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Income Tax Act 2007

Memorandum accounts - Terminating provisions

OZ 9: Benchmark dividends: ratio change

You could also call this:

“How a company's dividend ratio changes are handled during a transitional period”

This section talks about what happens when a company pays a dividend during a special time called the transitional period. If the company pays a dividend that is considered a “later dividend”, and the earlier dividend (called the benchmark dividend) had a special ratio of 30/70 or was affected by another rule, some special rules apply.

If the new dividend has a lower imputation ratio than the earlier one, the law treats it as if it had the same ratio as the earlier one. This happens in two situations:

  1. When the earlier dividend was affected by a special rule, but the new dividend isn’t because the company doesn’t have enough credit balance.

  2. When the earlier dividend had a 30/70 ratio for other reasons, and the new dividend has a 28/72 ratio.

This rule helps to keep things fair and consistent when companies pay dividends during this special period.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1632273.

Topics:
Money and consumer rights > Taxes
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Part O Memorandum accounts
Terminating provisions

OZ 9Benchmark dividends: ratio change

  1. This section applies when—

  2. a company pays a dividend in the transitional period; and
    1. the dividend is a later dividend for the purposes of sections OB 61(4) and OC 28(4) (which relate to the benchmark dividend rules), as applicable; and
      1. the relevant benchmark dividend—
        1. was 1 to which section OZ 8 applied; or
          1. has a ratio of 30/70, for a reason other than the application of section OZ 8.

          2. If, in the cases set out in subsection (3), the imputation ratio of the later dividend is less than that of the relevant benchmark dividend, the ratio is treated as the same as that of the relevant benchmark dividend.

          3. The cases referred to in subsection (2) are the following:

          4. in the case of a benchmark dividend described in subsection (1)(c)(i), section OZ 8 does not apply to the later dividend through the lack of a relevant credit balance described in section OZ 8(1)(b):
            1. in the case of a benchmark dividend described in subsection (1)(c)(ii), the later dividend has a ratio of 28/72.

              Notes
              • Section OZ 9: added, on , by section 520 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
              • Section OZ 9(1)(c)(ii): amended, on , by section 16(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
              • Section OZ 9(2): amended, on , by section 251(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section OZ 9(3)(b): amended, on , by section 16(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
              • Section OZ 9 list of defined terms FDP ratio: repealed, on , by section 251(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
              • Section OZ 9 compare note: repealed (with effect on 1 April 2008), on , by section 119 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).