Prime Minister John Key has welcomed a decision by Australia to review the tax treatment of the New Zealand earnings of Australian companies.
The thorny 'imputation credits' issue has long been a source of dispute between Australia and New Zealand. Australian companies such as ANZ, NAB, Westpac, CBA, APN and Fairfax earn over NZ$1 billion in profit each year from New Zealand and pay tax in New Zealand, but Australian investors do not get tax credits for these earnings.
The Australian Government does not recognise the tax paid on those earnings in New Zealand, meaning the Australian owners of those companies do not receive the 'franking credits' attached to those earnings. New Zealand has long argued Australia should grant those earnings tax credits, which would encourage more Australian investment in New Zealand.
However, Australia has regularly rejected the plea given it would cost hundreds of millions in lost tax receipts from the investors in those Australian-owned companies. New Zealand owned companies earn far less in Australia than vice versa, meaning the Australian government bears the biggest burden of mutual recognition of tax credits.
Key said in a statement after a joint meeting of the New Zealand and Australian cabinets in Sydney that he "welcomed Australia’s decision to make Mutual Recognition of Imputation Credits a matter for discussion in Australia’s Tax Reform White Paper."
Elsewhere, Key said Australian Prime Minister Tony Abbott had invited New Zealand to join the Business 20 (B20), which runs parallel to the G20 meeting being hosted by Australia on November 15/16.
He said they had also agreed that an "Australasia Business Week" showcasing their economies to the world would be held at the same time as the B20 summit in Sydney in July.
“This is a great opportunity for New Zealand and Australia businesses to work together to advance trade and economic reform," Key said.
Key also welcomed Abbott’s confirmation that Australia would extend access to students under the Higher Education Loan Program to long-term New Zealand residents in Australia.
“It is in both countries best interest to provide educational opportunities for young people," he said.
The Prime Ministers also announced that international visitors will only need one visa to attend games in next year's Cricket World Cup, which is being co-hosted by New Zealand and Australia.
The two Prime Ministers also released a joint response to a study by the New Zealand and Australia Productivity Commissions.
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