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New Zealand law explained for everyone

Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 2: Australian companies with imputation credit accounts

You could also call this:

“Companies in Australia can opt for a New Zealand tax account with conditions”

If you’re a company based in Australia, you can choose to have an imputation credit account in New Zealand. You need to tell the Inland Revenue Department if you want to do this.

You can’t choose to have an imputation credit account if:

  • You’re a certain type of company that’s not allowed to
  • You’re treated as not living in Australia under a tax agreement between New Zealand and Australia
  • You’re treated as living in another country under an agreement between Australia and that country
  • You’ve had this choice taken away before and haven’t fixed the problem

If you choose to have an imputation credit account, you need to start it from a certain date. This date depends on when you tell the Inland Revenue Department.

If you’re a New Zealand company that stops being required to have an imputation credit account because of a tax agreement with Australia, you still need to keep the account.

If you’re part of the same group of companies as an Australian company with an imputation credit account, you might have to help pay if they break the rules.

If you’re an Australian company with an imputation credit account and you pay a dividend in Australian dollars, you need to convert it to New Zealand dollars.

You can stop being an Australian company with an imputation credit account if you move out of Australia, don’t meet the requirements anymore, or choose to stop. The Inland Revenue Department can also make you stop.

Even if you stop being an Australian company with an imputation credit account, you still need to do everything you were supposed to do when you had one.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518700.

Topics:
Money and consumer rights > Taxes
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OB 1: General rules for companies with imputation credit accounts, or

“Rules for companies that need to keep a special tax account”

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OB 3: Imputation credit accounts, or

“Rules for companies tracking tax credits and debits”

Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 2Australian companies with imputation credit accounts

  1. A company that is resident in Australia may choose, by notifying the Commissioner, to be obliged to establish and maintain an imputation credit account.

  2. Despite meeting the residency requirements, a company is not eligible to make an election referred to in subsection (1) if—

  3. the company—
    1. is a company referred to in section OB 1(2)(a)(iii) or (iv), and (b) to (f); or
      1. is treated as not being resident in Australia under a double tax agreement between New Zealand and Australia; or
        1. is treated as resident in a country other than Australia under an agreement between Australia and the other country that would be a double tax agreement if negotiated between New Zealand and that other country; or
        2. an earlier election has been revoked by the Commissioner under subsection (7)(b), and the company has not shown the Commissioner that it has taken adequate steps to prevent the grounds of revocation occurring again.

          1. A company making an election under subsection (1) must maintain an imputation credit account from the following date, as applicable:

          2. the first day of the tax year in which the Commissioner is notified:
            1. for the purposes of section OB 60,—
              1. for a company that is formed or becomes eligible in the tax year, the first day of the tax year in which the Commissioner receives the notice and the Commissioner notifies the company of that date; or
                1. if subparagraph (i) does not apply, 30 days after the date on which the Commissioner receives the notice.

                2. If a company that is resident in New Zealand stops being a company that is required by section OB 1 to maintain an imputation credit account because, under a double tax agreement between New Zealand and Australia, the company is treated as not being resident in New Zealand, the company continues to be required to maintain an imputation credit account.

                3. A company that is part of the same wholly-owned group of companies as an Australian ICA company may have joint and several liability with the Australian ICA company for further income tax, civil penalties, and interest under Part 7 of the Tax Administration Act 1994 imposed on the Australian ICA company for a breach by the Australian ICA company of the imputation rules.

                4. Despite subsection (4), no joint and several liability arises if the Australian ICA company is prohibited by an independent regulatory body from being subject to the liability.

                5. An Australian ICA company that pays a dividend in Australian currency must make a currency conversion under section OB 60(6).

                6. A company ends its status as an Australian ICA company if—

                7. the company ceases to be resident in Australia or meets a requirement of subsection (2)(a) or (b); or
                  1. for a company that has made an election under subsection (1),—
                    1. the company revokes the election by notifying the Commissioner; or
                      1. the Commissioner gives the company notice revoking the election.

                        1. For the purposes of subsection (7), the company ends its status as an Australian ICA company—

                        2. from the day on which the relevant circumstance of ineligibility in subsection (2) applies; or
                          1. for a company that has made an election under subsection (1), unless paragraph (a) or (c) applies, from the last day of the tax year in which the company or the Commissioner revokes the election; or
                            1. for the purposes of section OB 60,—
                              1. when the company notifies the Commissioner, on the date on which the Commissioner receives the notice; or
                                1. on the date set out in the Commissioner’s notice.

                                2. A company that stops being an Australian ICA company for a tax year must nevertheless satisfy all obligations that the company had as an Australian ICA company.

                                Compare
                                Notes
                                • Section OB 2 heading: replaced (with effect on 15 March 2017), on , by section 91(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2(1) heading: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 120(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                • Section OB 2(1): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 120(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                • Section OB 2(2)(a)(i): amended, on , by section 258 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                • Section OB 2(2)(a)(i): amended, on , by section 493(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                • Section OB 2(2)(a)(ib): inserted (with effect on 15 March 2017), on , by section 91(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2(2)(a)(ii): substituted, on , by section 493(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                • Section OB 2(3) heading: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 120(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                • Section OB 2(3): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 120(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                • Section OB 2(3B) heading: inserted (with effect on 15 March 2017), on , by section 91(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2(3B): inserted (with effect on 15 March 2017), on , by section 91(3) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2(7)(a): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 120(5) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                                • Section OB 2(7)(b): replaced (with effect on 15 March 2017), on , by section 91(4) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2(7)(c): repealed (with effect on 15 March 2017), on , by section 91(4) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2(8)(b): amended (with effect on 15 March 2017), on , by section 91(5) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2 list of defined terms resident in New Zealand: inserted (with effect on 15 March 2017), on , by section 91(6) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                                • Section OB 2 list of defined terms resident in New Zealand: repealed (with effect on 1 April 2008), on , by section 379(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).