One of the major barriers to trans-Tasman investment, being the
tax leakage that occurs on trans-Tasman dividend flows, is under
review. That leakage arises from the inability to utilise
Australian franking credits attached to Australian dividends in New
Zealand (or to utilise New Zealand imputation credits attached to
New Zealand dividends in Australia). The respective systems are
designed to relieve double tax from occurring on income, once at
the company level and then again at the shareholder level. This may
be acceptable to revenue authorities where both company and
shareholder are in the same country and the credit is given in
respect of tax paid locally. However, where the shareholder is in a
different country from the company, recognising the credit for tax
paid in the company's home country is seen as eroding the
tax base in the shareholder's home country. This
historically has created resistance to addressing the issue.
Earlier this year, during talks between officials of each
country, Australia indicated it would look at the issue. Further to
this, in October 2008, the New Zealand Treasury made a submission
on this issue as part of Australia's official tax review,
recommending that Australia's review should support a
mutual recognition regime for imputation and franking credits. The
Australian review will be conducted in several stages. An initial
discussion paper has been released. The review panel will provide a
final report to the Australian Treasurer by the end of 2009.
The talks were part of the ongoing work programme between
Australia and New Zealand under CER which has this year resulted in
a scheme for the mutual recognition of trans-Tasman securities
offerings, signing of a treaty on trans-Tasman Regulatory
Enforcement and Court Proceedings, and is likely to soon include an
arrangement on retirement savings portability between Australia and
Aside from the mutual recognition issue, the New Zealand Revenue
is considering improvements to the current imputation system, and
released a discussion paper in August on this. That paper considers
the rules relating to streaming of imputation credits
('streaming' refers to the process of directing
imputation credits to shareholders who are able to make use of
them), and the ability to refund imputation credits (an issue of
particular importance to charities). The discussion paper is the
first step in a review of the imputation system. Submissions were
required by October 2008 and are under consideration.
Phillips Fox has changed its name to DLA Phillips Fox
because the firm entered into an exclusive alliance with DLA Piper,
one of the largest legal services organisations in the world. We
will retain our offices in every major commercial centre in
Australia and New Zealand, with no operational change to your
relationship with the firm. DLA Phillips Fox can now take your
business one step further − by connecting you to a global
network of legal experience, talent and knowledge.
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and should not be relied on as a substitute for professional
advice. Specialist legal advice should always be sought in relation
to any particular circumstances and no liability will be accepted
for any losses incurred by those relying solely on this
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In the years following the global financial crisis of 2008 many Australian investors lost their life savings as financial products failed and the Australian Stock Exchange shed over 3,000 points.
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