Forum Archive Index - May 2001

["John H T Wilkinson" <jhtw@clear.net.nz>]

Stephen,

 

I attend the meeting, detailed below, at which your colleague Andrea Black outlined the options that are being considered. I had a look on the IRD's Taxpolicy web site to see what may be on it but could find nothing re this topic.

 

How about seeing what you can come up with and either advising of a Link or pasting into an email to this site.

 

Cheers,

JHTW

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Triangular Taxation

"Triangular taxation" occurs where Australian shareholders in a New Zealand company operating in Australia are unable to access Australian sourced franking credits, with the same problem applying in reverse for New Zealand shareholders in Australian companies operating in New Zealand.

The New Zealand and Australian governments have agreed that the examination of triangular taxation is a worthwhile step in addressing possible barriers to trans-Tasman investment. Officials in both countries have been instructed to develop a workable model for recognition of imputation credits in triangular cases, and assess the costs and benefits of applying such a model.

The purpose of this discussion will be to discuss the current problems, highlight the issues and potential solutions.

The discussion will be led by Michael Shaw (Tax Partner, Deloitte Touche Tohmatsu) and Andrea Black (IRD Policy Advice Division).

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----- Original Message -----

From: Stephen Lukey

To: sharechat@sharechat.co.nz

Sent: Monday, 7 May 2001 8:31 p.m.

Subject: Re: Re: [sharechat] Aussie taxation - a bit of elucidation

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?)