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Australian Franking Credits: no use to NZ investors?
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What is imputation credits?
Imputation credits regime was introduced in NZ in 1988. It is a system which avoids double taxation on already taxed income. So, when NZ Company issue you a dividend this is reported in your tax return as income, and imputation credits attached with that dividend are used as tax credits to avoid double taxation.
Section LA5 (4) ITA 2007: permits imputation credits to be used as credits to settle one's income tax liability.
What is franking credits?
Franking credits is similar to what we have in NZ as imputation credits. In Australia imputation credits are referred as franking credits.
NZ and Australia both have similar imputation credit tax regime which ensures the taxes paid in local jurisdiction are not paid twice.
Can Franking credits be used by NZ investor in NZ tax return?
The common international practice is the relief of double taxation is only provided to local taxpayer and taxes paid in foreign country are not permitted as imputation or franking credits.
In general terms it means there is a single layer of taxes on local investment but double layer of taxes on foreign investments. So, if you are a NZ investor invested in Australian equities receiving dividend and franking credits, these franking credits are no use to you and you cannot claim as credits in NZ tax return.
Where to from here?
With increased trans-Tasman harmony many New Zealanders are investing in Australian equities and vice versa, but it is indeed discouraging for NZ investors to invest in Australia when the income is taxed twice.
NZ Government is actively working on this issue and it is expected sometime soon Australian franking credits will be used in NZ as imputation credits.
Australia and NZ are some of the countries left in OECD using imputation regime, Europe is no longer using imputation regime system. If franking credits are permitted as imputation credits in NZ it would be great for Trans-Tasman economic harmony.
Saurav Wadhwa is a Principal Accountant at IBBZ Accounting Limited
M Bus (TAX) PG Cert (LAW) CA CPA
Membership and Qualification:
- Masters in Professional Business Studies (Taxation) with Distinction from Auckland University of Technology
- Post Graduate Certificate in LAW, Law School at Auckland University of Technology
- Chartered Accountant(CA), New Zealand Institute of Chartered Accountants (NZICA)
- Certified Practicing Accountant(CPA), CPA Australia
- Bachelor of Commerce, Grad. Cert. in Business from Auckland University of Technology
Saurav has many years of practical experience in tax & accounting services and is the co-founder of IBBZ Accounting Limited. He is qualified both in law and accounting. Saurav has worked in various tax & accounting specialist roles for large corporates in New Zealand. He loves to work with Small Businesses.
His key focus is on:
- Tax advisory for small and family operated businesses on a wide range of taxation issues.
- Legitimate tax saving structures.
- Advising on range of new business issues.
- Ensuring business growth is attained.
- Effective cash flow planning.
Saurav specialises in Tax Disputes resolution, Tax Relief applications, Tax Debt resolution/management, and representation in Tax Audit. Saurav can represent you in Taxation Review Authority, in Tax Dispute Court Cases or he can represent you during Tax Audit Investigations.
Blend of skills in Tax laws and accounting, makes him perfect advisor for small businesses and individuals like you. Saurav understands how to safeguard your business from creditors risk, maximise the business growth and pay low taxes. He can be your good strategic and business partner. He is of a friendly nature and easily approachable.
Saurav understands the numbers very well. He is a qualified Chartered Accountant and registered with highest professional accounting bodies of Australia and New Zealand. He can help you to plan for the future to satisfy all your financial needs.
Consumed by a hunger for knowledge, Saurav has never stopped furthering his education or expanding his pool of knowledge. Nothing gives Saurav more satisfaction than assisting his clients to achieve their financial goals. His diligence, passion and accuracy has earned him a reputation as a reliable professional who strives to serve his clients above and beyond the call of his duties.
Saurav was nominated for the Best Accountant of the year and the Young Entrepreneur of the year, and his company IBBZ Accounting won the award of Best Small Business 2014. In 2015 Saurav won the award of Best Accountant of the Year.
In 2017 Saurav was appointed as a committee member to New Zealand Public Practice Board of CPA Australia.
Saurav is a dedicated family man. Saurav is very fond of outdoor activities and enjoys pretty much all outdoor activities: running, bike, motorbike, snorkel, fishing, skiing etc. Saurav, is also a self-confessed workaholic, spends some of his free time thinking about his client’s affairs and forecasting their financial future.
He can be contacted on saurav@ibbz.co.nz or 09 272 8050
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they have been saying they will fix this for 10 years