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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 78: Co-operative companies attaching imputation credits to cash distributions

You could also call this:

“Co-operative companies can add tax credits to cash payouts for shareholders”

If you’re part of a co-operative company that’s an ICA company, you can choose to add an imputation credit to cash you give out to shareholders. This is only for one income year at a time. You can do this if you give money to everyone who was a shareholder during that year. The amount each person gets is based on how much they bought from or sold to the company compared to all shareholders.

You can only do this if the company would normally get a tax deduction for giving out this money. You can’t choose this option if you’ve already chosen a different way to give out cash that year.

To work out how much imputation credit to add, you use a special maths formula. This formula uses the total amount of money given out and the basic tax rate for that year.

Each shareholder gets a share of the imputation credit. This is worked out using another formula that looks at how much of the total payout each shareholder gets.

If your company chooses to treat this payout as a dividend, you can’t claim it as a tax deduction. You need to tell the Commissioner about this choice for it to work.

There might be some changes to how you work out the imputation credit amount in some cases.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518932.

Topics:
Money and consumer rights > Taxes
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OB 78B: Co-operative companies attaching imputation credits to cash distributions to groups, or

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Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 78Co-operative companies attaching imputation credits to cash distributions

  1. On meeting the requirements of subsection (2), a co-operative company that is an ICA company may choose, for an income year, to attach an imputation credit to a cash distribution paid to the company’s shareholders.

  2. A co-operative company may make an election under subsection (1) if—

  3. the distribution is made to all persons who were shareholders of the company at a time during the income year; and
    1. the distribution is based on the proportion for the income year in which the payments to or by a shareholder for their produce transactions are of total payments to or by all shareholders for all produce transactions; and
      1. the company 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 some other provision of this Act; and
        1. no other election for a cash distribution is made for the income year.

          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 (3),—

            • 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 shareholder’s share of the imputation credit attached as described in subsection (3) is calculated using the formula—

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

                  Where:

                  • In the formula in subsection (5),—

                  • shareholder’s distribution is the amount that is the shareholder’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 the total amount of imputation credit attached to the distribution calculated under subsection (3).

                        1. If a co-operative company chooses to treat a distribution as a dividend, it is denied a deduction under section DV 18 (Statutory producer boards and co-operative companies). The company must notify the Commissioner of an election under this subsection under section OB 82(3) for the election to be effective.

                        2. Section OZ 15 (Attaching imputation credits and notional distributions: modifying amounts) may apply to modify subsection (3).

                        Compare
                        Notes
                        • Section OB 78(4)(b): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section OB 78(8) heading: added, on , by section 502 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section OB 78(8): added, on , by section 502 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                        • Section OB 78 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).
                        • Section OB 78 list of defined terms Maori Authority: repealed (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 140(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).