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RE 15: Bonus issues in lieu and shares issued under profit distribution plans
or “How companies calculate tax on bonus shares or profit distribution plan shares instead of cash dividends”
You could also call this:

“Tax on money or benefits you receive from a Maori authority”

When a Maori authority gives you money or adds money to your account, this is called a taxable Maori authority distribution. This is a type of income that you might need to pay tax on.

The Maori authority has to work out how much tax to take from this payment and give to the government. They use a special maths formula to do this. The formula looks at how much money they’re giving you and if there are any credits attached to it.

If the Maori authority doesn’t pay you in cash, they use a different formula to work out the tax. This formula is a bit more complicated, but it still looks at how much they’re giving you and any credits.

In both formulas, there are three important parts:

  1. The tax rate, which is set by the government in another part of the law.
  2. The distribution amount, which is how much money the Maori authority is giving you before any tax is taken out.
  3. The credit attached, which is any extra money the Maori authority adds to help with the tax.

The Maori authority uses these formulas to make sure they’re taking the right amount of tax from your payment to give to the government.

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Next up: RE 17: Replacement payments under share-lending arrangements

or “How to calculate tax on payments replacing share income in lending arrangements”
Next

Part R General collection rules
Withholding tax on resident passive income (RWT)

RE 16Taxable Maori authority distributions

  1. This section applies when a Maori authority makes a payment of resident passive income that consists of a taxable Maori authority distribution in the form of a sum of money or an amount of a credit in the balance of an account with the Maori authority.

  2. The amount of tax for the payment that the Maori authority must withhold and pay to the Commissioner is calculated using the formula—

    (tax rate × (distribution amount + credit attached)) − credit attached.

    Where:

    • Despite subsection (2), if the resident passive income is not paid in cash, the amount of tax for the payment that the Maori authority must pay to the Commissioner is calculated using the formula—

      (tax rate × distribution amount ÷ (1 − tax rate)) − credit attached.

      Where:

      • In the formulas in subsections (2) and (3),—

      • tax rate is the basic rate set out in schedule 1, part D, clause 6 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits):
        1. distribution amount is the amount of the distribution before the amount of tax is determined:
          1. credit attached is the amount of the Maori authority credit attached to the distribution.

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            Notes
            • Section RE 16(4)(a) tax rate: amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).