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Inland Revenue

Tax Policy

PUBLISHED 30 November 2004

Securities lending - discussion document

The government today released a discussion document proposing a reform of the tax treatment of securities lending transactions. The aim of the proposals is to bring New Zealand in line with the international treatment of these transactions and to remove barriers to the establishment of an onshore securities lending market. The proposed changes are also intended to address concerns regarding the use of securities lending transactions to trade imputation credits and avoid tax.

For more information see the discussion document, 'Taxing securities lending transactions: substance over form', and the government's media statement.

Hon Dr Michael Cullen
Minister of Revenue


New tax rules for securities lending transactions

A government discussion document released today proposes new tax rules for transactions involving the lending for a fee of securities such as shares, units and bonds.

"The aim of the proposed changes is to help remove barriers to these commercial transactions and improve New Zealand's reputation as an investment destination," Revenue Minister Michael Cullen said today.

"Unlike many countries, New Zealand taxes securities lending on the basis of legal form rather than economic substance, which may account in part for the relatively small local market in these transactions.

"Other benefits of the new rules will be greater consistency with other tax jurisdictions, especially Australia, greater consistency with the treatment of other commercial transactions, and increased taxpayer certainty.

"Another important feature of the proposed package is the introduction of anti-avoidance rules to prevent the use of securities lending to give rise to undue tax advantages or tax avoidance. The focus of the rules will be on economic ownership and preventing shareholders selling imputation credits.

"Depending upon the result of the consultation, changes are expected to be included in amending legislation next year," Dr Cullen said.

The closing date for submissions on the proposals is 31 January 2005.

The discussion document, 'Taxing securities lending transactions: substance over form', is available at and

Contact: Patricia Herbert [press secretary] 04-471-9412 or 021-270-9013. E-mail [email protected]
Technical inquiries to Helen Mackenzie [tax advisor Dr Cullen’s office] 471-9728