Tasman tax geometry not symmetrical

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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