Forum Archive Index - May 2001

["Stephen Lukey" <slukey@paradise.net.nz>]

Hi All

 

I don't think the franking / imputation credit thing will be fixed anytime soon. This is because Oz has a comprehensive capital gains tax and NZ only has a limited version of a capital gains tax that doesn't ordinarily apply to small investors. I would imagine that any trans Tasman deal on recognition of tax credits would involve NZ having to adopt a capital gains tax. This would be politically inexpedient given the hordes of residential property investors in NZ.

 

Smalltime New Zealanders investing in low or no div yield Oz companies therefore have an advantage over the small Aussie Aussie investor as they only miss out on a tiny imputation credit yet pay no capital gains tax.

 

And if you add the benefit of buying shares with borrowed money (ie if you have a mortgaged residential property and $10,000 in the bank, you use the $10,000 to pay off your house loan and raise a seperate share loan of $10,000 using your house as security) you then have a nice interest deduction as well!

 

It's not all doom and gloom in NZ.

 

Steve (disc - I am a tax lawyer, I work for IRD, scary huh?)