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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 73: Statutory producer boards attaching imputation credits to cash distributions

You could also call this:

“Producer boards can add tax credits to cash payments to members”

If you are part of a statutory producer board that is an ICA company, you can choose to attach an imputation credit to cash payments made to members. This can happen if you pay all members who were part of the board during the income year. The payment must be based on how much produce a member sold, how much they paid in fees, or another way approved by the Commissioner.

The amount of imputation credit is worked out using a special formula. This formula takes into account the total payment and the tax rate. Each member’s share of the imputation credit is then calculated based on how much of the total payment they receive.

If the board chooses to treat the payment as a dividend with an imputation credit, they can’t claim it as a business expense. There’s a special rule in section DV 18 about this.

Sometimes, the amount of imputation credit might be changed by section OZ 15.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518899.

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Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 73Statutory producer boards attaching imputation credits to cash distributions

  1. On meeting the requirements of subsection (2), a statutory producer board that is an ICA company may choose, for an income year, to attach an imputation credit to a cash distribution paid to a member of the producer board.

  2. The producer board may make an election under subsection (1) if—

  3. the distribution is made to all persons who were members of the board at a time in the income year; and
    1. the board proposes to pay the distribution based on 1 of the factors set out in subsection (3); and
      1. the board would, in the absence of this section, have a deduction for some or all of the distribution, whether as an association rebate under subpart HE (Mutual associations) or under some other provision of this Act.

        1. The amount of the distribution must be based on 1 of the following methods of determination, as applicable, for an income year:

        2. all payments for a member’s produce transactions during the income year as a proportion of total payments for all members’ produce transactions during the income year; or
          1. all levies payable by a member for the income year as a proportion of total levies payable by members for the income year; or
            1. another method of determination approved by the Commissioner.

              1. The total amount of imputation credit attached to the distribution is calculated using the formula—

                total net dividend × tax rate ÷ (1 − tax rate).

                Where:

                • In the formula in subsection (4),—

                • total net dividend is the total amount of the distribution excluding the amount of imputation credit:
                  1. tax rate is the basic rate of income tax set out in schedule 1, part A, clause 2 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits) for the income year.

                    1. The amount of a member’s share of an imputation credit attached under subsection (4) is calculated using the formula—

                      (member's distribution ÷ total distribution) × total imputation credit attached.

                      Where:

                      • In the formula in subsection (6),—

                      • member’s distribution is the amount of the member’s share of the distribution excluding the amount of imputation credit:
                        1. total distribution is the amount of the total distribution paid excluding the amount of imputation credit:
                          1. total imputation credit attached is total amount of imputation credit attached to the distribution calculated under subsection (4).

                            1. If a producer board chooses to treat a distribution as a dividend, it is denied a deduction for the amount of the distribution under section DV 18 (Statutory producer boards and co-operative companies).

                            2. Section OZ 15 (Attaching imputation credits and notional distributions: modifying amounts) may apply to modify subsection (4).

                            Compare
                            Notes
                            • Section OB 73(5)(b): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                            • Section OB 73(9) heading: added, on , by section 500 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                            • Section OB 73(9): added, on , by section 500 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                            • Section OB 73 list of defined terms basic rate: repealed, on , by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).