TAX ON DIVIDENDS

Wanganui Chronicle, Volume 77, Issue 83, 9 April 1934, Page 11

TAX ON DIVIDENDS

AN AUSTRALIAN IMPOST. [ Per Press Association, j AUCKLAND, April 6. An unpleasant surprise has been provided by the Australian Government Tax Department for some shareholders of New Zealand companies whose trading extends to the Commonwealth. Shareholders of some prominent New Zealand companies have received notice of assessment for Federal income tax on their dividends, assessment being based on the proportion of profits earned by companies in Australia. This is' something new in Government taxation, although the Federal Government for some years has taxed the dividends of New Zealand shareholders of companies with head offices in Australia. The Federal taxation law makes possible the taxation of companies in respect of profits earned, and the taxation of the individual shareholder, whether a resident of Australia or not, when those profits are distributed as dividends. Evidently the officials have discovered that they can throw their net a little wider and catch the Now Zealand, shareholder of a New Zealand company operating partly in the Commonwealth. There appears to be no precedent for this action. The law in New Zealand dealing with the taxation of dividends in the l ands of a shareholder appears mild in comparison with the Federal legislation. Actually the Income Tax Department does not levy directly on dividends, but assesses the income derived from that source for the purpose only of increasing the rate of the tax. This applies to dividends received from any New Zealand company or Brtish Empire company trading in the Dominion, which has itself paid tax on its profits. There are very few instances where tax has not already been paid. The method of increasing the rate is explained in the case of the taxpayer with, say, a salary of £7OO and an income from dividends of £2OO. The rate of £7OO is lid in the £1 and on. £9OO Is Id, so that the levy is Is Id on £7OO, only under New Zealand law dividends received from Empire companies not trading New Zealand are not assessed at all. Thus Bank of New South Wales dividends arc brought in for an increasing rate only, while Mount Lyell dividends escape taxation altogether. The only case where a direct tax is levied is on income derived from investments in foreign companies. It is understood that the assessment in cases is retrospective for some years. Principal among the shareholders affected by the new Australian tax are those with holdings in the South British and New Zealand Insurance Companies. No demands have yet been received, but the matter has already been taken up with the New Zealand Commissioner of Taxes, who has stated that he can take no action. A group of shareholders is now considering an appeal against the imposition.