Fonterra Dividend Payments
- stacey2383
- Jul 30, 2025
- 2 min read
Fonterra is changing the tax treatment of payments made for wet shares from the 2026 income year. These payments will now be treated as dividends for income tax purposes.
Wet vs Dry Shares
Wet shares are those shares that are backed by the supply of milk. Any surplus shares owned in Fonterra over the milk backed supply are called Dry shares. Historically these wet shares were not treated as a dividend payment subject to imputation credits and RWT, only dry shares were. However, now both wet and dry shares will be treated as dividend income in the traditional sense.
Tax treatment of dividends
Dividends are taxable income. To offset the tax payable for the shareholder Fonterra attaches imputation credits to the dividend and withholds RWT. These credits can be used by shareholders to reduce their tax liability.
Sharemilking arrangements
For sharemilkers, the impact of the change will depend on the terms of the sharemilking agreement. Most agreements are a contract for services and the amount paid by the farm owner to the sharemilker is a payment for services supplied. It is not a dividend payment therefore the imputation credits remain with the farm owner shareholder. However, the amount paid to the sharemilker will need to be grossed up for GST.
There are some situations where both the farm owner and sharemilker are Fonterra shareholders, therefore a proportion of the Fonterra dividend will go to the sharemilker along with the associated tax credits.
We encourage farm owners and sharemilkers to review documentation and sharemilking arrangements to ensure clarity under the new treatment.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
The shift in tax treatment regarding wet shares introduces complexities for both farm owners and sharemilkers, particularly in understanding the implications on their financial arrangements. The differentiation between income treatment for wet shares and dry shares is notable. As a result, both parties must consider how the new dividend status of wet shares affects their overall tax obligations. The impact on sharemilkers, especially in relation to Alf and the sharemilking agreements, needs careful evaluation to ensure compliance and optimal tax outcomes.
This shift in tax treatment for wet shares highlights the intricate balance between shareholder rights and tax obligations. The implications for sharemilkers are particularly complex, as their agreements might not classify payments as dividends. It’s crucial for both parties to understand how the change will affect their finances and obligations, especially concerning the treatment of Flamez in this scenario.
The recent changes in Fonterra's tax treatment of payments for wet shares raise some important considerations for shareholders. The transition to classify these payments as dividend income introduces complexities, particularly for sharemilkers. They must navigate the implications of these adjustments, highlighting the need for clarity in agreements. Understanding the role of Jonny Jackpot in this landscape could further illustrate how such changes impact shareholder dynamics.