TIB index based from the NZ Tax Information Bulletin - kwister.net
Current Time (NZ)
03:24:18
29 Dec 2024
03:24:18
29 Dec 2024
TIB index based from the NZ Tax Information Bulletin - kwister.net
ON-PAYMENT OF KIWISAVER EMPLOYER CONTRIBUTIONS
The KiwiSaver Act 2006 has been amended to allow Inland Revenue to pay employer contributions to a member's KiwiSaver scheme provider based on employment income information, in advance of the employer paying the contribution to Inland Revenue. Inland Revenue on-pays employee contributions to a member's KiwiSaver scheme provider as soon as practicable after receiving payday employment income information that an employee contribution amount has been deducted from the member's salary and wages. As employment income information is due to Inland Revenue prior to the due date for payment of these deductions, employee contribution can be on-paid to scheme providers sooner than they otherwise would be.OTHER KIWISAVER ADMINISTRATIVE REFINEMENTS
A number of technical amendments have been made to the KiwiSaver Act 2006 and the Tax Administration Act 1994. These seek to enhance Inland Revenue's administration of KiwiSaver, to ensure members receive the correct contribution amounts and facilitate the faster transfer of contributions to KiwiSaver scheme providers.WITHDRAWAL IN CASES OF LIFE-SHORTENING CONGENITAL CONDITIONS
A new KiwiSaver withdrawal category has been introduced to allow members with life-shortening conditions to withdraw their savings before reaching the age of 65 in order to provide for themselves in retirement. The reason for this new category of withdrawal is to recognise that people with life-shortening congenital conditions may not live until the New Zealand superannuation qualification age (currently 65) - the age at which they would ordinarily be eligible to access their retirement savings. While there is an existing withdrawal category for KiwiSaver members who are seriously ill, this does not assist those with life-shortening congenital conditions. This is because the serious illness withdrawal category is only available where the member is totally and permanently unable to engage in work for which they are suited, or else has a condition which poses a serious and imminent risk of death.LIMITING ABILITY TO REOPEN ANY REPAYMENT OBLIGATION RELATING TO YEARS PRIOR TO 1 APRIL 2013
Inland Revenue was required to maintain the student loan rules back to 1992 when the scheme was introduced in case either the Commissioner or the borrower seeks to review a borrower's repayment obligation. Retaining rules back to 1992 has increased the complexity of the scheme over time as changes have been made to the scheme in 21 of the last 26 years. Compliance costs for borrowers are high, as understanding changes to their loan balance is difficult due to historical rules applying for prior years. Administration costs for Inland Revenue are also high, as are the costs of building the rules back to 1992 into new systems and processes, with little benefit.REPLACING THE UNDERESTIMATION PENALTY WITH SHORTFALL PENALTY
Borrowers who earn income other than salary and wages and whose end-of-year repayment obligation on this income is more than $1,000, are required to make interim repayments in the following year. A borrower can base these interim repayments on either the previous year's assessed amount plus an uplift percentage or an estimate of the expected end-of-year repayment obligation.REPAYMENT OBLIGATIONS LIMITED TO CONSOLIDATED LOAN BALANCE
The Student Loan Scheme Act 2011 defines the term 'loan balance' as including core borrowing, loan interest charged and the administration fee, but not including unpaid amounts (which are defaults and late payment interest). The Act also defines the 'consolidated loan balance', which includes the loan balance and unpaid amounts. The Act previously limited a borrower's repayment obligation to their loan balance, rather than their consolidated loan balance, meaning deductions from salary and wages could only occur until the loan balance has been repaid. This prevents salary and wage deductions from being made to repay unpaid amounts. The Act replaces 'loan balance' with 'consolidated loan balance' for the purpose of this limitation. The amendment will allow salary and wage deductions to continue until the consolidated loan balance is fully repaid.REQUIREMENT TO DEDUCT REPAYMENTS FROM SCHEDULAR, ELECTION DAY, AND CASUAL AGRICULTURAL INCOME
Repealing the legislation requiring loan repayment deductions to be made from schedular, election day, and casual agricultural payments at source. Changes enacted as part of the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 require student loan repayments to be deducted from schedular, election day, and casual agricultural income each pay day, with effect from 1 April 2020. These changes were introduced to benefit borrowers in reducing their loan balance and reducing compliance costs by making repayment deductions during the year. However, although consultation undertaken before enactment raised no compliance cost issues for employers, further consultation undertaken as part of implementing these changes has identified significant compliance costs for employers in implementing these changes. Therefore, the changes have been repealed with effect from 1 April 2020.COMMISSIONER MAY NOTIFY EMPLOYERS WHEN LOAN BALANCE CLOSE TO ZERO
Enabling Inland Revenue to notify employers of a borrower's remaining loan balance when the borrower’s loan is close to being fully repaid.REDUCING ANNUAL NET INCOME THRESHOLD FROM $1,500 TO $500
The Act contains a concession where a borrower with less than $1,500 of non-salary and wage income is not required to make loan repayments on this income. This threshold reflects the compliance costs associated with the requirements to file a return and/or notify Inland Revenue of any adjustments to income for student loan purposes.REPLACE REPAYMENT HOLIDAY WITH TEMPORARY REPAYMENT SUSPENSION
Replacing the term 'Student Loan Repayment Holiday' with 'Student Loan Temporary Repayment Suspension'DATE REPAYMENT DEDUCTIONS DEEMED TO BE MADE
Changing the date that student loan repayment deductions are deemed to be made from the 15th of the month to the employee's payday.NOTIFICATION OF INCOME BY OVERSEAS-BASED BORROWERS APPLYING TO BE TREATED AS NEW ZEALAND-BASED
Clarifying that a borrower can notify the Commissioner of their adjusted net income at the time they apply for treatment as being physically in New Zealand or a later date. Borrowers can apply to be treated as being physically in New Zealand if the principal reason for not being in New Zealand is included within a list of categories in the Act, for example, as part of their New Zealand employment the borrower is posted overseas. If granted, borrowers' repayment obligations are income contingent and the loan is interest free for the relevant period. Borrowers can apply for this treatment before, during or after being absent from New Zealand.INTEREST FOR NEW ZEALAND-BASED BORROWERS
Removing the requirement to impose interest and then write it off for New Zealand-based borrowers, for reassessments prior to 1 April 2020. In the past Inland Revenue's system limitations meant that the only way to impose interest on overseas-based borrowers was to impose interest on all borrowers and then to immediately write it off for New Zealand-based borrowers. This has caused confusion and concern to borrowers.ALIGNING THE WRITE-OFF RULES
Amending the Act to enable the Commissioner to write off amounts of $20 or less.EARLY ASSESSMENTS OF STUDENT LOAN ADJUSTED NET INCOME
Allowing valid returns filed before the end of the tax year to be finalised and the borrower's repayment obligation to be calculated.PAYMENT ORDERING RULES
Allocating payments against the oldest unpaid period, and within each period against interest first, then the principal.LOANS RESULTING FROM IDENTITY THEFT
Enabling Inland Revenue to write off loans taken out before 2000, where the Commissioner is satisfied that the borrower did not take out the loan, and the correct borrower cannot be identified.OVERSEAS-BASED BORROWERS WITH SERIOUS ILLNESS OR DISABILITIES
On application, the Commissioner of Inland Revenue may treat overseas-based borrowers who are unable to meet their repayment obligation as a result of a serious illness or disability as being physically in New Zealand.STUDENT LOAN SCHEME (DETAILS OF BORROWER'S CONTACT PERSON) AMENDMENT REGULATIONS 2020
Under the Student Loan Scheme (Details of Borrower's Contact Person) Regulations 2012, borrowers are required to provide the date of birth and IRD number of their alternative contact person when they apply for their student loan. However, at that time, no equivalent regulations were passed for when borrowers apply for a repayment holiday.REFUNDING R&D TAX CREDITS
These changes affect the amount of R&D tax credits that can be refunded to a person. They replace the existing $255,000 refundability cap, corporate eligibility criteria, and R&D wage intensity test with new broader refundability rules.FOREIGN TERTIARY EDUCATION ORGANISATIONS AND CALLAGHAN INNOVATION NOT ELIGIBLE FOR R&D TAX CREDITS
Foreign tertiary education organisations and Callaghan Innovation are excluded from the tax credit, as are their associates and any entities they control. These exclusions apply from the 2019–20 income year.CERTAIN TAX-EXEMPT ENTITIES NOT ELIGIBLE FOR R&D TAX CREDITS
Entities which receive exempt income under sections CW 38, CW 39, CW 40, CW 41, CW 42 and/or CW 55BA of the Income Tax Act 2007 are ineligible for the R&D tax credit from the 2020-21 income year. This exclusion does not apply to industry levy bodies.ALLOCATING CREDITS TO JOINT VENTURE MEMBERS
Entities which receive exempt income under sections CW 38, CW 39, CW 40, CW 41, CW 42 and/or CW 55BA of the Income Tax Act 2007 are ineligible for the R&D tax credit from the 2020-21 income year. This exclusion does not apply to industry levy bodies.INTERNAL SOFTWARE DEVELOPMENT CHANGES
The amendment broadens the definition of internal software development expenditure subject to the $25 million cap, so that it includes all software development expenditure that is not external software development or software development undertaken for the purpose of internal administration.GENERAL APPROVAL OF SUPPORTING ACTIVITIES
Businesses in the general approval regime must obtain approval of their supporting activities for these activities to be eligible for the tax credit. Various amendments were made to the Taxation (Research and Development Tax Credits) Bill in response to submissions made to the Bill at the Select Committee stage. This included an amendment to the scope of general approval. In the Taxation (Research and Development Tax Credits) Bill as introduced, general approval only applied to core activities.GENERAL APPROVAL BINDS THE COMMISSIONER
The general approval regime is intended to provide customers with certainty that their R&D activities will be eligible for the credit during (or soon after) the income year in which those activities take place. Prior to this amendment, general approval was not binding on the Commissioner. This meant she could change her view as to whether an activity was a core or supporting activity, even if she had approved the activity as part of the general approval process.CRITERIA AND METHODOLOGIES APPROVAL MANDATORY FOR SIGNIFICANT PERFORMERS
Criteria and methodologies approval ('CAM') is mandatory for a person who opts into the significant performer regime from the 2020-21 income year. From the 2020-21 income year, all businesses seeking to receive R&D tax credits are required to obtain general approval or, if they qualify, opt into the significant performer regime. A business can be eligible for the significant performer regime if it reasonably expects to have more than $2 million of eligible R&D expenditure for the relevant income year. The significant performer regime is intended to provide large R&D performers with an alternative to the general approval regime, because the compliance and administrative costs associated with obtaining general approval for large amounts of R&D activities may outweigh the benefit of the R&D tax credit for these businessesTIMEFRAME FOR COMPLETING DISPUTES PROCESS
This amendment allows the Commissioner to adjust a person's R&D tax credit claim upwards if the person has initiated the disputes process through issuing a notice of proposed adjustment (NOPA) within four months of filing their income tax return or a year after their income tax return due date.APPROVED RESEARCH PROVIDERS MUST PERFORM CORE R&D ACTIVITIES
To become an approved research provider, a person must be able to perform core R&D activities.DECLINING R&D CERTIFIER APPLICATIONS
The amendment clarifies the circumstances in which a person’s accepted R&D certifier application must be declined, by explicitly providing that the Commissioner must decline a person's application where approving the person as an accepted R&D certifier would adversely affect the integrity of the tax system.REVOKING R&D CERTIFIER STATUS
The amendment extends the circumstances in which the Commissioner must revoke a person's accepted R&D certifier status. The amendment requires the Commissioner to revoke a person's approval as an accepted R&D certifier where the accepted R&D certifier has provided an R&D certificate to another person in the last 2 years who has entered into a tax avoidance arrangement for R&D tax credits, or where allowing the accepted R&D certifier to retain their R&D certifier status would adversely affect the integrity of the tax system.CHALLENGING THE COMMISSIONER'S DECISIONS
The amendment prevents a person from challenging the Commissioner's decisions made for the pilot approval scheme and exceeding the $120 million cap. Pilot approval scheme A pilot approval regime is in place in year 1 of the R&D tax credit scheme (the 2019-20 income year). The pilot is aimed at enabling the Commissioner to test and refine the in-year approval regimes before they are rolled out more broadly in year 2 (the 2020-21 income year).AMENDMENT TO PART-YEAR OVERRIDE OF SECTION LY 3(2)(B)
This amendment corrects a drafting error. It is intended to ensure that section LZ 13 operates as intended.OVERSEAS DONEE STATUS
These charities have been granted donee status from the 2019–20 and later income years:REFUNDING OVERPAID PIE TAX
A number of amendments have been made to introduce a year end square up process for tax on individuals' multi-rate portfolio investment entity (PIE) income, such as KiwiSaver schemes. This process uses individuals' correct prescribed investor rate (PIR) to determine whether the right amount of tax has been paid on this income during the tax year. Individuals' multi-rate PIE income is taxed separately as PIE schedular income at the PIR. An adjustment is made to the amount of the person's income tax liability at year end for over- or under- payments of tax by the PIE during the tax year.WIDENING THE COMMISSIONER'S POWER TO PUT INVESTORS ON THE CORRECT PRESCRIBED INVESTOR RATE
The amendment widens the Commissioner of Inland Revenue’s ability to provide a tax rate (prescribed investor rate) to a multirate portfolio investment entity (PIE) that it must apply to the investor's attributed PIE income.TAXATION OF TRUSTS
The amendments to the trust rules arise from an administrative review of the taxation of trusts. This review identified several areas in the current law that were unclear and did not appropriately reflect either the policy intent or how the Commissioner applies the law. These amendments to the trust rules address those concerns.CLARIFYING THE RELATIONSHIP BETWEEN SECTION BB 2 AND BF 1 OF THE INCOME TAX ACT 2007
The amendment provides consistency in terminology used in both of sections BB 2 and BF 1 of the ITA 2007.RESIDENCE OF CO-TRUSTEES TREATED AS A NOTIONAL SINGLE PERSON
In the ITA 2007, the term trustee is defined to include all co-trustees for the time being. Under section HC 2 of the ITA 2007, cotrustees are treated as a notional single person for satisfying the income tax obligations for trustee income of that trust. Prior to the amendments to HC 2, which relate to the tax residence of co-trustees, the Commissioner considered that cotrustees of a trust were resident in New Zealand if at least one of those co-trustees was a New Zealand resident in their personal capacity. This view is consistent with the long-standing policy intent. The amendments address questions raised in submissions about residence for co-trustees circumstances during the review of the taxation of trusts. The amendments give taxpayers greater certainty, and are consistent with the policy intent.CORPUS OF A TRUST
The amendments to section HC 4 clarify the value of a settlement of property made on trust. Under general trust law, a settlement of property is treated as a single trust and the value of that property constitutes the corpus of that trust. Section HC 3 of the ITA 2007 modifies this general law to allow multiple settlements of property made to a trustee of a trust to be treated as being made on a single trust for income tax purposes.CERTAIN SETTLEMENTS EXCLUDED FROM TRUSTEE INCOME
The proposed amendment is a response to a submission made during the administrative review of trust taxation that section HC 7 contained an unintended legislative change arising in the rewrite of this provision.ELECTION TO PAY TAX ON WORLDWIDE TRUSTEE INCOME
The amendments are intended to allow a future distribution of worldwide trustee income from income derived after the effective date of the election to be made from a complying trust (that is, the distribution is exempt income). A section HC 33 election does not change the tax treatment of distributions made before 23 March 2020.DEFINITION OF COMPLYING TRUST
This amendment provides consistency with the amendments to section HC 33, which allow such an election, including a section HC 33 election that has retrospective effect for up to 4 years before the year in which the election is made.TRANSFER OF VALUE FOR DEFERRAL OR NON-EXERCISE OF RIGHT TO DEMAND PAYMENT
The administrative review of the taxation of trusts identified that it was very difficult to value a settlement or a distribution relating to financial assistance provided by one person to another subject to an on-demand condition for principal and interest.MEANING OF SETTLOR AND SETTLEMENT
The amendments to section HC 27 and HC 28 clarify certain circumstances in which a person may become a settlor of a trust. These issues were identified in the administrative review of the taxation of trusts The amendment to section FC 2(4) clarifies that the rules taxing holding gains for property before it is gifted do not apply to determine whether a transfer of value is made to a trust as a settlement on the trust.FOREIGN-SOURCE INCOME DERIVED BY A TRUSTEE
The amendment to section HC 25 applies to a trust that has a corporate settlor that continues to exist after the natural person settlor of that trust has died. If that corporate settlor ceases to exist, and no settlor remains, the residence of the settlor will be determined by the residence of that corporate settlor when it ceased to exist.DISTRIBUTIONS
The amendment to section HC 14 clarifies that an amount of interest paid to a beneficiary under the terms of a loan is not a distribution (that is, it is not included in beneficiary income). However, if the amount of interest exceeds the amount determined under the terms of the loan agreement, the excess amount of interest is treated as a distribution.DEFINITIONS
A few definitions are amended consequential to amendments to the substantive trust rulesMAORI AUTHORITY DISTRIBUTIONS
The amendments to section LO 2 and OK 19 correct an unintended legislative change in the rewrite of each of the provisionELIMINATING THE REQUIREMENT TO ESTIMATE AT THE FINAL INSTALMENT DATE FOR PROVISIONAL TAX
This amendment removes the requirement for taxpayers to switch to the estimate method at the final instalment of provisional tax when they believe their residual income tax for the year will be less than the standard instalments and retain the interest concession contained in section 120KBB of the Tax Administration Act 1994 as long as their residual income tax is $60,000 or more.CLARIFYING THE 'LESSER OF' CALCULATION OF INTEREST FOR STANDARD 'UPLIFT' TAXPAYERS
The amendment clarifies the legislation to reflect the application of the 'lesser of' calculation for standard 'uplift' taxpayers to ensure this aligns with the way in which UOMI is calculated in Inland Revenue's technology platforms.CLARIFYING THE APPLICATION OF LATE PAYMENT PENALTIES APPLICABLE FROM THE FINAL PROVISIONAL TAX INSTALMENT DATE
This change aligns the legislation with Inland Revenue's systems to ensure that late payment penalties are only calculated on an instalment amount at the date of the final instalment of provisional tax for the year rather than on the total outstanding tax liability at that date. UOMI will continue to accrue on the total tax liability outstanding. This change aligns the legislation with the policy intent and the system configuration of Inland Revenue's technology platforms.REMOVING THE ABILITY FOR TAXPAYERS TO CHOOSE THE PROVISIONAL TAX INSTALMENT TO WHICH A PARTICULAR PAYMENT IS APPLIED
The Tax Administration Act 1994 previously contained a provision that permitted a taxpayer to direct the application of a provisional tax payment made to a particular instalment. Prior to the introduction of the interest concession rules in section 120KBB of the Tax Administration Act 1994 and the removal of incremental penalties from income tax it was always beneficial for taxpayers to apply payments to the oldest debt first.CLARIFYING THE WAY IN WHICH PROVISIONAL TAX IS TRUNCATED TO WHOLE DOLLARS
It is Inland Revenue's operational practice to truncate provisional tax amounts to whole numbers and its technology platforms have been designed in keeping with that practice. However, Inland Revenue's legal team concluded that the way in which its technology platforms truncates instalments to whole numbers was not consistent with the legislation. Inland Revenue's systems have been configured to apply these rules on truncated whole dollars and will not prevent taxpayers receiving a concession when partial dollars are truncated. The amendment confirms that configuration. In practical terms, this amendment will not affect any taxpayers.NON-STANDARD PROVISIONAL TAX INSTALMENTS
An amendment was made to section 139B(6)(bb) of the Tax Administration Act 1994 when the interest concession rules in section 120KBB were inserted into the Tax Administration Act 1994 to ensure the definitions worked with the new rules. A taxpayer that has more or less than three instalments of provisional tax, was not correctly dealt with and this is corrected for clarity.AMEND THE DATE A GOODS AND SERVICES TAX CREDIT BECOMES AVAILABLE FOR A TAXPAYER TO USE
This amendment moves the day a GST credit is available from the day after the return was filed, to the day the credit arises. As this amendment is minor and is taxpayer favourable this change has already been operationalised within Inland Revenues system and thus does not practically affect any taxpayers.CLARIFICATION FOR TAXPAYERS WHO PAY PROVISIONAL TAX IN ONE OR TWO INSTALMENTS
Section RC 9(4)(c) of the Income Tax Act 2007 applies where a person is liable to pay provisional tax but has not provided a return in the preceding year and whose residual income tax (RIT) in the year before the preceding year is less than $2,500. Section RC 9(10) then states that sections RC 13(1)(b) or RC 14(1)(b) will apply so that provisional tax is payable in either two or one instalment(s), depending on when the prior year's return is filed.CALCULATING STANDARD PROVISIONAL TAX INSTALMENTS FOR AMALGAMATED AND CONSOLIDATED COMPANIES
Sections RC 29 and RC 33 of the Income Tax Act 2007 outline how a new consolidated group or amalgamated company should calculate their standard method uplift amount of provisional tax. These sections previously only referred to the year preceding the current tax year. This wording did not correctly deal with the situation where those amalgamating or consolidating companies have not filed their prior year tax returns.ENSURING THE PROVISIONAL TAX RULES APPLY APPROPRIATELY TO PARTNERS AND MEMBERS OF UNINCORPORATED BODIES
In determining whether a person has an initial provisional tax liability the definition of "taxable activity" is used to determine if someone has started a business. This definition refers to the definition in the Goods and Services Tax Act 1985 but currently excludes taxpayers who earn exempt supplies (that is, the initial provisional taxpayer rules apply to taxpayers who make exempt supplies).ENSURING THE EARLY PAYMENT DISCOUNT APPLIES AS INTENDED
In determining whether a person has an initial provisional tax liability the definition of "taxable activity" is used to determine if someone has started a business. This definition refers to the definition in the Goods and Services Tax Act 1985 but currently excludes taxpayers who earn exempt supplies (that is, the initial provisional taxpayer rules apply to taxpayers who make exempt supplies).CLARIFY THE DEFINITION OF PROVISIONAL TAX
In determining whether a person has an initial provisional tax liability the definition of "taxable activity" is used to determine if someone has started a business. This definition refers to the definition in the Goods and Services Tax Act 1985 but currently excludes taxpayers who earn exempt supplies (that is, the initial provisional taxpayer rules apply to taxpayers who make exempt supplies).ALIGN THE TREATMENT OF OVERPAID TAX BY A COMPANY USING THE ACCOUNTING INCOME METHOD (AIM) WITH TAX PAID ON BEHALF OF AIM SHAREHOLDERS
There are two ways in which an AIM company can transfer overpaid tax to its shareholders. The first is where the company creates a provision for shareholder employees’ salary and pays tax on that on behalf of the shareholders to enable the company to take a tax deduction for the provision. In this situation the company acts as an “agent” for the shareholder employee and the tax is “transferred” as a tax credit reducing the shareholder employee’s residual tax liability.INCLUSION OF A TOLERANCE FOR PROVISIONAL TAX INSTALMENTS
The Tax Administration Act 1994 contains a safe harbour provision from the application of use-of-money interest (UOMI) to some provisional taxpayers. The safe harbour applies where a taxpayer has residual income tax that is less than $60,000, they have used the standard uplift provisional tax calculation method, and they paid all their instalments as required.AMEND THE DEFINITION OF "START TAX TYPE" IN THE TAX ADMINISTRATION ACT 1994 TO INCLUDE RELEASE 4 TAX TYPES
Release 4 of Business Transformation will migrate more tax types onto Inland Revenue's new technology platform, START. Section 183C of the Tax Administration Act 1994 deals with rules around the cancellation of interest. These rules are specific to the START platform only and as taxes migrate to that platform the rules for cancellation of interest change over what was done in the old technology platform, FIRST.ADDING START TAX TYPES TO SECTION 184A(5) OF THE TAX ADMINISTRATION ACT 1994
As part of Release 4 of Business Transformation, new tax types are being introduced into START. With the inclusion of the new tax types Inland Revenue is able to direct credit refunds through section 184A of the Tax Administration Act 1994. However, some of the tax types included in Release 4 did not fall within the definition of tax in section 184A(5).SELF-CORRECTING CERTAIN ERRORS IN SUBSEQUENT RETURNS
The Tax Administration Act 1994 contains rules which recognise the compliance and administration costs associated with making amendments to returns and assessments which contain errors. These rules allow errors which do not breach certain prescribed thresholds to be corrected in the next return due, following discovery of the error. These rules are contained in section 113A and apply in respect of errors that relate to returns for income tax, FBT, and GST.AMENDMENTS RELATING TO THE BINDING RULINGS REGIME
The provisions that enable the binding rulings regime are contained in Part 5A of the Tax Administration Act 1994. The purpose of the binding rulings regime is to provide taxpayers with certainty about the way the Commissioner will apply taxation laws and help them meet their obligations under those laws by enabling the Commissioner to issue rulings that will bind the Commissioner on the application of those laws.PROCESS FOR REMOVING A PERSON FROM THE LIST OF TAX AGENTS AND DISALLOWING STATUS AS A NOMINATED PERSON OR REPRESENTATIVE
A broader range of third parties and intermediaries who act on behalf of others have been recognised in the Tax Administration Act 1994 since March 2019, following amendments made by the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019. In addition to consolidating the provisions relating to third parties and intermediaries into new Part 7B of the Tax Administration Act 1994, 2 new types of third parties and intermediaries were added. This includes 'nominated persons' and 'representatives'. These are explained in further detail in Tax Information Bulletin Vol 31 No 4 at pages 67 to 70.EMPLOYEE SHARE SCHEMES - DEFINITION OF MARKET VALUE
New sections CE 7CB and CW 26DB and amended section YA 1 of the Income Tax Act 2007 (ITA) expand the definition of 'market value' for the purposes of the employee share scheme (ESS) and exempt ESS rules to include a 5-day 'volume weighted average price' or an equivalent, and other methods accepted by the Commissioner of Inland Revenue. This makes it easier for companies offering ESSs to value their shares, reducing compliance costs and improving accuracy of valuations.EXEMPT EMPLOYEE SHARE SCHEMES - TAKEOVERS AND SIMILAR REORGANISATIONS
In order for an ESS to qualify as exempt, the terms of the scheme must provide that shares are held by the employee for a period of time - generally three years - before they are disposed of. This is to ensure the scheme achieves the objective of aligning employee and employer incentives, and also to prevent employers from granting employees shares which the employee can sell immediately to realise an untaxed cash benefit (when remuneration in cash would have been taxed).EMPLOYEE SHARE SCHEMES - FLEXIBILITY TO ALLOW EMPLOYEES TO KEEP SHARES IF THEY LEAVE EMPLOYMENT
New section CW 26C(8) allows for alternative approaches where the period of restriction ends because the employee leaves the company voluntarily. The employee may either have the choice to keep their ESS shares, or be required to return them to the company for the lesser of cost or market value. This update to the legislation allows alignment of the treatment of these so-called ‘bad leavers’ under the New Zealand exempt scheme rules with their treatment under the Australian exempt scheme rules, which will make it easier for trans-Tasman companies to offer the same scheme in both countries.RING-FENCING OF RESIDENTIAL PROPERTY DEDUCTIONS
The new ring-fencing rules in subpart EL, which apply from the start of the 2019-20 income year, were introduced to limit deductions for residential property to income from the property. Before the introduction of these rules, loss-making investors could use the excess deductions from their rental properties to offset their income from other sources (such as salary and wages), thus reducing their income tax liability.TAXATION OF LIFE INSURANCE BUSINESS - TRANSITIONAL RELIEF
Changes have been made to section EY 30 in response to submissions on the bill regarding remedial changes to the life insurance transitional rules made by the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019.EXEMPTION FOR CERTAIN GOVERNMENT GRANTS PROVIDED TO SOCIAL HOUSING PROVIDERS
Like other residential landlords, social housing providers are exempt from GST in respect of their supplies of accommodation in dwellings provided to their tenants. In 2015, a provision was added to the GST Act to ensure that payments made by the Government to social housing providers under reimbursement agreements and tailored agreements to provide social housing are treated as consideration for an exempt supply of accommodation in a dwelling.GST DEDUCTIONS FOR CAPITAL RAISING COSTS OF PARTICIPATORY SECURITIES
Like other residential landlords, social housing providers are exempt from GST in respect of their supplies of accommodation in dwellings provided to their tenants. In 2015, a provision was added to the GST Act to ensure that payments made by the Government to social housing providers under reimbursement agreements and tailored agreements to provide social housing are treated as consideration for an exempt supply of accommodation in a dwelling.GST ON LOW-VALUE IMPORTED GOODS REMEDIALS
Amendments have been made to the Goods and Services Tax Act 1985 (the GST Act) and the Tax Administration Act 1994 to address technical issues with the new GST on low-value imported goods legislation (referred to here as 'the distantly taxable goods rules') to ensure that these rules and similar GST rules applying to supplies of remote services work as intended.BRIGHT-LINE MAIN HOME EXCLUSION
The main home exclusion for the bright-line test requires that a person use the land as their main home for most of the time they own the land. The amendment aligns the period of ownership for the main home exclusion for the bright-line test with the period in the bright-line test itself. A further amendment clarifies when this period of ownership starts for land transferred on a settlement of relationship property as define in section FB 1B.CONSIDERATION FOR GRANT OF EASEMENT AND OTHER LAND RIGHTS
The amendments to sections CC 1 and CC 1B of the Income Tax Act 2007 ('the Act') make two clarifications regarding the tax treatment of certain land use related payments. The first clarification is that a payment directly for the grant, renewal, extension or transfer of a land right (defined as a leasehold estate or a licence to use land) is taxable. The second clarification ensures that a one-off payment for the grant of a permanent easement is not taxable, as has always been intended.INTEREST LIMITATION REMEDIALS
Three changes have been made to the interest limitation rules which apply to cross-border related debt. These changes: a) remove the inbound thin capitalisation de minimis when the group has related party debt from a non-resident; b) exclude certain financial arrangements from being a non-debt liability in the thin capitalisation calculations where the funding is pro rata with a group member's shareholding or by a group member with a substantial shareholding; and c) ensure the optional credit rating method can be calculated based on secured debt.DISREGARDED HYBRID PAYMENT RULE - EXCEPTION FOR REIMBURSEMENT OF THIRD-PARTY EXPENDITURE
Remedial amendments to the hybrid and branch mismatch rules introduce a new exception to the disregarded hybrid payment rule in section FH 5 of the Income Tax Act 2007. This exception ensures the New Zealand branch of a non-resident company or New Zealand hybrid entity is allowed a deduction for a payment to the extent that: a) the payment reimburses a control group member for third-party expenditure; and b) the third-party expenditure is non-deductible (in New Zealand or in the foreign jurisdiction) because income of the branch or hybrid entity is not taxable in the foreign jurisdiction.REVERSE HYBRID PAYMENT RULE - ALLOWING DEDUCTIONS WHERE PAYMENT IS TAXABLE IN NEW ZEALAND
This amendment repairs an error in the reverse hybrid payment rule in that the rule would have denied a deduction to a New Zealand resident company for a payment to a related non-resident company if that payment was exempt under foreign tax law but taxable in New Zealand through the non-resident company's New Zealand branch. Denying a deduction in this situation is not consistent with the policy intent of the rule which is to address deduction-no inclusion hybrid outcomesADJUSTING PAYMENT DUE DATES FOR SOME TAX CREDIT RECIPIENTS
The amendment allows Inland Revenue to adjust the terminal tax due dates for some tax credit recipients, if their assessment cannot be finalised within 30 days of their payment due date because Inland Revenue needs to finalise their partner's or expartner's assessment first, to determine entitlement to tax credits.REINSTATEMENT OF ABILITY TO RECONCILE WORKING FOR FAMILIES FOR MSD RECIPIENTS
The Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019 made significant changes to individual income tax provisions for the 2019 year onwards. As part of these changes the provision that allowed Inland Revenue to choose whether to not to complete a WFF reconciliation for a person who received all of their WFF payments from MSD was inadvertently not carried forward into the new provisions.RECIPROCAL EXEMPTION FOR INCOME FROM INBOUND INTERNATIONAL AIR TRANSPORTATION
As a member of the International Civil Aviation Organisation (ICAO), New Zealand is obligated to reciprocally grant a full income tax exemption to non-resident aircraft operators. New Zealand gives effect to this obligation in section CW 56 of the Income Tax Act 2007, first introduced in 1985 as section 64A of the Income Tax Act 1976. Previously CW 56 only permitted an exemption to be granted for income from outbound air transport. The amendment ensures an exemption can also apply to inbound air transport.INDIVIDUALS' INCOME TAX REMEDIALS
Several amendments have been made to the Tax Administration Act 1994 to ensure that the individuals' income tax changes that were made in the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019 are aligned with the policy intent. The measures contained in that Act simplify individuals' year-end income tax filing obligations and help them to use more appropriate rates of withholding during the year.AMENDMENTS TO INVESTMENT INCOME WITHHOLDING AND REPORTING RULES
The Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Act 2018 made changes to improve the administration of investment income information. The changes aimed to enable the pre-population of tax returns and to ensure that taxpayers' tax obligations and social policy entitlements are calculated more accurately during the year. Monthly reporting of investment income is compulsory from 1 April 2020.INFORMATION SHARING PROVISION BETWEEN INLAND REVENUE AND THE SERIOUS FRAUD OFFICE TO BE REPLACED BY SHARING OF INFORMATION UNDER AN APPROVED INFORMATION SHARING AGREEMENT
The legislative provision enabling Inland Revenue to share information with the Serious Fraud Office to assist the investigation of serious fraud, is repealed with effect from a date to be determined by Order in Council. The information sharing for serious fraud will now be allowed under the Serious Crime Approved Information Sharing Agreement (AISA) under Part 9A of the Privacy Act 1993.MEANING OF CHARITABLE OR OTHER PUBLIC BENEFIT GIFT
On 17 December 2019 the Court of Appeal found in Commissioner of Inland Revenue v Roberts that donation tax credits and gift deductions were available for gifts made by way of debt forgiveness. This was contrary to the long-standing policy that donation tax credits and gift deductions were only available for gifts paid in cash or by payment methods such as credit cards, electronic bank transfer, or cheque.INCOME ATTRIBUTION RULE AND FOREIGN TAX CREDITS
The income attribution rules apply when an individual ('the working person') earns income from providing their own services to a buyer ('personal services income') through an interposed entity ('the associated entity') that has one main source of such income. These rules disregard the entity and tax the working person directly, at the end of the income year, to prevent tax on income from the individual's personal services being paid at the lower company rate (currently 28%) instead of at the working person's higher marginal rate of tax (currently 33%).INCOME ATTRIBUTION RULE AND TREATMENT OF DIVIDENDS
The income attribution rules apply when an individual ('the working person') earns income from providing their own services to a buyer ('personal services income') through an interposed entity ('the associated entity') that has one main source of such income. These rules disregard the entity and tax the working person directly, at the end of the income year, to prevent tax on income from the individual's personal services being paid at the lower company rate (currently 28%) instead of at the working person's higher marginal rate of tax (currently 33%).TAXATION (USE OF MONEY INTEREST RATES SETTING PROCESS) AMENDMENT REGULATIONS 2020
An Order in Council has been made to ensure that the Commissioner's use of money interest paying rate cannot be set at a negative rate. The Taxation (Use of Money Interest Rates Setting Process) Regulation 1997 outlines the methodology to be used when setting the use of money interest rates. This has been amended to specify that when setting the Commissioner's paying rate, that it must be set at the higher of: a) the 90-day bank bill rate minus 100 basis points; or b)0%. In effect, this prevents it being set at a negative rate.TAX ADMINISTRATION (DIRECT CREDIT OF REFUNDS OF EXCESS FINANCIAL SUPPORT AND STUDENT LOAN PAYMENTS) ORDER 2020
An Order in Council has been made to include refunds for excess payments of financial support and student loan deductions as tax types refundable by direct credit under section 184A of the Tax Administration Act 1994. The provisions in sections 184A and 184B require tax refunds to be paid via direct credit to a bank account nominated by the taxpayer and were introduced to benefit taxpayers by eliminating time delays associated with the postal system and costs related to cheques.KAINGA ORA-HOMES AND COMMUNITIES CONSEQUENTIALS
The Kainga Ora-Homes and Communities Act 2019 was enacted in September 2019. It established, from 1 October 2019, the Crown entity, Kainga Ora–Homes and Communities. This new entity took over many of the functions of the former Housing New Zealand Corporation, plus several additional functions. As a result of this development, a range of references in the Income Tax Act to Housing New Zealand Corporation have been updated to now instead refer to Kainga Ora–Homes and Communities.MAINTENANCE AMENDMENTS
The amendments reflect minor technical maintenance items arising from both the rewrite of income tax legislation and subsequent changes.Determination G31: NZX Milk Price Futures Contracts: an expected value approach
The amendments reflect minor technical maintenance items arising from both the rewrite of income tax legislation and subsequent changes.Determination FDR 2020/01 – A type of attributing interest in a foreign investment fund for which a person may not use the fair dividend rate method (Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) – NZD Hedged)
Units in Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) (“the Fund”), an Australian Managed Investment Scheme, are an attributing interest in a foreign investment fund (“FIF”) for New Zealand resident investors. The Fund is structured as a multi-class Managed Investment Scheme.Notice of Withdrawal of Product Ruling
A) Product ruling BR Prd 20/01 is hereby withdrawn due to the proposed arrangement not proceeding. B) Product ruling BR Prd 20/01 applied for the period 26 February 2020 to 30 September 2021. It is published in this TIB. It is withdrawn on 11 May 2020.BR Prd 20/01: Vital Healthcare Property Trust
The Arrangement is the proposed separation of VHPT's New Zealand and Australian real estate investments into separate holding vehicles in the following manner: 1) New Zealand assets are held through a New Zealand Portfolio Investment Entity (PIE) structure. VHPT will establish a New Zealand unit trust (Vital NZ) for this purpose. 2) Australian assets continue to be held indirectly by VHPT through underlying Australian-managed investment trusts. VHPT will migrate its tax residence to Australia and be renamed Vital Australia (Vital Aus). Vital Aus will be a managed investment scheme registered with the Australian Securities and Investments Commission under the Corporations Act 2001 (Cth), and will qualify as an Australian-managed investment trust for Australian tax purposes. Units in Vital NZ and Vital Aus will be stapled together so they cannot be traded separately. The stapled units will be dual listed on the New Zealand Stock Exchange (NZX) and the Australian Securities Exchange (ASX).Supreme Court refuses leave to appeal in child support judicial review litigation
The Supreme Court declined P's application for leave to appeal to that Court about P's entitlement to receive child support. The Supreme Court considered the decisions in the Courts below (on the application of the Child Support Act 1991 to the facts) were not in error and there was no risk of a miscarriage of justice.