Māori authority credits can be attached to distributions paid to members. These attachments work like company imputation credits.
If you choose not to attach credits, members will be taxed on distributions through their personal income liability.
How Māori authority credits work
Attaching credits means payments to members are not taxed twice. Members can claim Māori authority credits against their own income tax liability.
Most Maori authorities need to keep records of how their credits are handled. Details of Māori authority activity and possible credit use are generally kept in a Māori authority credit account (MACA).
Attaching credits to distributions
There are limits on how many credits can be attached to distributions. The maximum credit ratio is 17.5:82.5. This means up to $17.50 can be attached to every $82.50 of dividends.
The maximum ratio makes sure Māori authorities do not pass on more credits than profit tax they have paid.
The first taxable distribution made by Māori authorities are known as benchmark distributions. These set the ratio between credits and dividends for the rest of the tax year. Distributing with more credits than your benchmark ratio will lead to an allocation debt penalty.
The benchmark ratio can be changed by completing a Ratio change declaration - IR407.