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Companies use an imputation credit account (ICA) to keep track of how much tax they've paid and how much tax they’ve passed on to shareholders or had refunded to them.

The balance of the ICA records how much credit for that tax the company can pass on to shareholders.

An ICA is a memorandum or record keeping account. It's used to complete the company’s imputation returns for each tax year.

Organisations that must keep an ICA

Most New Zealand resident companies need to keep an ICA. Any organisation that's treated as a company for income tax purposes also needs to keep one. This includes:

  • unit trusts
  • cooperative companies
  • life insurance companies
  • statutory producer boards
  • group investment funds (except for certain income).

Organisations that do not have to keep an ICA

You do not need to keep an ICA if you're a:

  • company that is not resident in New Zealand
  • company that is resident in New Zealand, but treated as non-resident because of a double tax agreement (with the exception of the Australian double tax agreement from 15 March 2017)
  • trustee company (except any group investment funds deriving category A income)
  • company whose constitution prevents their income or property being distributed to any proprietor, member or shareholder
  • local authority
  • subsidiary company of the Accident Compensation Corporation to which section 266 of the Accident Compensation Act 2001 applies
  • Māori authority
  • look-through company (LTC).

Exceptions to not having to keep an ICA

If you do not have to pay tax on any of your company's income - you're exempt - you generally will not need to keep an ICA. The exception to this is if the income is exempt because it's one of the following:

  • foreign dividends derived by a New Zealand resident-company or trustee of a group investment fund
  • dividends paid before 1 April 1996 to a unit trust manager or a trustee or manager of a group investment fund
  • inter-company dividends between companies in a 100% commonly owned group.

Our system posts imputation financial transactions to a company’s income tax account.

Imputation return – IR4J with a debit balance

We’ll post the further income tax (FIT) assessment value plus the 10% imputation penalty tax to the income tax filing period where the ICA debit balance is.

Our system then synchronises what the company owes for FIT with what it owes for income tax in the following period reducing that liability. For example, provisional tax amounts before terminal tax. Payment for FIT owing also covers any income tax owing. FIT reduces what is owed in the following period using the earliest due date first.

If the company does not owe provisional tax in the following period, then the terminal tax owing reduces when it files the following year’s income tax return.

Example: Reducing what the company owes for FIT

You file the IR4J for year ended 31 March 2022 with a debit closing balance of $3,000. The FIT amount and 10% imputation penalty posts into the 2022  income tax period.

The company has 3 provisional tax instalments of $2,000 each to pay for the 31 March 2023 year.

The first instalment is reduced to $0 ($2,000 provisional tax less $2,000 FIT). The second instalment is reduced to $1,000 ($2,000 provisional tax less $1,000 FIT). The last instalment remains $2,000.

Last updated: 05 Jun 2024
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