Fund manager to lose PIE status
Thursday, March 24th 2016, 4:19PM
Property investor Augusta Capital may lose its PIE tax status due to an increase in the market value of its funds management business.
This loss of PIE status arises due to the market value of the funds management business and other subsidiaries exceeding 10% of Augusta’s total assets.
PWC has valued the funds business between $28 million and $34.8 million
If it loses PIE status Augusta will need to withhold tax from dividend payments to New Zealand resident shareholders at up to a level of 33%, as compared to the current maximum prescribed investor rate of 28%, unless they have a withholding tax exemption.
While, imputation credits will continue to be attached up to the maximum level of 28%, this is dependent on available imputation credits. In recent times the ACL dividend has been fully imputed as the dividend pay-out ratio has been approximately 75-80% of operating earnings.
Based on the current annual dividend of 5 cents per share, the net effective dividend rate under the non-PIE regime will be 4.64 cents per share for a shareholder with a 33% withholding tax rate and 33% final tax rate. The effective dividend for a shareholder, who is a PIE entity themselves, will remain unchanged.
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