Trans-Tasman triangular tax - Preface
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This discussion document outlines a proposed mechanism for the reform of the taxation of triangular investment, or "triangular tax", and seeks the views of the public on the details of the proposal.

Under present law, Australian shareholders in a New Zealand company operating in Australia are unable to access Australian franking credits. The same problem applies in reverse to New Zealand shareholders in Australian companies operating in New Zealand. In effect, both groups of shareholders are taxed twice on their income.

We have agreed that the examination of triangular taxation is a worthwhile step in addressing possible barriers to trans-Tasman investment. This is a problem that obviously requires a bilateral solution - one that preserves the tax bases of both countries and is acceptable to government and business in both countries.

To that end, we instructed officials in both countries to develop a workable model that allocates both franking and imputation credits to shareholders in proportion to their shareholding of the company. The mechanism is known as pro rata allocation.

As the next step in the evaluation of the model, before deciding whether to implement it or not, we seek the views of businesses, their tax advisers and other interested parties on its operation. The two governments will use this information in assessing the costs and benefits of implementing the proposed model.