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Inland Revenue

Tax Policy

PUBLISHED 15 September 2015

Loss grouping issues paper released

An officials’ issues paper dealing with the taxation consequences of loss grouping and the implications for imputation credits was released today. For more information see the media statement and the issues paper.

Hon Todd McClay
Minister of Revenue

15 September 2015

Media statement

Paper addresses loss grouping tax issues

Revenue Minister Todd McClay says that a consultation paper released today focusing on the question of loss grouping and imputation credits could remove obstacles to business growth and provide greater investment opportunities for mum and dad investors.

“Companies paying dividends to shareholders can pass credits (known as imputation credits) on to those shareholders for tax paid on profits at the company level.

“This is good because it makes investment more attractive,” says Mr McClay.

“However if a company has made a loss it may elect to make the benefit of that loss available to another company in its group that is in profit. This is known as loss grouping. But by doing so, this means less tax is paid, and therefore fewer imputation credits to pass on to shareholders.

“If the companies are not wholly owned, the dividend will be taxable, in some cases, resulting in tax to pay for the shareholder, effectively reversing the benefit of the loss grouping,” Mr McClay says.

He says that this is causing problems for businesses and distorting economic decisions.

“For example, the current rules make it more attractive for a company considering buying shares in a company to actually acquire 100 per cent of that company simply to avoid this tax issue,” says Mr McClay.

This can mean that everyday investors can be shut out of investing in successful companies because having multiple investors can be a disadvantage and a barrier to partial corporate listings on the NZX.

“So it’s a good thing for our economy to address this issue. Businesses must be free to make business decisions to enable their business to flourish.

“We want to see more businesses listing on the NZX resulting in a deeper capital market and New Zealanders able to take advantage of those investment opportunities,” says Mr McClay.

The officials’ issues paper Loss grouping and imputation credits can be found at The closing date for submissions is 27 October 2015.

Media contact: Lesley Hamilton  027 490 1345