Commission dividend for Auckland households plummets 25% after Vector pay tax change

Entrust’s annual dividend fell to $ 280 for 340,500 Auckland households after they made $ 375 last year.

The community trust is the majority owner of the gas and power lines company Vector, and will pay the dividend starting today.

Tax changes are the main reason for the dividend cut, which will be a blow to Auckland residents facing the economic fallout from Covid-19. A survey conducted last year by Entrust said that 63 percent of households relied on payment to cover the rising cost of living in the city.

The trust says it understands that many people will be “disappointed” by the cut.

In February this year, Vector decided to reduce the dividend allocation credits from 28% to 10.5%. This change means that Entrust has to pay significantly more tax on the dividend it receives from Vector, resulting in a lower amount paid to Entrust beneficiaries than in previous years.

“In previous years, Vector’s tax payments minimized the amount of tax Entrust had to pay before distributing its own dividend,” said Entrust President William Cairns.

Cairns said it was a decision made by Vector’s board, which includes two Entrust members, to manage its tax obligations efficiently.

“We understand that as a result of Vector’s dividend policy, beneficiaries may be disappointed that Entrust’s dividend amount is lower than in previous years,” he said.

The number of homes in the Entrust area, within the boundaries of the old Auckland Electric Power Board, has also increased by 4,000, meaning it is more finely distributed.

Last year the trust paid $ 120 million, but this year it was down to $ 95 million.

Cairns said that in the current economic climate, $ 95 million is still a significant injection into Auckland’s economy.

“This year’s payment comes at a critical time, after the economic impact of Covid-19 and for many families, every dollar counts in the family budget, particularly when other support initiatives are ending, including mortgage holidays and salary subsidy “, said.

Last year’s payment included a $ 15 Transpower payment.

Most of the people have chosen to receive their dividends by direct credit to their bank account, and this has been paid today.

Checks have also shipped today, and people are encouraged to keep an eye on it by mail and wait a few days for New Zealand Post to complete delivery.

Those who receive the dividend as a credit to their energy account will see it on the next available energy bill. “

Entrust owns 75.1 percent of Vector, which last month reported an after-tax profit of $ 97.3 million over the last financial year.

The dividend paid by Vector to all shareholders this year has not changed since 2019, at 16.5 cents per share.

“We appreciate that 2020 has been difficult for many people and we are pleased to be able to pay a dividend this year,” said a spokeswoman.

The company said last year that it would review its dividend policy.

“Currently, Vector has a tax balance credit, so this is one way Vector is managing its tax obligations efficiently.”

Entrust requires Vector to invest $ 10.5 million a year in new energy and underground technologies. There is currently a large scale burial project on Mt Albert around Carrington and New North Rds in progress.