Trans-Tasman imputation for New Zealand companies
New Zealand companies can choose to use the Australian franking (or imputation) rules to avoid being taxed twice on some Trans-Tasman investments. If you're considering using the Australian franking system, you should visit the Australian Tax Office (ATO) website.
Trans-Tasman imputation for Australian companies
In a similar way, Australian companies can also keep an imputation credit account (ICA) in New Zealand. Companies that do this are called Australian imputation credit account companies. They can pass imputation credits on to their shareholders for New Zealand tax that has been paid.
Australian imputation credit account companies must meet all the New Zealand domestic, administrative and legislative requirements for imputation.
Who is eligible
Australian companies and unit trusts can choose to keep a New Zealand imputation credit account if they:
- are ‘resident in Australia’, according to the New Zealand residence rules but in regards to Australia
- are not treated under a double taxation agreement as a resident in a country other than Australia or New Zealand
- meet the New Zealand eligibility criteria for keeping an imputation credit account (except residency).
If the company is part of a wholly owned group, all the companies in this group will be jointly liable for any further income tax, penalties and interest incurred.
From 15 March 2017 a New Zealand resident company automatically (without the need for an election) becomes an Australian ICA company when its residence tie-breaks to Australia under the Australia/New Zealand double tax agreement (the DTA).
Any accumulated imputation credits up until the point of becoming an Australian ICA company are retained.
How to make an election
An Australian company must elect to maintain an imputation credit account in New Zealand at least 30 days before it pays a dividend that includes a New Zealand imputation credit. For all other purposes, this choice is backdated to the beginning of the tax year.
Australian companies that want to keep a New Zealand imputation credit account can register online through myIR, or complete a Trans-Tasman imputation election form - IR488.
If the Australian company is not already a New Zealand taxpayer, we'll issue an IRD number so they can keep the imputation credit account.
A New Zealand resident company that automatically becomes an Australian ICA company because its residence tie-breaks to Australia under the Australia/New Zealand DTA must also register online through myIR, or complete a Trans-Tasman imputation election form - IR488.