Fonterra has updated the tax treatment of dividends paid on supply-backed shares, following the Co-operative’s shift to paying tax in New Zealand from 2025. This change comes after Fonterra fully utilised its New Zealand tax losses in 2024.

From 2025 onwards, Fonterra will generate imputation credits due to its New Zealand tax payments. To ensure all shareholders can benefit from these credits, Fonterra has revised the tax treatment of supply backed shares:

- Previously, dividends on supply-backed shares were treated as a business expense paid by Fonterra to farmer suppliers. This tax deduction reduced the amount of tax payable by Fonterra but meant imputation credits were not able to be attached to supply-backed shares.
- Going forward, dividends on supply-backed shares are not being deducted for tax purposes by Fonterra. This change increases the amount of tax payable by Fonterra but means that imputation credits can now be attached to dividends on all Fonterra shares (supply-backed shares and ‘dry’ shares) and available to offset tax payable by shareholders.
- Dividend payments on all shares are now subject to Resident Withholding Tax (RWT), but the RWT payable is reduced by the amount of the imputation credits.

What this means for shareholders

Farmer shareholders can now offset imputation credits attached to their dividends against their income tax liability. They may also be eligible to apply for a Certificate of Exemption in relation to Resident Withholding Tax, for example in the case of charities.

For accountants:

Fonterra encourages you to discuss these changes with your Fonterra clients to ensure they understand the implications for their tax positions.

Please see further information about the tax change here or watch a recording of the recent webinar on this topic.