Overtaxed Petition

Thanks for your support of our over-taxation petition

Our petition for a fairer tax deal for Entrust dividend recipients has taken an important step, with the petition presented and tabled in Parliament in May 2024. Thanks to the more than 13,000 people who signed the petition.

Many people receiving the annual Entrust dividend pay more tax than they need to on the dividend amount. That’s because tax rules say that the Entrust dividend must be taxed at the top tax rate of 33%, when the majority of people receiving the dividend are on a lower tax rate than this. The process to get a refund is really complicated because the dividend is split over two tax years, and it requires detailed knowledge of tax and trust law. We think that’s a big ask!

This means that every year Aucklanders miss out on around $14 million from the dividend due to it 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, and getting the money back is not as easy as you might think.

The over-taxation can be refunded if dividend recipients file a tax return and include details of their dividend together with the various tax credits they are entitled to. But, we know that the overwhelming majority of Entrust dividend recipients (especially low-income earners) have not done this in the past.

That’s why we started a campaign to put more money in the hands of Entrust dividend recipients from the get go, rather than have them go to all the trouble of trying to get the money back through the tax refund process.

For more information about our campaign, read our FAQs and watch the overtaxation video below.

Entrust Trustees review the petition. L-R: Alastair Bell, Denise Lee (Chair), William Cairns (Deputy Chair), Dr Paul Hutchison.

Watch the video:

And follow us on Facebook for updates:

Questions & Answers

What is this all about?

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.

Is my dividend being over-taxed?

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 September 2022, the Entrust payment was $303, made up of 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.

Can I do a tax return to claim the over-taxed part of the dividend back?

Yes you can, but 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.

How do you want to change the law?

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.

Why are you talking about this now?

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.