Māori authorities provide benefits to their members through distributions. Not all distributions are taxable, for example, distributions of capital.
Māori authorities are required to deduct tax at 17.5% from any distributions paid to members. When the income is paid out, tax credits for this amount are attached to ensure the income isn’t taxed twice.
The individual will only have to pay additional tax where their marginal tax rate exceeds 17.5%. Māori authority members who don’t give their IRD numbers to the authority have tax deducted at the non-declaration rate of 33% for any distribution exceeding $200. In this case, the distribution will be made up of Māori authority tax credits up to the 17.5% tax rate, and resident withholding tax (RWT) credits up to the 33% tax rate.
Currently, Inland Revenue doesn’t receive any information about individual taxpayers from Māori authorities showing the total distributions received and tax paid. Inland Revenue only receives summary information about the total amount of distributions after the end of the tax year.
More information would be provided, more often
It is proposed that Inland Revenue receive more frequent and detailed information about Māori authority distributions. This will help provide an up-to-date picture of a taxpayer’s income and would enable tax returns to be pre-populated and social policy entitlements to be more accurately determined.
The detailed information required from the Māori authority would be the:
- amount of the distribution;
- recipient’s details (name and address, as well as IRD number and date of birth if held);
- amount of the Māori authority credits; and
- amount of any RWT credits (if any).
This information would be required in the month following the month in which distributions are made to members. Māori authorities are already currently required to send this information to their members when they make distributions. It is also similar to the information banks provide about the interest they pay to their customers.