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Trans-Tasman Tax Reform: The Real Story


  • David G. Dunbar


In 2003 the Australian and NZ governments enacted legislation to permit trans-Tasman companies to allocate to their shareholders franking credits and imputation credits. This legislation is known as the pro rata allocation method, and was heralded as a major improvement in trans-Tasman taxation. This paper critically evaluates the claims which have been made by the Australian and NZ governments about the reduction in personal income tax which the pro rata allocation solution will deliver to individual share holders in a typical trans-Tasman company. The paper concludes that the benefits have been significantly over stated and that a more effective legislative solution would have been the streaming model. Accordingly the pro rata allocation solution is unlikely to discourage trans-Tasman companies from engaging in profit repatriation strategies to overcome the inherent tax inefficiency associated with the pro rata allocation solution.

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  • David G. Dunbar, 2006. "Trans-Tasman Tax Reform: The Real Story," Taxation eJournal of Tax Research , ATAX, University of New South Wales.
  • Handle: RePEc:nsw:discus:322

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    Australia; New Zealand; tax; pro rata allocation; streaming model; tax reform;
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