Officials that it would be useful to revise the drafting to ensure that the gross amount of the dividend is correctly determined. Officials consider that the amendments in section RE 14B should not apply to dividends derived by a trustee that are retained as trustee income. The policy intent is to ensure that a company or trustee acting as an intermediary is not required to pay RWT on a non-cash dividend derived from a foreign company provided that the dividend passes through to the investor in the same income year. In the absence of this amendment, the company or trustee would be required to pay RWT on the non-cash dividend derived from a foreign company. The measure is a simplification that ensures a natural person investor is appropriately taxed on non-cash dividends derived from a foreign company, whether the dividend is derived directly or indirectly through a trust or a company. It is not consistent with the policy intent if a trustee retains the non-cash dividend as trustee income instead of passing the dividend through to the beneficiary. Officials believe the meaning of intermediary in context is clear and do not consider it is necessary to define the term. Officials consider the proposed amendments do not apply to dividends that arise from dividend reinvestment plans, which are taxed as bonus issues in lieu. Recommendation That the officials’ comments be That submission (i) from EY and the submission from FNZ relating to clarifying the gross amount of the dividend be accepted. Clause 120 Submission (Chartered Accountants Australia and New Zealand, Corporate Taxpayers Group, PwC) The submitters supported the proposal. One stated that the does not appear to correctly reflect the position the Commentary Income Tax Act 2004 or the proposed legislative amendment. (Chartered Accountants Australia and New Zealand) Another stated that the to the Bill misstates the operation of the rule and may Commentary cause confusion and this should be clarified in a following Tax Information Bulletin enactment of the Bill. The submitter also notes that the proposed legislation does not appear to limit the rules to the group debit balance. (Corporate Taxpayers Group) One stated that the is incorrect as the transfer of imputation credits from a group Commentary company to the group imputation credit account (ICA) is intended to be allowed when a debit
Officials that it would be useful to revise the drafting to ensure that the gross amount of the dividend is correctly determined. Officials consider that the amendments in section RE 14B should not apply to dividends derived by a trustee that are retained as trustee income. The policy intent is to ensure that a company or trustee acting as an intermediary is not required to pay RWT on a non-cash dividend derived from a foreign company provided that the dividend passes through to the investor in the same income year. In the absence of this amendment, the company or trustee would be required to pay RWT on the non-cash dividend derived from a foreign company. The measure is a simplification that ensures a natural person investor is appropriately taxed on non-cash dividends derived from a foreign company, whether the dividend is derived directly or indirectly through a trust or a company. It is not consistent with the policy intent if a trustee retains the non-cash dividend as trustee income instead of passing the dividend through to the beneficiary. Officials believe the meaning of intermediary in context is clear and do not consider it is necessary to define the term. Officials consider the proposed amendments do not apply to dividends that arise from dividend reinvestment plans, which are taxed as bonus issues in lieu. Recommendation That the officials’ comments be That submission (i) from EY and the submission from FNZ relating to clarifying the gross amount of the dividend be accepted. Clause 120 Submission (Chartered Accountants Australia and New Zealand, Corporate Taxpayers Group, PwC) The submitters supported the proposal. One stated that the Commentary does not appear to correctly reflect the position the Income Tax Act 2004 or the proposed legislative amendment. (Chartered Accountants Australia and New Zealand) Another stated that the Commentary to the Bill misstates the operation of the rule and may cause confusion and this should be clarified in a Tax Information Bulletin following enactment of the Bill. The submitter also notes that the proposed legislation does not appear to limit the rules to the group debit balance. (Corporate Taxpayers Group) One stated that the Commentary is incorrect as the transfer of imputation credits from a group company to the group imputation credit account (ICA) is intended to be allowed when a debit
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