | $ 195 | |
| Less Maori authority credit | $ 195 | |
| Tax payable by member | Nil | |
| Result for member | ||
| Cash distribution received | $ 805 | |
| Less tax payable | Nil | |
| Net distribution after tax | $ 805 | |
Date published: 03 Apr 2006
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