Forum Archive Index - May 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

> 
> Does anybody know what the state of play is with the refusal of
> Australia and NZ refusing to recognise each other's imputation tax
> credits?  
>
>
That is the situation, no change.
>
>
>I had thought that there was some kind of agreement in the
> wind to sort this one out.  
>
>
There is not enough political mileage in it to do anything.
>
>
>I am in the tricky position where a
>reasonable chunk of my income will soon be coming in the form of
>Australian dividends, and I am not too keen on the prospect of
>having that income taxed twice under the current system.  How to get
>around it?
> 
>
The only way around it that I know of (apart from moving to 
Australia for tax purposes) is something that would really only be 
tenable for 'blue chip' type shares.  Many of these shares have 
equivalent warrants which are the option to buy the share at a future 
time at a fixed price.   Because the price you must pay in the future 
for the share is fixed, the price you pay for the warrant is 
variable, as it tracks the actual share price that varies on a day to 
day basis.   Built into the share price is the expectation of future 
dividends.   Because most of the warrant holders for Australian 
shares are based in Australia for tax purposes, this means the 
warrants are priced with the effect of imputation credits taken into 
account.

Warrants do not pay dividends, so you would have to periodically sell 
some to make up for the dividends that you failed to get, should you 
have held the head shares.  Nevertheless the price you sell at should 
reflect the contribution of the imputation credit.

Of course there are other 'problems' with warrants, the main being 
that they are far more volatile than shares, possible reduced 
liquidity and the fact you don't get an annual report posted to you 
to keep track of your investment.  So personally I wouldn't do it.  
Nevertheless if you *must* get around the double taxation of 
dividends, I understand that this is a way. SNOOPY

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