Many people have asked us “What is a dividend?” In short, a dividend is an allocation of profits from a company to its shareholders.
In small businesses it usually works like this – a company has made a profit for the year and paid income tax on that profit at the company tax rate of the time (currently 28%). The shareholders have not yet had the use of this money.
When the shareholders decide they’d like to withdraw this money from the company a dividend needs to be declared. The tax paid by the company is also attached to the dividend so that the shareholders aren’t double taxed on this income. However companies are required to distribute these with 33% tax paid – so the extra 5% tax will be payable by the company at the time it declares the dividend to the shareholders. The shareholder will receive the net amount for their use.
In the shareholders tax return for the year – if they are not in the 33% tax bracket (over $70,000 income) then they will receive a tax refund for the difference between the 33% tax paid on the dividend and their personal tax rate (eg 30%, 17.5% or 10.5%). If the shareholder earns over $70,000 then no extra tax is payable on this dividend.
If you have any questions about dividends (or anything else) please ask us!
About Kiwitax – Award winning business improvement, tax and accounting service
Here’s the thing. As a business, rental property owner or start-up, you get a kick out of having your own gig. But chances are dealing with your tax and accounting leaves you cold. Good news! We love it, so hand it over to Kiwitax and we’ll look after it all for you.
Whether you deal with us online, by phone or drop into our Napier office, you’ll find a friendly, professional hardworking team ready to work with you, however you keep track of your financial information and from wherever you do business. And all for a fixed price.
Plus if you’re at a loss to know how to improve aspects of your business – from growth planning to cashflow management, even tax debt and so much more – we’re all over that too. Our Business Improvement advisors can help you make a plan and put it into action.
Kiwitax are a preferred training provider for Business Improvement services through the Regional Business Partner Network Capability Voucher Scheme. This is a government funded scheme designed to boost business capability by providing funding of up to 50% of approved training programs with specified training providers up to a maximum value of $5000.
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