I'm wondering how excess imputation credits are treated.
For example say I receive dividends from Turners which are fully imputed. However, in retirement my margin tax rate is 17.5%. Can I use those excess imputation credits to offset tax payable on dividends from another NZ company that are not fully imputed?
Also, can excess imputation credits be offset again other income ?
Thanks
Quote from: Dolcile on Jan 12, 2025, 04:03 PMI'm wondering how excess imputation credits are treated.
For example say I receive dividends from Turners which are fully imputed. However, in retirement my margin tax rate is 17.5%. Can I use those excess imputation credits to offset tax payable on dividends from another NZ company that are not fully imputed?
Nein. An NZ company zhat does not pay income tax vill be vorced to deduct vithholding tax at zource eef zhey pay you a dividend. You cannot use tax paid by another NZ company to offset zhis tax liability.
Quote from: Dolcile on Jan 12, 2025, 04:03 PMAlso, can excess imputation credits be offset again other income ?
Ja. You can offset excess NZ imputation credits against a tax liability on dividends vrom Australian companies, vhich generally do not deduct NZ vithholding tax at zource.
RB
Quote from: Dolcile on Jan 12, 2025, 04:03 PMI'm wondering how excess imputation credits are treated.
For example say I receive dividends from Turners which are fully imputed. However, in retirement my margin tax rate is 17.5%. Can I use those excess imputation credits to offset tax payable on dividends from another NZ company that are not fully imputed?
Also, can excess imputation credits be offset again other income ?
Thanks
"Excess imputation credits" is a specific term used by the IRD which is slightly different to what you describe. I think you are referring to imputation credits that are over and above your tax liability for a single shareholding (e.g. TRA). Whereas IRD use this phrase when looking at your entire tax liability - more on this later.
Imputation credits are much like any other tax credit - they can be used to offset your personal tax liability. So I believe* the short answer is 'yes' to both your questions. {*I say I 'believe' the answer is yes based on my knowledge of taxable income which is pretty bog standard (e.g. wages, pension, rent, interest, dividends & self employment etc) - there may be some weird and wonderful exceptions for this which are outside my circle of expertise.}
So how does it work? Let's assume you have PAYE income (incl. the pension), dividend and interest income and you have tax credits for PAYE, RWT and imputation credits. Let's also assume that in preparing your tax calculation you end up being owed a large refund. If the refund due to you is greater than the sum total of all of your PAYE + RWT deductions, the IRD will refund the PAYE & RWT values only. They do not pay a refund on the imputation credits. In this case, the difference between your refund due and refund paid out is what the IRD refer to as 'excess imputation credits' and these are carried forward to the next tax year and are able to be used against next year's tax liability.
A worked example using made up numbers: assume PAYE deductions of say $11k, RWT deductions of $9k, imputation credits of $20k. Total tax credits is therefore $40k. For whatever reason your tax liability is say $15k but you have tax credits of $40k. You are owed a refund of (40-15) $25k but the IRD will only pay out (11+9) $20k of the refund - being the tax deductions paid in cash (rather than in kind). The unpaid refund of (25-20) $5k is what the IRD call 'excess imputation credits'.
I trust that helps.
Quote from: Dolcile on Jan 12, 2025, 04:03 PMI'm wondering how excess imputation credits are treated.
For example say I receive dividends from Turners which are fully imputed. However, in retirement my margin tax rate is 17.5%. Can I use those excess imputation credits to offset tax payable on dividends from another NZ company that are not fully imputed?
Ze key to understanding zhis eez een ze name 'imputation
credits'. You are being given 'credit' vor tax paid by zomeone or zometheeng else (an NZ company een thees case). Ze reason 'imputation credits' are not '
refundable' to you, eez zhat you never paid zhem een ze virst place! Ze government eez not een ze business of 'giving back' correctly calculated tax paid by a company to you.
RB