TIB index based from the NZ Tax Information Bulletin - kwister.net
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15:10:11
04 Apr 2025
15:10:11
04 Apr 2025
TIB index based from the NZ Tax Information Bulletin - kwister.net
GST on low-value imported goods
The Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 amends the Goods and Services Tax Act 1985 by applying goods and services tax (GST) to 'distantly taxable' goods supplied by nonresident merchants, operators of marketplaces and redeliverers to consumers in New Zealand.GST on low-value imported goods - Scope of the new GST rules
The GST Act imposes GST on goods and services supplied in New Zealand. The Act adopts a broad set of rules to determine whether a good or service is considered to be supplied in New Zealand in the first instance. The place of supply rules are accompanied by a range of exclusions that determine whether the supply is zero-rated or exempt rather than taxed at the normal 15% rate.GST on low-value imported goods - Distantly taxable goods supplied to GST-registered businesses
. New section 8(4E) applies to supplies of distantly taxable goods by non-residents to GST-registered businesses and treats these as being made outside New Zealand (not subject to GST). However, as discussed later at [310] to [317], a limited exception will in certain circumstances allow a non-resident supplier to treat these supplies as being made in New Zealand (subject to GST).GST on low-value imported goods - Special rules for certain businesses
GST is normally payable by the merchant who sells the goods or services. However, the GST on a supply of distantly taxable goods may be payable by either an operator of a marketplace, the merchant who sold the goods, a 'redeliverer' who brings the goods to New Zealand, or a New Zealand resident acting on behalf of a non-resident principal.GST on low-value imported goods - Marketplaces
A marketplace is a medium that allows consumers and merchants to interact to facilitate the sale and purchase of goods or services. When certain conditions are satisfied, an operator of an electronic marketplace instead of the merchant (referred to as the 'underlying supplier') may be required to register and return GST on supplies made through the marketplace. Under the new rules, electronic marketplaces are required to register and return GST, and non-electronic marketplaces can register subject to the Commissioner of Inland Revenue's approval.GST on low-value imported goods - Redeliverers
Some non-resident merchants do not provide shipping of goods to New Zealand. New Zealand consumers can, however, use a redeliverer to ship or arrange the shipment of goods to New Zealand. A redeliverer may be a person that provides a 'mailbox' service, meaning that they provide the use of an overseas delivery address for consumers purchasing goods from offshore suppliers. These types of redeliverers would receive or collect the goods from the overseas address and deliver the goods to the consumer's address in New Zealand, or arrange the collection and delivery of the goods to the customer in New Zealand.GST on low-value imported goods - New Zealand-resident agents
Amended section 60(1A) and 60(1AB) allows New Zealand-resident agents acting for non-residents that supply distantly taxable goods to consumers to agree with the non-resident principal to treat the agent (and not the principal) as making the supply in the course and furtherance of a taxable activity carried on by them. If this option is exercised, the agent would be required to register and return GST on the supplies of distantly taxable goods. Since the agent is a New Zealand resident they would be treated as any other resident supplier of goods and services and, therefore, would be required to return GST on both supplies to New Zealand consumers and GST-registered businesses.GST on low-value imported goods - Preventing double taxation
To simplify border processes and reduce the risk of potential double taxation occurring under the new legislation applying to distantly taxable goods, the Government is proposing changes to the Customs and Excise Regulations 1996.GST on low-value imported goods - Vouchers
In the situation where a face value token, stamp or voucher is redeemed for distantly taxable goods or remote services, new section 5(11G)(a) clarifies that the supplier of the token, stamp or voucher may treat the supply of goods and services that the token, stamp or voucher is redeemed for as the relevant supply for GST purposes. This means that the seller of a face value voucher would have the option of treating GST as applying on the redemption of the voucher, if the voucher is (or could be) redeemed for remote services or distantly taxable goods. This option to treat the supply as arising on the redemption of the voucher would apply regardless of whether the issuer or seller of the voucher is a different person to the supplier of the goods and services that the voucher is redeemed for.GST on low-value imported goods - Converting foreign currency amounts to New Zealand dollars
Generally, the GST Act requires all amounts to be expressed in New Zealand currency at the time of supply. This means that if a supply is paid for in a foreign currency, the value of the supply must be expressed as the amount of foreign currency converted to New Zealand currency at the exchange rate applying at the time of supply.GST on low-value imported goods - Methods for electronic marketplaces and redeliverers to determine GST treatment of supplies
As discussed earlier at [137] and [173], new sections 60C and 60E treat operators of electronic marketplaces and redeliverers as supplying goods that are actually sold by third party merchants, but only if the goods are destined for a delivery address in New Zealand, and - in the specific case of marketplace operators - if the underlying supplier of the goods is a non-resident.GST on low-value imported goods - Reverse charge (GST-registered recipient of remote services)
. An amendment to the reverse charge rule in section 8(4B) will require GST-registered recipients of distantly taxable goods (that are treated by section 8(4E) as not being supplies in New Zealand) to return output tax if the percentage of intended or actual taxable use of the goods is less than 95 percent of the total use.GST on low-value imported goods - Administration of the supplier registration system
Under amended section 15(6), non-resident suppliers that only supply distantly taxable goods and/or remote services will have calendar quarterly taxable periods (1 April to 30 June, 1 July to 30 September, 1 October to 31 December, and 1 January to 31 March). This is intended to align with these suppliers' filing obligations in other jurisdictions. However, for the period beginning 1 December 2019 to 31 March 2020, non-resident suppliers of distantly taxable goods will have a taxable period of four months (see new section 15(7)). This initial four-month taxable period will apply to non-resident suppliers of distantly taxable goods that become liable to register for GST in the period 1 December to 31 December 2019 - including non-residents who also supply remote services to New Zealand-resident consumers but did not register for GST before 1 December 2019 due to being below the NZ$60,000 registration threshold.GST on low-value imported goods - Optional rules aimed at reducing costs for suppliers
Special rules applying to non-resident businesses that do not make any supplies in New Zealand were introduced in 2014 to allow these businesses to claim refunds of GST incurred on business expenses. For the purposes of claiming input tax (GST on purchases), a deduction rule in section 20(3L) allows non-resident businesses registered under section 54B to claim back input tax relating to their worldwide taxable activity (for example, GST incurred in sending employees to a conference in New Zealand).Ring-fencing of residential property deductions
New subpart EL introduces rules to ring-fence deductions for residential properties to income from those properties. To the extent the deductions exceed the income, they cannot be used against income from other sources, such as salary and wages. Instead, the excess deductions will be carried forward for use against residential property income in future years. The residential ring-fencing rules apply from the start of the 2019-20 income year.Ring-fencing of residential property deductions - Property subject to the rules
The rules apply to 'residential land', using the same definition of 'residential land' in section YA 1 that already exists for the bright-line test.Ring-fencing of residential property deductions - Property excluded from the rules
A taxpayer may use their home in part to earn income, so a portion of their property-related expenses may be deductible. As the focus of the rules is on loss-making rental properties, a taxpayer's main home is specifically excluded from the scope of the rules. To qualify for the exclusion from the ring-fencing rules (in section EL 9), the property has to be used predominantly as the person's main home for most of the particular income year.Ring-fencing of residential property deductions - Income residential property deductions can be used against
Residential property deductions are allocated to a particular income year up to the total of the taxpayer's 'residential income' for that year.Ring-fencing of residential property deductions - LTCs
If the residential property is owned by an LTC, whatever basis the LTC has applied the ring-fencing rules on in filing its return will flow through to and be binding on the shareholders (section HB 1(6)).Ring-fencing of residential property deductions - Partnerships
This is not the case for partners in partnerships, as there is no provision equivalent to section HB 1(6) for partnerships. If a partnership has filed a partnership return applying the rules on a particular basis, the partners do not necessarily need to apply the rules on that same basis. And different partners in the partnership may potentially apply the ring-fencing rules on different bases in respect of their share of the residential income and deductions.Ring-fencing of residential property deductions - Use of ring-fenced deductions when properties are sold
There may still be unused ring-fenced deductions for a rental property after it is sold. In some circumstances these may be released from the ring-fencing rules (or unfenced), meaning they can then be used against the taxpayer's income from any source. If a taxpayer sells a property to which they have applied the ring-fencing rules on a property-by-property basis and the sale is not taxed, the unused deductions would remain ring-fenced.Ring-fencing of residential property deductions - Application of the rules to close companies
The ring-fencing rules apply to close companies - in general terms, these are companies with five or fewer natural persons whose total voting interests are more than 50%, with associated persons being treated as one person.Ring-fencing of residential property deductions - Interposed entities
Without rules to deal with interposed entities, some taxpayers could get around the ring-fencing rules by interposing an entity (for example, a company) to separate a loan (and interest deductions) from the residential rental property, so the interest deductions would not be subject to ring-fencing. For example, a taxpayer could borrow money to buy shares in a company, which uses those funds to buy a residential investment property. Because the interest on the borrowings formally relates to the individual's investment in shares in the company, not to the acquisition of a residential rental property, in the absence of the interposed entity rules the individual would have been able to claim deductions for the interest even if the rental property was loss-making taking into account those deductions, and offset those deductions against income from other sourcesThe Commissioner's care and management role
Generally, tax law is consistent with the policy intent, but in some circumstances, the interpretation of the law when applying ordinary statutory interpretation principles does not accord with original the policy intent. When this happens, it can tie the Commissioner's and taxpayer's resources up in outcomes that are inconsistent with both parties' practice and/or expectations. Amendments have been made to the Tax Administration Act 1994 that provide additional mechanisms, in the form of two new regulation-making powers, that can be used to address issues with tax laws that produce outcomes that are inconsistent with policy intent.Social policy changes - STUDENT LOAN DEDUCTIONS FROM WITHHOLDING INCOME
The Student Loan Scheme Act 2011 contains changes to make it easier for borrowers earning schedular, casual agricultural, or election day income to meet their student loan obligations. Currently, borrowers earning these forms of income must make student loan repayments in lump sums at the end of the year, and it can be challenging for borrowers to meet this obligation. By collecting throughout the year, Inland Revenue hopes to reduce or eliminate the large student loan bills that these borrowers face at the end of the yearSocial policy changes - INTEREST-FREE STUDENT LOANS
Limitations in Inland Revenue's previous IT system meant that all student loan borrowers would be charged interest and would get it written off if they were New Zealand based. The new system does not face these limitations. The Student Loan Scheme Act 2011 has been amended so only overseas-based borrowers are charged interest on their student loans. Instead of being charged interest and having it written off at the end of the tax year, New Zealand-based student loan borrowers will not be charged any interest on their loansSocial policy changes - STUDENT LOAN DAY COUNT TEST
The act clarifies the application of the day count test and reinstates the tie-breaker provision that was inadvertently removed from the Student Loan Scheme Act when it was rewritten. For borrowers who frequently travel between New Zealand and overseas, the provision clarifies if they are overseas-based or New Zealand-based.Social policy changes - DEFINITION OF INCOME FOR STUDENT LOANS AND WORKING FOR FAMILIES
The definition of 'net adjusted income' that is used for student loan purposes and the definition of 'family scheme income' that is used for Working for Families tax credits have been more closely aligned.Social policy changes - CHILD SUPPORT (DISCRETION TO GRANT PERMANENT EXEMPTION)
The Child Support Act 1991 has been amended to give Inland Revenue discretion to grant sex offence victims a permanent exemption from paying child support even though there is no convicted offender. A person can have a child as a result of being the victim of a sex offence and may be made liable to pay child support for that child. Since 2006, a permanent exemption from paying child support has existed for the parent of a child born as a result of a sex offence. Before these amendments, for the parent to qualify for the exemption, the offender must have been convicted.Other policy changes - KEEPING TAX RECORDS IN TE REO MAORI
The Tax Administration Act 1994 and the Goods and Services Tax Act 1985 (GST Act) have been amended to allow taxpayers to hold tax records in te reo Maori as a matter of right. Obligations remain on taxpayers to produce certain documents in English, such as tax invoices for GST purposes and donation tax receipts that are used by third parties to take a tax position.Other policy changes - COLLECTION OF IRD NUMBERS FOR TRANSFERS OF MAIN HOMES
From 1 January 2020 most people who transfer property - including those who are transferring their main home - will need to include their IRD number and any relevant overseas tax residence information on the transfer documentation. The remaining non-notifiable reasons, for which transferees or transferors are not required to include their IRD number, are set out in the Land Transfer (Land Information and Offshore Persons Information) Exemption Regulations 2015.Other policy changes - EXTENDING THE TAX EXEMPTION FOR NON-RESIDENT OFFSHORE OIL RIG AND SEISMIC VESSEL OPERATORS
Offshore rigs and seismic vessels operated by non-residents are covered by an exemption in section CW 57. These rigs and vessels are used to drill for oil and gas and gather data on potential oil and gas finds. There is a worldwide market in rigs and seismic vessels. No New Zealand company owns offshore rigs or seismic vessels, so any company wishing to explore in New Zealand waters needs to use a rig or seismic vessel provided by a non-resident owner.Other policy changes - SECURITISED PRE-1990 FOREST LAND EMISSIONS UNITS
Changes have been made to the Income Tax Act 2007 to treat certain securitisation transactions involving pre-1990 forest land emissions units according to their economic substance. New Zealand's emissions trading scheme (ETS) distinguishes between pre-1990 forest land and post-1989 forest land, 1990 being the base year of measurement under the Paris agreementon climate change. The scheme places mandatory deforestation obligations on exotic forests that were first established before 1990, referred to as 'pre-1990 forests'. This means if pre-1990 landowners choose to deforest, for example when converting forest land to a different use, they face 'deforestation liabilities' under the ETS, have to report on emissions and surrender an equivalent amount of New Zealand emission units to the Government.Other policy changes - EMPLOYEE SHARE SCHEMES - WITHHOLDING OBLIGATIONS
This amendment gives companies offering employee share schemes (ESSs) the option of making an irrevocable election (at the time a share benefit is offered) to withhold tax from the benefit when it is provided to the employee. If made, this irrevocable election creates a statutory obligation on the company to pay the PAYE on the benefit. This statutory obligation will also apply to replacement awards, so an election cannot be revoked by simply issuing a replacement benefit without the withholding obligation.Other policy changes - EMPLOYEE SHARE SCHEMES - WITHHOLDING OBLIGATIONS
This amendment gives companies offering employee share schemes (ESSs) the option of making an irrevocable election (at the time a share benefit is offered) to withhold tax from the benefit when it is provided to the employee. If made, this irrevocable election creates a statutory obligation on the company to pay the PAYE on the benefit. This statutory obligation will also apply to replacement awards, so an election cannot be revoked by simply issuing a replacement benefit without the withholding obligation.Other policy changes - BENEFICIARIES AS SETTLORS
An amendment has been made to the trust rules to ensure that, in certain circumstances where an amount of income is allocated by a trust to a beneficiary but retained by the trust, such beneficiaries do not become settlors. Prior to this amendment, where no interest was paid by the trust to the beneficiary on such amounts, the beneficiary became a settlor of the trust. This was because by transferring value to the trust (via the provision of interest-free funds) the beneficiary met the definition of 'settlor' in section HC 27 of the Income Tax Act 2007. In certain cases, such an outcome was an overreach of this provision.Other policy changes - CO-OPERATIVE COMPANIES: NON-DEDUCTIBLE CASH DISTRIBUTIONS
The amendments clarify that a co-operative company may elect to make a fully imputed cash distribution of profits attributable to a specific group of shareholders of the company.Other policy changes - PRE-CONSOLIDATION IMPUTATION CREDITS
The amendment in section 244 of the Taxation (Annual Rates for 2018-19, Modernising Tax Administration and Remedial Matters) Act 2019 ('The ARMTARM Act') contained incorrect date references. This amendment corrects those dates to ensure the savings provision in section OP 22(4) works as intended for tax positions taken by a consolidated imputation group for the transfer of pre-consolidation imputation credits to the group imputation credit account ('ICA') for periods ending on or before 1 April 2019.Other policy changes - APPLICATION OF THE COMMON REPORTING STANDARD TO CORPORATE TRUSTEES
The CRS is a global standard that was incorporated by reference into New Zealand law in 2017. Incorporation by reference effectively means that the provisions of the CRS and its official OECD commentary themselves have legal effect in New Zealand. Under the CRS, financial institutions must undertake specified due diligence procedures to identify non residents holding (and, in certain circumstances, controlling) financial accounts in New Zealand and report information on those non-residents to Inland Revenue. The reported information is then exchanged with other countries under tax treaties, to assist those jurisdictions in the detection and prevention of offshore tax evasion.Other policy changes - LOSS OF EARNINGS INSURANCE
Taxpayers manage risk of business interruption by taking out loss of earnings insurance. When a business experiences a period of economic loss due to an adverse event (for example, an earthquake or fire), it can receive compensation for loss of earnings. Since these proceeds are income of the business, they are subject to income tax.Other policy changes - GST EXEMPTION FOR RESIDENTIAL PROPERTY THAT IS SOLD AFTER BEING SUB-LET FOR FIVE OR MORE YEARS
Most sales of residential land are not subject to GST as they are either not sold by GST-registered persons or are not part of the GST-registered person’s taxable activity. However, if a GST-registered person is regularly selling residential land, then they may have a taxable activity of selling property and so they may have to apply GST when they sell residential land.Remedial amendments - GST - CAPITAL RAISING COSTS
The Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Act 2017 inserted section 20H into the Goods and Services Tax Act 1985. The section allows GST-registered businesses to recover GST on their costs of raising capital to fund a taxable activity and applied from 1 April 2017.Remedial amendments - GST - DEFINITION OF 'ASSOCIATED PERSONS'
The universal tripartite test of association in section 2A(1)(i) of the GST Act 1985 generally associates two persons, A and B, if person A is associated with a third person (person C) under any one of paragraphs (a) to (h), and person B is also associated with person C under any one of paragraphs (a) to (h).Remedial amendments - APPORTIONING GST FOR MIXED-USE ASSETS
An amendment has been made to the definition of 'input tax for asset' which relates to the formula for apportioning input tax on mixed-use assets. The amended definition excludes expenditure solely related to taxable use of the asset, as well as expenditure solely related to non-taxable use of the asset.Remedial amendments - TREATMENT OF ARRANGING SERVICES RELATING TO GOODS OFFSHORE
The Taxation (Residential Land Withholding Tax, GST on Online Services, and Student Loans) Act 2016 applied GST to supplies of 'remote services' from non-residents to New Zealand-resident consumers with effect from 1 October 2016. It was recognised at the time that, for the new rules to work as intended, an amendment was needed to the zero-rating rule for services that are physically performed outside New Zealand. Section 11A(1)(j) was therefore amended so that services physically performed outside New Zealand (or that arrange services that are physically performed outside New Zealand) are zero-rated, provided that these services are not remote services supplied to a New Zealand resident who is not a registered personRemedial amendments - BINDING RULINGS MINOR AMENDMENTS
Consistent with the 'right-from-the-start' framework, amendments were made to the binding rulings provisions in the Tax Administration Act 1994 following the enactment of the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019 to enable greater up-front certainty for taxpayers by extending the scope of matters that the Commissioner can issue binding rulings on.Remedial amendments - TAXATION OF LIFE INSURANCE: REMEDIAL CHANGE TO THE TRANSITIONAL RULES
Changes have been made to the transitional rules for life insurance policies sold as 'level premium' in response to the low rates of inflation experienced in New Zealand over recent years.Remedial amendments - REIMBURSEMENT ACC ATTENDANT CARE PAYMENTS
An unintended consequence of an amendment previously made to exempt backdated ACC payments that reimburse ACC beneficiaries for care they have paid for, is that the tax credit for the tax withheld by ACC is passed through to the carer where it should be assigned to the claimant. This amendment rectifies this unintended consequence.Remedial amendments - ALLOWING REFUNDS THAT ARISE FROM A REIMBURSEMENT ACC ATTENDANT CARE PAYMENT TO BE PAID OUTSIDE THE TIMEBAR PERIOD
An amendment has been made to section RM 2 of the Income Tax Act 2007 to include an exception that allows a taxpayer to claim a refund from an amended assessment outside the time bar period where the refund arises due to a reimbursement ACC attendant care payment.Remedial amendments - TAX ADMINISTRATION ACT - INFORMATION COLLECTION
The Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 provided a new power for the Commissioner of Inland Revenue to request information held by a member of a large multinational group. The policy intent was that criminal penalties would not apply in respect of such information requests. Instead, the civil penalty in section 139AB of the Tax Administration Act could be applied to large multinational groups that fail to provide information requested by the Commissioner of Inland Revenue.Remedial amendments - DEFINITION OF HIRE PURCHASE AGREEMENT
The definition of 'hire purchase agreement' in section YA 1 of the Income Tax Act 2007 contains an exclusion in paragraph (d) for agreements under which the legal ownership of the goods passes absolutely to the purchaser of the goods at the time the agreement is made or before the goods are delivered.Remedial amendments - RWT EXEMPT STATUS
The amendment removes the requirement for a charity registered under the Charities Act 2005 to apply for RWT exempt status. The amendment reduces compliance costs for such charities by ensuring that as soon as a charity becomes a registered charity, it will also have RWT exempt status. The RWT exempt status will continue until the charity is deregistered.Remedial amendments - MAINTENANCE AMENDMENTS
The following amendments are minor technical maintenance items arising from both the rewrite of income tax legislation and subsequent changes.Social Assistance Legislation (Budget 2019 Welfare Package) Amendment Act 2019
The Social Assistance Legislation (Budget 2019 Welfare Package) Amendment Act was introduced into Parliament on 30 May and received Royal assent on 5 June 2019. The Budget 2019 Welfare Package is designed to increase the incomes of low-income individuals and families and to support a sustained reduction in child povertySocial Assistance Legislation (Budget 2019 Welfare Package) Amendment Act 2019 - REPEAL OF BENEFIT SANCTION FOR SOLE PARENTS WHO FAIL TO ASSIST CHILD SUPPORT
Amendments have been made to the Child Support Act 1991 consequential to the repeal of the s192 benefit sanction on sole parent beneficiaries in the Social Security Act.Social Assistance Legislation (Budget 2019 Welfare Package) Amendment Act 2019 - EXCUSING CARERS FROM THEIR OBLIGATION TO APPLY FOR CHILD SUPPORT
An amendment has been made to give the Commissioner of Inland Revenue the ability to excuse people receiving an Unsupported Child or sole parent rate of benefit from their obligation to apply for child support in compelling situations.BR Pub 19/03: Income tax - employer issued crypto-assets provided to an employee
An amendment has been made to give the Commissioner of Inland Revenue the ability to excuse people receiving an Unsupported Child or sole parent rate of benefit from their obligation to apply for child support in compelling situations.Commissioner's Operational Position - New section HC 27(6) - treatment of a beneficiary as a settlor in certain circumstances
The law around whether a beneficiary who leaves distributions in a trust is regarded as a settlor has been unclear, and Inland Revenue has expressed differing views on the issue. In December 2013 Inland Revenue wrote to NZICA (as it then was) and advised that merely leaving funds available at call in a trust current account did not result in a beneficiary becoming a settlor.High Court considers whether a geothermal turbine hall is a building for depreciation purposes
The law around whether a beneficiary who leaves distributions in a trust is regarded as a settlor has been unclear, and Inland Revenue has expressed differing views on the issue. In December 2013 Inland Revenue wrote to NZICA (as it then was) and advised that merely leaving funds available at call in a trust current account did not result in a beneficiary becoming a settlor.