Getting more from your investment in NZ businesses

December 3, 2019

Philanthropy New Zealand is continuing to lobby for the implementation of an imputation credit refund scheme for charities who invest in New Zealand companies.

Chief Executive Sue McCabe says, “we surveyed members and found there to be strong support for this kind of scheme. The current situation is inconsistent with charities’ tax-exempt status and unfair to a sector that makes a massive contribution to the well-being of New Zealanders.”

PNZ and a member group is now seeking a follow-up meeting with the Minister for Revenue Hon Stuart Nash to discuss an imputation credit refund scheme in more detail and intends to advocate more widely on this issue in 2020.  This follows an initial meeting with Minister Nash late last year.

The member survey also revealed mainly positive support for a minimum distribution of funds being expected from charities claiming imputation credit refunds.  Accumulation is a topic of interest in New Zealand and was raised in last year’s Tax Working Group. It relates to trusts and foundations attracting tax concessions but not distributing their funds for public benefit.

PNZ and a core group of members (including representatives from J R McKenzie Trust, the Tindall Foundation, Nikau Foundation, Rātā Foundation, Foundation North, and Perpetual Guardian Trust) believe that any set rate of distribution would need to be appropriate to the New Zealand setting and different charity types (which was the main issue raised in the survey feedback) and reviewed post implementation.  Member feedback suggested an annual distribution rate of between 2-3% of equity might be appropriate.

There was also support amongst survey respondents for the proposal that public accountability for an imputation credit refund scheme would be increased by ensuring that eligible charities are registered with Tier 1, 2 or 3 accounting standards and publish audited accounts.

We would welcome any views on this issue directly or you can head to our Members hub to discuss this on our Research & Policy forum.

Please let us know if you wish to be involved in any forward engagement.  You are also free to share this article with those you think will be interested.

What are imputation credits?

Dividends paid by companies to shareholders can have imputation credits attached.  This means the company passes on any credit for tax paid at the company level to shareholders.  Shareholders can then use that imputation credit to offset other income tax.

But, tax-exempt charities currently miss out on this benefit because they do not pay other income tax.