If you’re a New Zealand resident and you’ve received a dividend from your local Power Consumer Trust, you might be wondering how to report it to the Inland Revenue Department (IRD) when filing your taxes. While the Power Consumer Trust dividend is a nice bonus, it’s important to ensure that you report it correctly to stay compliant with the country’s tax laws.

In this blog post, we’ll walk you through everything you need to know about reporting your Power Consumer Trust dividend, from what it is to how you should report it on your tax return.

What is the Power Consumer Trust Dividend?

Before diving into how to report the dividend, it’s helpful to understand exactly what it is.

The Power Consumer Trust (PCT) is a type of trust set up by electricity distribution companies in New Zealand to ensure that profits from the company benefit local consumers, rather than shareholders or external investors. If you’re a customer of one of these companies, you may receive a dividend from the trust.

This dividend is typically paid out annually to the consumers, and the amount you receive depends on the size of the trust’s profits and the number of eligible consumers in your area.

Do You Need to Report Your Power Consumer Trust Dividend?

The Power Consumer Trust dividend is considered income by the IRD, so you must report it on your tax return. This is true even if the dividend is relatively small, as it could impact your overall tax liability for the year. Whether you’re getting a large dividend or just a small amount, the tax rules around income are the same.

The important thing to note is that your Power Consumer Trust dividend is  automatically taxed at the source like your wages are. For individuals the dividend will have tax credits attached to it of 33% meaning that for most reporting the dividend will lead to a credit on taxes and could lead to a refund 

How to Report Your Power Consumer Trust Dividend

Here’s a simple guide to help you report your Power Consumer Trust dividend:

1. Gather Your Information
   First, make sure you have all the relevant details about the dividend. The Power Consumer Trust will typically send out a dividend statement that shows how much you received during the year. This statement should include the total amount of the dividend and may also show any tax already deducted as Imputation Credits and Withholding Tax.
2. Include the Dividend in Your Tax Return
   When you file your annual Income Tax Return (IR3), you’ll need to report the Power Consumer Trust dividend as part of your total income.
   • For most individuals, the Power Consumer Trust dividend will be reported under the “Dividend Income” section of the IR3 tax return form.
   • Make sure to enter the gross amount of the dividend, which is the total amount you received before any tax was deducted. This will be the amount shown on your dividend statement not the amount received in the bank account.
3. Tax Deducted at Source
   The Power Consumer Trusts will deduct resident withholding tax (RWT) before paying out your dividend. The amount of Imputation Credits and RWT will usually be indicated on your dividend statement.
   As tax was already deducted, you can claim this amount as a credit on your tax return, which will reduce the amount of tax you need to pay. The IRD will use this information to adjust your final tax liability.
4. Don’t Forget About Other Forms of Income
   If you receive other types of income, such as wages, investment income, or rental income, be sure to report them as well. The Power Consumer Trust dividend is just one component of your total income, so it’s important to include everything to ensure your tax return is accurate.
5. Use MyIR to File
   You can file your income tax return through the MyIR online portal, which is easy to use and provides clear instructions. If you’re unsure about any part of the process, MyIR offers helpful guidance and tools to make it easier to complete your return.

What Happens If You Don’t Report Your Power Consumer Trust Dividend?

Failing to report the Power Consumer Trust dividend can lead to penalties and interest, so it’s important to include it in your tax return. The IRD may conduct an audit if they believe you’ve under-reported your income, and this could result in fines or additional tax payments.

If you realize you’ve missed something or made a mistake after you’ve filed, don’t panic. You can file an amended return to correct any errors. It’s always better to be proactive and get it right, rather than risk penalties later on.

Final Thoughts

Receiving a Power Consumer Trust dividend is a nice benefit, but it’s important to remember that it’s still considered taxable income. By reporting your dividend correctly on your Income Tax Return (IR3), you can avoid any surprises at tax time and ensure that you’re in compliance with New Zealand’s tax laws.

Remember to gather your dividend statement, report the income in the “Dividend income” section of your return, and account for any tax already deducted. If you have any doubts or need assistance please reach out to as through the website contact form or email us at support@berntsentax.co.nz

By understanding how to report your Power Consumer Trust dividend, you’ll have peace of mind knowing that you’re meeting your tax obligations and making the most of the benefits that the trust offers.