The trans-Tasman imputation reform allows a New Zealand company to choose to enter the Australian imputation system. This will allow the New Zealand company to maintain an Australian franking account and pay dividends franked with Australian franking credits.
Reciprocal rules have been introduced by the New Zealand government to allow an Australian company to elect into the New Zealand rules.
Prior to the reform, Australian shareholders of New Zealand companies that earn Australian income were unable to access Australian franking credits arising from company tax paid on that income. The same problem exists with New Zealand shareholders of Australian companies that earn New Zealand income. In effect, both groups of shareholders are taxed twice on such income. The reform was introduced to address this double taxation issue.