Introduction to Maori authorities: Maori authorities overview

What is a Maori authority?

In 1939, Maori authorities were created to act as trustees in order to administer communally owned Maori property on behalf of individual members.  

Today, a Maori authority must manage or administer assets held in common ownership.  These entities may be trustees of trusts or companies.  

Changes

In 1952 a Commission of Inquiry recommended that the tax rules surrounding the Maori authorities be updated to ensure fairer taxation. In August 2001 the government released the discussion document Taxation of Maori Organisations which contained policy options for modernising the tax rules for Maori authorities.

Legislation was passed in 2003 to introduce new rules that apply to the taxation of Maori authorities. The new legislation became effective from the 2004/05 income year and replaced the existing tax rules governing Maori authorities.

All Maori organisations wanting to take advantage of the new Maori authority tax rules, including the reduced tax rate of 19.5%, must meet the qualifying criteria and elect into the system.

Your organisation will need to weigh the advantages and disadvantages before deciding whether to elect into the Maori authority system.

Advantages

Some of the advantages to becoming a Maori authority are:

• A lower income tax rate of 19.5%, which matches the tax rate of the majority of authority members.
• Simplified tax accounting and compliance procedures.
• Removing the need for the majority of members to complete an income tax return to claim back the difference between their personal tax rate and the Maori authority's tax rate.
• Credits attached to distributions that exceed a member's tax liabilities will be refunded.
• The resident withholding tax (RWT) can be a lower rate than that applicable for other taxpayers.
• Maori authorities can "opt" out of the Maori authority system if they wish without the requirement to wind up and establish another entity.

Disadvantages

Some of the disadvantages of becoming a Maori authority are:

• Maori authorities that are companies cannot group losses, amalgamate or consolidate with other companies that are not Maori authorities.
• A 39% RWT rate applies on distributions over $200 where the Maori authority does not hold a member's IRD number.
• A Maori authority that elects out and then re-enters later is treated as having disposed of and then reacquired all of its assets at market value.

Date published: 03 Apr 2006

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