A New Zealand company that has chosen to join the Australian imputation system may pay dividends franked with Australian franking credits. Australian residents who own shares in a New Zealand company or who receive a distribution from a partnership or trust that includes dividend income from the New Zealand company may be able to claim a tax offset for the Australian franking credits. The imputation system allows the payment of company tax to be imputed, or attributed, to shareholders. The tax paid by the company is allocated or attributed to shareholders by way of franking credits attached to dividends they receive. A dividend that carries franking credits is called a franked dividend. A New Zealand company that has chosen to join the Australian imputation system can pay dividends franked with Australian franking credits.
If the dividend from the New Zealand company is assessable, you must declare the dividend (including any supplementary dividend) as assessable foreign income even if dividend withholding tax was deducted in New Zealand. You can claim a foreign income tax offset for any New Zealand dividend withholding tax paid on the dividend.
If the franked dividend from the New Zealand company is included in assessable income, the amount of the Australian franking credit on that distribution is also assessable income and you can claim a tax offset equal to that amount (subject to the exceptions described under When you are not entitled to claim a franking tax offset).
The Australian franking credit included in your assessable income and the tax offset is reduced by the amount of a supplementary dividend paid by the New Zealand company if the supplementary dividend is paid in connection with the franked dividend and you are entitled to a foreign income tax offset because the franked dividend is included in your assessable income.
Last modified: 21 May 2013QC 17566
Not all dividends from New Zealand companies have Australian franking credits attached.
Australian residents cannot claim New Zealand imputation credits.
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