Fran O'Sullivan: Work still needed to fine-tune transtasman business settings

A number of issues that impact on the ability of businesses to operate as transtasman companies need to be put on the single market agenda.

Proposals to harmonise banking regulation and supervision, the competition arena and accounting standards have taken centrestage so far.

But those companies which have answered the politicians' calls - floated shares on both exchanges, streamlined their businesses across both countries on operational lines and seconded executives to work across them - are facing new challenges.

At a recent Wellington dinner, Australian Treasurer Peter Costello was challenged by PricewaterhouseCoopers chairman John Shewan to face up to the substantial taxation impediments that impact on transtasman business - particularly dividend imputation and franking credits.

Costello fobbed off Shewan's questions but he subsequently told the Herald he had already solved the major transtasman impediment - triangular taxation - "at some cost to the Australian Treasury".

"I think he had a different point - that is he wants to pay less tax - if I may say so.

"What he was asking for was nothing unique about Australia and New Zealand."

But the fact is, the clamour for a new round of tax reform is increasing.

Shewan's objection - which is shared by many Australian and New Zealand business players - is that under current taxation rules shareholders often miss out by not being able to fully access imputation credits or franking credits.

Under the pro rata rules, franking or imputation credits, are allocated in proportion to the percentage of shareholders residing in either country - not where the tax is paid.

This can result double-taxation when shareholders are not able to access sufficient credits and at company level it can mean a waste of credits.

Companies say the way to resolve the problem is for full mutual recognition of imputation credits between the two markets.

Costello: "I have not stated as a goal a unified taxation system - that is beyond the realms of any discussion I've been involved in."

But if the treasurer wants Australia and New Zealand to bulk up as a single market, he will need to rise above his current stance - If we unify with New Zealand "we will disunify with a number of other countries."

The Australia New Zealand Business Council also argues it it time to update the double tax agreement between the two countries.

In a session with Australasian trade ministers late last year, the council said the double tax agreement between Australia and the United States is more favourable than its Australasian counterpart.

The council was told to gather evidence on taxation impediments and make its case to the finance ministers.

Another major issue is how to assist with the mobility of executives to work on both sides of the Tasman, given the number of companies now reorganising themselves to operate from Sydney and Auckland.

The particular bugbear is superannuation.

Australian executives seconded to New Zealand whose companies continue to contribute to their Australian Superannuation Scheme can find these contributions subject to fringe benefit tax here.

The council wants the requirement to pay FBT wiped so that contributions by seconded employees can be made by the Australian employer without New Zealand tax consequences.

The council says, that New Zealand employees who are seconded to Australia and required to contribute to the Australian Superannuation Scheme, are not able to have these contribution refunded as they were not required to have a visa to work in Australia.

The council wants such employees to be able to have their contributions refunded in line with other foreign nationals working in Australia. What also irks business is the failure of the two Governments to take a comprehensive look at the harmonisation of sectors such as telecommunications and transport.

Australian High Commissioner Allan Hawke has been deputed to push his Government's case for further reform of New Zealand's telecommunications regime.

The Australian-Government controlled Telstra - which will be prepared for full privatisation later this year - argues TelstraClear has not had a fair go in New Zealand.