Tax on dividends after credits.
Tax still to pay on the dividend
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Net dividend after all tax
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Your breakdown
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Why your dividend is taxed twice over, then credited
A New Zealand company pays 28 percent company tax on its profit before it can pay you a dividend. Without a fix, that same money would then be taxed again in your hands as income, which is double taxation. The imputation system stops that. The company attaches an imputation credit for the tax it already paid, you gross the dividend back up to its pre-tax amount, calculate tax at your marginal rate, then subtract the credit. You only pay the gap between your rate and the 28 percent the company already covered.
This tool does that whole dance for you. Enter the cash dividend you received, your marginal rate, and whether the dividend is fully imputed. It grosses up the cash for the 28 percent credit, taxes the grossed-up figure at your rate, deducts the credit, and shows what is still owing plus your net dividend after all tax.
Working a $5,000 imputed dividend through the gross-up
Take a $5,000 fully imputed cash dividend received by someone on the 33 percent rate. The credit is the cash times 28 divided by 72, because 72 percent of the pre-tax profit is what became the cash payout. That is $1,944.44. Gross the dividend up to $6,944.44, tax that at 33 percent, and you get $2,291.67. Subtract the credit and $347.22 remains.
In practice you rarely write a separate cheque for that $347.22. The company usually deducts resident withholding tax at payout to bring the total tax up to 33 percent, which is exactly this gap, so it has already been handled before the cash hits your account. The chart shows where the grossed-up $6,944 goes: most is covered by the company credit, a slice by RWT, and the rest is your net cash.
The 33 percent sweet spot, and who sits outside it
Because imputation credits plus RWT bring a fully imputed dividend up to 33 percent total tax, someone on the 33 percent rate comes out square, nothing more to pay and nothing back. The two edges are where it gets interesting. A 39 percent earner still owes a little at the end of the year, because RWT only tops the tax up to 33 percent, leaving a 6 percent gap on the grossed-up amount that the calculator captures. A lower earner, say on 17.5 percent, has had more tax credited than they owe. Here is the catch most people miss: excess imputation credits are not refunded in cash the way an RWT overpayment is. They convert into a loss that can offset other income, but you will not get a cheque for the difference.
No capital gains tax on the shares themselves
This tool covers tax on dividends only. The shares are a separate question, and New Zealand has no general capital gains tax, so selling your NZX holdings for a profit is usually not taxed at all, provided you are a long-term investor rather than a trader. The exception worth knowing is overseas shares, where the foreign investment fund rules can tax you on a deemed return regardless of dividends, once your offshore holdings cost more than $50,000. For a portfolio of plain New Zealand shares, though, dividends are the only recurring tax event, which is part of why local investors lean on imputed dividend payers. A practical tip: set your prescribed investor rate and your RWT rate correctly with your broker or share registry, because an out-of-date rate is the usual reason a dividend gets under or over taxed.
What does an unimputed dividend mean for my tax?
If a dividend carries no imputation credits, often the case with some property and offshore-sourced payouts, the full cash amount is taxable at your marginal rate with nothing to offset it. On a $5,000 unimputed dividend a 33 percent taxpayer owes the full $1,650, not $347. Always check the dividend statement for the imputation credit attached before assuming you are square.
Do I need to declare dividends if RWT was already deducted?
Yes. Even when RWT and imputation credits have been deducted, the dividend income and the credits both belong in your tax return or are reflected in Inland Revenue’s automatic income assessment. For most salary earners the income is pre-populated, but if you are on the 39 percent rate or have other income, declaring it is how the final top-up gets calculated.