Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Loophole in unit trust tax rules to be closed

6 November 2001 Media Statement

Loophole in unit trust tax rules to be closed


A possible loophole in the law that may allow unit trust managers to take advantage of excess imputation credits to achieve an unintended windfall gain at a potential cost to the revenue of $30 million is to be closed.

“The change will clarify that managers cannot take advantage of section CF 2(15) of the Income Tax Act to generate excess imputation credits following a simple redemption of units,” Revenue Minister Michael Cullen said.

"Investors in unit trusts usually dispose of their units by selling them back to the unit trust manager at market value. The manager then redeems them at the same time with the unit trust. This is usually a straightforward operation in which the manager does not make a cash gain or loss.

"The government is aware that some managers are trying to use the excess imputation credits arising from these transactions to offset their other income. It was never the intention of the law that imputation credits gained in this manner should be used in such a way.

"The law will be amended to ensure that when unit trust managers redeem units in the ordinary course of their business they will not be able to use the excess imputation credits arising from any dividend received if it merely reflects the manager's purchase costs of the units.

"The change, once enacted, will apply from today with effect from 1 April 1996, when the relevant rules came into force. It will not apply to unit trust managers who advised Inland Revenue before the date of this announcement that they intended to adopt or had adopted the position that this proposed amendment addresses.

"The amendment will be included in the tax bill to be introduced in December.

"The bill will include another technical change that will be welcomed by the unit trust industry because it removes a longstanding tax problem faced by the industry. The problem is known in the industry as the 'negative' dividend' issue. The change will allow unit trusts to use lost available subscribed capital that arises when units are redeemed to cover shortfalls in their imputation credit accounts," Dr Cullen said.

ENDS


© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Budget 2022


At base, the political biffo back and forth on the merits of Budget 2022 comes down to only one thing. Who is the better manager of the economy and better steward of social wellbeing – National or Labour? In its own quiet way, the Treasury has buried a fascinating answer to the “who’s best at running an economy during a crisis?” question, at page 57 of the Fiscal Strategy section...
More>>



 
 

Government: Helps Supermarket Shoppers Get A Fair Deal
Urgent Budget night legislation to stop major supermarkets blocking competitors from accessing land for new stores has been introduced today, Minister of Commerce and Consumer Affairs Dr David Clark said... More>>


Budget 2022: A Secure Future In Difficult Times
Budget 2022 will help build a high wage, low emissions economy that provides greater economic security, while providing support to households affected by cost of living pressures... More>>

ALSO:

Budget: Climate Investments Provide Path To Economic Security
The Government is investing in New Zealand’s economic security by ensuring climate change funding moves away from short-term piecemeal responses and towards smart, long-term investment... More>>

ALSO:



National: Jacqui Dean To Retire From Parliament In 2023

Waitaki MP Jacqui Dean has announced that she will not be seeking re-election at the 2023 election. “I have advised the President and Leader of the National Party that I have decided not to put my name forward... More>>

Classification Office: Following Decision To Ban Manifesto The Buffalo Mass Shooting Livestream Is Now Banned
The livestream video of yesterday’s mass shooting in the United States has now been banned, Acting Chief Censor Rupert Ablett-Hampson announced this morning. The decision follows on from his decision yesterday to call in and ban the ‘manifesto... More>>

Borders: New Zealand Poised To Welcome International Students Back
New Zealand is fully reopening to international students and the Government is committed to help reinvigorate and strengthen the sector, Education Minister Chris Hipkins said today... More>>

 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels