Trans-Tasman Imputation System Overview

From 1 October 2003, a New Zealand company that has chosen to join the Australian imputation system may pay dividends franked with Australian franking credits. (A franking credit is your share of tax paid by a company on the profits from which your dividends or distributions are paid.)

Australian residents who own shares in the New Zealand company or receive a distribution from a partnership or trust that includes dividend income from the New Zealand company may be entitled to claim a tax offset for the Australian franking credits. This reform is known as the Trans-Tasman imputation reform (TTI).

New Zealand imputation credits cannot be claimed by Australian residents.

Prior to the reforms, Australian shareholders of New Zealand companies who earn Australian income could not access credits arising from company tax paid in Australia on that income. This resulted in shareholders being taxed twice on such income. The same problem existed with New Zealand shareholders of Australian companies that earn New Zealand income.

The Australian Government introduced rules to allow a New Zealand company to join the Australian imputation system. The ATO administers these rules. Similar rules, which are administered by the New Zealand Inland Revenue Department, were introduced by the New Zealand Government to allow an Australian company to join the New Zealand imputation system.

Refer to Trans Tasman rules on the ATO website page for International tax for business.

Refer to You and your shares (NAT 2632) available on the ATO website.

CCH References

4-490 Trans-Tasman triangular imputation rules