2 Cheap in imputation credits error
2 Cheap Cars Group says a review of shareholding changes during the 2024 financial year has identified an overstatement of the company’s imputation credit account (ICA) balance.
The overstatement, which appears in statements and annual reports for the 2024 and 2025 financial years, arose from an inadvertent breach of shareholder continuity rules for imputation purposes in October 2023.
The company adds that consequently, imputation credits accumulated before May 30, 2023, were forfeited but credits earned after this date remain available for use.
An announcement to the NZX on August 18 explains the total value of forfeited imputation credits is estimated to be about $3.7 million.
The company’s reported ICA balances for the 2024 and 2025 financial years did not account for this.
2 Cheap Cars says it does not anticipate restating and reissuing the 2025 financial year statements or annual report, subject to guidance received from relevant regulatory bodies and the company’s external advisers. The required correction will be made in the current financial year’s reports.
The group is reassuring shareholders there is no shareholder tax impact from the loss of imputation credits and all imputation credits attached to dividends already paid remain valid.
It continues that shareholders will not face any adverse tax consequences related to dividends paid since May 30, 2023, as a result of the forfeiture of imputation credits.
The statement to the NZX also says there are sufficient imputation credits for future dividends.
“The ICA currently holds enough imputation credits to fully impute future dividends under the existing dividend policy of paying 60 per cent of net profit after tax [NPAT].
“While there are no plans to change the dividend policy, the company will review the availability of imputation credits if the payout ratio were to increase materially, particularly during a period of significant profit growth.”
The company notes its dividend policy of distributing 60 per cent of NPAT as dividends remains unchanged and is unaffected by this adjustment.
Next steps
2 Cheap Cars will file an amended 2024 financial year imputation return with Inland Revenue to reflect the loss of shareholder continuity, including payment of a minor penalty for a temporarily overdrawn balance.
“This adjustment will not affect the company’s ability to pay fully imputed dividends under its current dividend policy,” it explains.
“2 Cheap Cars remains committed to transparency and timely communication with shareholders and will keep the market informed of any material developments.”
