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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

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

You could also call this:

“Co-op companies can attach tax credits to group cash payments”

If you’re a co-operative company that’s an ICA company, you can choose to attach an imputation credit to cash payments you make to groups of your shareholders. This means you won’t be able to claim a tax deduction for these payments. To do this, you need to meet some rules:

You must be registered under the Co-operative Companies Act 1996. The payment must go to all members of a shareholder group during the income year. Your company’s constitution must allow you to make this kind of payment. The amount each member gets is based on how much they’ve paid or received for produce during the year, compared to the total for all group members. Without this rule, you would normally be able to claim a tax deduction for some or all of this payment. You can only make one of these elections for cash payments in a year. You have to tell the Commissioner about your choice.

There’s a special way to work out how much imputation credit to attach to the payment. You use a formula that takes into account the total payment and the tax rate. Each shareholder’s share of the imputation credit is worked out based on how much of the total payment they receive.

Remember, there might be other rules that change how this works, so it’s a good idea to check with an expert if you’re not sure.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS223638.

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Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 78BCo-operative companies attaching imputation credits to cash distributions to groups

  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 members of a group of the company’s shareholders and be denied a deduction for the payment by section DV 18 (Statutory producer boards and co-operative companies).

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

  3. the company is registered under the Co-operative Companies Act 1996; and
    1. the distribution is made to all the persons who are members of a group of shareholders at a time during the income year; and
      1. the company’s constitution permits a distribution to be made to the members of the group; and
        1. the amount of the distribution to a member of the group is based on the payments for the income year to or by the member for produce transactions as a proportion of the total amount of payments for the income year to or by the members of the group 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 under subpart HE and section DV 19 (which relate to mutual associations) or another provision of the Act; and
            1. no other election for a cash distribution is made in the income year; and
              1. the company notifies the Commissioner of the election as required by section OB 82(3).

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

                              Notes
                              • Section OB 78B: inserted, on , by section 71 of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).