The taxing rules for distributions change if an eligible company or trust elect to be taxed as a Māori authority.
Distributions of cash or kind are Māori authority distributions to authority members. Māori authority distributions are either taxable or non-taxable distributions.
Shareholders of companies that are Māori authorities, and beneficiaries of trusts that are Māori authorities, are generically termed members (of a Māori authority).
Distributions of dividends to shareholders and trust distributions to beneficiaries of a Māori authority are generically referred to as Maori authority distributions to a member.
A distribution that is a taxable Māori authority distribution to a member is a distribution from an authority’s post-2005 and subsequent tax years tax paid income reserves.
All other distributions between a Māori authority and its members is more than likely a non-taxable distribution to the member.
It is the directors or trustees of a Māori authority that determine whether a Māori authority distribution will be taxable or non-taxable. Factors that may be relevant in making this decision are the balance of pre-2005 income year income reserves, the balance of post-2005 income year income reserves, current year’s income and the balance in the authorities MACA account.
Examples of Māori authority distributions are set out below.
|The amount paid or credited by the Māori authority to a member or in any manner or under any name.||A Māori authority pays a distribution to its members based on the individual members land shares.|
|A taxable bonus issue made by the Māori authority.|
|An amount applied by the Māori authority exclusively for the member.||A Māori authority may pay a member’s electricity bill. Although this amount isn’t paid or credited to the member, it’s treated as a distribution as it’s applied for the benefit of that member.|
|An amount advanced by the Māori authority to a member to the extent that the advancement isn’t a genuine investment by the Māori authority.||A Māori authority may extend an interest-free loan to a member. As they would have received interest if they had invested that money in a bank, the interest forgone by the Māori authority is treated as a distribution to the member who received it.|
|Property disposed of by the Māori authority to a member without payment in cash or kind or where the payment is less than the market value of the property.||A Māori authority owns a hectare of land with a market value of $30,000. If the Māori authority sells that land to a member for $20,000, the $10,000 difference between the market value and the actual price paid will be treated as a distribution to the member.|
|Property disposed of by a member to the Māori authority for more than the market value of the property.||A Māori authority member owns a hectare of land with a market value of $30,000 that the Māori authority wishes to use for its own purposes. If the Māori authority were to pay $40,000 for the land, the $10,000 that the member receives over and above the market value of the land will be treated as a distribution.|
Every year Inland Revenue is asked to explain the tax treatment of particular types of distribution to members. These are distributions that are described as kaumatua grants and education grants.
The descriptive words to describe a particular distribution does not determinate whether the payment is taxable or non-taxable.
As with all distributions they are either taxable or non-taxable. It is non-taxable if paid from pre-2005 year reserves. It is taxable if paid from post-2005 year reserves. It is the authorities directors or trustees who are responsible for making this decision.
This is a monetary payment made by a Māori authority to a member. It is a Māori authority distribution. It will be taxable if the distribution is paid from post-2005 income.
An education grant is a monetary payment made by a Māori authority to a member, generally made to enable that member to gain a trade or tertiary qualification.
A grant may be a bursary, a scholarship, or other financial assistance to the members to assist children attend primary and secondary schools or tertiary institutions.
An education grant is a Māori authority distribution. An education grant may be accounted for by the Māori authority as a non-taxable or a taxable distribution. The authority must apply the MACA rules if the distribution is a taxable distribution.
Members who receive taxable distributions must include that income, inclusive of MACA tax credits, in their individual tax return.
Educational grants that are bursaries and scholarships that are taxable Māori authority distributions when paid by the authority are exempt income to the member. Taxable distributions will have an amount of MACA tax credits attached. A member may obtain a refund of these tax credits by including them in their end of year tax return.
If a Māori authority is a registered charity and qualifies for an income tax exemption, the rules regarding Māori authority distributions do not apply. Refer to our charities page for more information on your requirements.
Our Kaitakawaenga Māori can provide one-to-one advice and information on Māori authority distributions. You can request a visit from a Kaitakawaenga Māori here: