Why some pensioners missed out on lines company rebate

34 minutes ago

Photo: 123RF

Low-income households, including those on NZ Super, may be entitled to a tax refund on their lines company rebate in some parts of the country.

In many parts of New Zealand, community and consumer trusts own shares in their local lines company. Each year, the company pays a dividend to shareholders.

In most parts of the country, that is applied as a discount on power bills, but in some, such as the Entrust area of Auckland and the Union area of Hawke's Bay, they are paid as taxable dividends and taxed at a rate of 33 percent.

That could mean that someone in a single-person household, who was on a 17.5 percent tax band - as many people living on NZ Super are - would be due a refund of almost $80.

An Inland Revenue spokesperson said people would need a copy of the certificate from the dividend with their personal details on it to request an adjustment through the IR system.

"They can then request a change to their income tax assessment to add the income type 'NZ dividend' in myIR."

Entrust chair Denise Lee said it was aware some people were taxed at a higher rate than necessary.

"Entrust has been campaigning for a fairer tax outcome for its beneficiaries for many years and has made significant efforts to have this issue resolved. This has included ongoing engagement with Inland Revenue and successive Governments, launching a public petition and presenting to the Petitions Select Committee in October 2024.

"Unfortunately, despite these efforts, Entrust has been unable to achieve a fairer outcome."

The dividend is paid to households, while tax is paid individually, which adds complication.

"Beneficiaries have the option to include the Entrust dividend in their tax return, however the IRD auto tax return system makes it difficult for individual taxpayers to complete tax returns to get the over-taxation back. This is due to the complexity of the dividend distribution.

"As an example, the two annual Vector dividends Entrust receives and distributes are taxable in the hands of beneficiaries in two different income years, not just the income year in which the distributions are received by beneficiaries."

Electricity Networks Aotearoa chief executive Tracey Kai said, if a company was paying dividends to a large number of shareholders and did not have information that would justify a different approach, it would generally apply the withholding rules prescribed by Inland Revenue, rather than trying to tailor deductions to each person's marginal tax rate.

"Any adjustment to an individual's final tax position is then handled through the Inland Revenue process. Whether through dividends, discounted power bills, or re-investment in local services and infrastructure, all lines companies are returning profits to their regions."

Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money.