Imputation credit rule change makes Taxi more accessible
A key amendment to the imputation credit rules means that, from 1 April 2025 when the change takes effect, more taxpayers will be able to access tax-backed working capital through Taxi, without impacting their imputation credit account (ICA).
What’s changed?
The change clarifies that there will be no debit to a taxpayer’s ICA as a result of a 'transfer by way of security' over a tax pool deposit, which is what occurs between a taxpayer and Taxi when a taxpayer uses its tax deposit as collateral to access business funding via Taxi.
It means that:
- No debit arises in the taxpayer’s ICA account when they access funds through Taxi.
- An ICA debit arises only if the taxpayer defaults on repayment, and the ownership of the tax deposit transfers to Taxi.
Inland Revenue (IR) has issued a Product Ruling, which confirms this is the Commissioner's view on how the tax law applies in relation to Taxi.
Why that matters
The change removes ICA compliance concerns, making it easier for more provisional taxpayers to use their tax pooling deposits to secure tax-backed working capital with Taxi.
It ensures that a transfer by way of security over a tax pool deposit is not treated as a sale of the tax pool deposit, enabling a taxpayer to retain their imputation credits.
The definition of 'transfer' as it applies for sections OB 6(1), OB 35(1), OP 9(1) and OP 33(1) of the Income Tax Act 2007 will be amended, to make it explicit that a transfer by way of security, unlike a sale or other absolute transfer, should not trigger a transfer of the related imputation credits.
How we got here
Following a submission by Taxi Co-Founder Josh Taylor, IR recommended this remedial change as part of the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures Bill), which the Finance and Expenditure Select Committee endorsed.
The Bill received Royal Assent on 29 March 2005 and the amendment will take effect from 1 April 2025.
A step forward for taxpayers
This amendment is positive for taxpayers as it simplifies access to affordable business funding and strengthens the benefits of tax pooling.
Tax Traders wants to thank policy officials at IR and members of the Finance and Expenditure Select Committee for recognising the importance of confirming that a transfer by way of security does not trigger a transfer of imputation credits.
The amendment will help ensure that the full benefits of using a tax deposit to access working capital through Taxi are available to more of your clients.
Further information
For more details on how Taxi can benefit your clients, or to discuss imputation credit issues, feel free to contact the team at Tax Traders.
References and resources
Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Bill
Finance and Expenditure Select Committee’s report on the Bill