Tasman tax geometry not symmetrical

Friday 22nd September 2000

Changes to tax law on both sides of the Tasman are needed to deal with the "triangulation problem" which is discouraging cross-Tasman capital flows.

New Zealand shareholders of an Australian company with a New Zealand subsidiary cannot access New Zealand imputation credits passing from the New Zealand subsidiary to its Australian parent. The imputation credit is a credit against New Zealand tax and is worthless to an Australian company which cannot pass the credit on to its own New Zealand shareholders.

A solution is to allow Australian companies to pay special dividends to New Zealand shareholders with a credit attached for the otherwise lost imputation credit, according to Ernst & Young's Alan Judge, chairman of the Institute of Chartered Accountants tax committee.

Another is for mutual recognition of imputation credits, he said.

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