New tax arrangements to facilitate trans-Tasman investment have been passed in the Australian Parliament to overcome the problem of double taxation, the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, said today.
The reforms are aimed at what is known as the `triangular tax' problem, where Australian and New Zealand shareholders investing through a company resident in the other country that earns income and pays taxes in their own jurisdiction are unable to get imputation credits arising from the payment of such taxes.
The Taxation Law Amendment Bill (No.6) 2003 amends the imputation rules to allow New Zealand companies to enter the Australian imputation system. A New Zealand company will be able to maintain an Australian franking account and attach Australian franking credits to dividends.
Senator Coonan said these reforms will make it easier for Australian companies to expand their operations and shareholder bases in New Zealand.
The measure will enable Australian shareholders of New Zealand companies deriving income in Australia to receive franking credits, and consequently a tax offset, for Australian tax paid on that income.
"This measure fulfils Australia's commitment to the reform of triangular taxation," Senator Coonan said.
New Zealand introduced complementary legislation on 23 June this year.
"Those changes will make it more attractive for Australians to hold shares in New Zealand companies, thereby aiding the flow of investment between the countries," Senator Coonan said.
The reforms enhance the already strong Closer Economic Relations agreement between Australia and New Zealand by further promoting trans-Tasman business.