Entrust is seeking a legislative change to fix a long-standing problem with the over-taxation of the Entrust annual dividend payment to Entrust beneficiaries. 70% of Entrust beneficiaries are being over-taxed, which results in the government unfairly taking around $14 million a year from predominantly lower income Auckland households. We do not think this is fair and we want to see it resolved, especially given the current economic climate.
Sign the petition, and help us put $14 million back in the pockets of Aucklanders
Every year Entrust distributes a dividend to beneficiaries, and every year Aucklanders miss out on around $14 million from that dividend due to being over-taxed by the government.
For Aucklanders earning the least, that’s up to $90 a year of their dividend gone from their back pocket.
The most frustrating part? Changing the law to fix this is easy, we just need someone in government to care. You can help us send a message to government by signing the petition, and sharing this message with your friends and family so they can too.
You can read the full wording of our petition here.
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Questions & Answers
If you are one of about 250,000 lower-income people in the Entrust district earning less than $70,000, you will have been over-taxed by up to $90 on your Entrust dividends in recent years.
The exact amount of over-taxation depends on your individual circumstances and the amount of the Entrust dividend. In 2021 the Entrust payment was $303 made up of a $283 dividend with $20 from Vector, but beneficiaries on the lowest tax rate were over-taxed by $90.63 and as a whole Aucklanders were over-taxed by approximately $14.2 million.
In September 2022, the Entrust payment was again $303 with a dividend of $273 plus $30 from Vector. Beneficiaries on the lowest tax rate were over-taxed by $86.53 and as a whole Aucklanders were over-taxed by approximately $13.6 million.
The new IRD auto tax return system makes it difficult for individual taxpayers to complete tax returns to get the over taxation refunded to them.
It is even more complicated because the Entrust dividend comes from dividends paid to us by Vector that fall in two different financial years. To do the tax return properly, you have to account for the tax in both those years, not just the year you received the Entrust dividend.
Additionally, a beneficiary would need to know the following to be able to do a tax return:
- How the trust tax rules work in some detail including what amounts constitute trustee income (taxed at the trust level) and what is beneficiary income (taxed in the hands of beneficiaries).
- How imputation works
- The difference between imputation credits and resident withholding tax credits
If you receive a benefit from the Government, your situation is more complicated and you would be best to seek advice from an accountant to work out the best approach for your circumstances.
Completing a tax return is not a simple process, it is complex and confusing and we have accountants contacting Entrust from time to time about this. A change in law would resolve this.
The changes from 1 April 2020 requiring IRD numbers to be provided to IRD by payers of interest or dividends does not apply to Entrust as we are not a company. Having said that, Trustees always have the beneficiary interests top of mind so we have had ongoing conversations with IRD to establish if IRD could use this information if we could find a way to collect IRD numbers from beneficiaries.
After a lot of back and forth, IRD have advised that beneficiary IRD numbers would not resolve the over-taxation issue as the majority of our beneficiaries are paid the dividend under a joint name and the dividend is not split out to each person, whereas IRD applies tax rates to individuals or single entities. IRD have advised this is an issue they have no way to resolve.
We have sought advice from tax specialists who have advised the most viable legislative solution would be to allow Entrust to be taxed as a Listed Portfolio Investment Entity (PIE).
Broadly this uses the tax treatment applying to KiwiSaver. Entrust would be taxed at either a 17.5% rate (our preference as this rate prevents half of beneficiaries from being over-taxed) or 28% (the normal PIE rate).
The change is a simple one and would require minor amendments to the Income Tax Act.
We have been talking to the Government about this issue since 2017, including discussing the issue with Inland Revenue and writing to consecutive Governments, but to date the issue hasn’t been resolved. We don’t think that’s fair to our beneficiaries.
You can help us send a message to government by signing the petition and sharing this message with your friends and family so they can too.