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Joint investments

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Each of the owners of a joint investment is taxable based on their share of ownership of the investment. It is important to accurately allocate the income to each owner to ensure that their tax and social policy obligations and entitlements are correctly calculated.

Currently, Inland Revenue is only provided with one IRD number for a joint bank account. Unless all joint account owners file tax returns, tax is withheld at the tax rate of the owner whose IRD number is associated with the account. This can result in the income being over or under taxed where the owners are on different marginal tax rates. 

To pre-populate return information and withhold tax at the right rate, Inland Revenue would need the IRD numbers of all account owners to allocate the income between them. There are three potential options for allocating income:

Option 1 (as shown in diagram one):  Joint investments are treated the same way as they are currently, that is, the income is allocated to the person whose IRD number is associated with the account, and it remains the responsibility of each owner to allocate the income between them.

Option 2 (as shown in diagram two):  The investment income payer splits the income and tax withheld among the owners according to their ownership proportions, and passes this information on to Inland Revenue.

Option 3 (as shown in diagram three):  The payer informs Inland Revenue that the taxpayers are operating a joint account.  Inland Revenue then prepopulates the information on the assumption that the account is owned in equal shares.  The account owners are then able to adjust their ownership shares if they don’t hold equal proportions.

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