Tax Policy Bulletin is a regular round-up of recent tax headline news. If you'd like any further detail on the items reported in the update, please reach out to your usual PwC tax advisor.
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Tax Relief for flood and cyclone impacted people - interest remission
The January floods and Cyclone Gabrielle were both declared by Order in Council as emergency events for the purposes of the Tax Administration Act 1994.
The Orders apply to taxpayers who are significantly adversely affected by the January flood or cyclone events in respect of making a payment required by tax law by the due date.
The effect is that taxpayers may ask the Commissioner to remit interest charged under Pt 7 of the Tax Administration Act 1994 for failing to make payments by a due date. The Commissioner may then remit the interest if satisfied that:
it is equitable that the interest be remitted
the taxpayer asked for the relief as soon as practicable, and
the taxpayer made the payment as soon as practicable.
The January floods Order expires on 30 April 2023. The Cyclone Gabrielle Order expires on 31 March 2023.
Other tax considerations - flood and cyclone impacted people
- Donated trading stock - businesses seeking to donate their trading stock (e.g. bottled water; food; clothes; etc.) should consider the tax implications of their donation.
- 31 March income tax filing date - there is no extension of the 31 March 2023 due date for 2022 income tax returns. However, taxpayers impacted by the adverse weather could apply for a remission of any late filing penalties after filing the return.
- Tax pooling - businesses impacted by the adverse weather events could consider using tax pooling to help with cash flow or managing tax payments.
Please reach out to your usual PwC advisor if you have any questions regarding the above.
Extension for deadline for R&D loss tax credit statements
The Tax Administration (Extension of Deadline for Research and Development Loss Tax Credit Statements) Order 2022 (SL 2022/342) extends the filing deadline under s 70C(2) of the Tax Administration Act 1994 for the 2021/22 tax year.
The deadline is now 30 April 2023 for the purposes of the 2021/22 tax year.
- This deadline applies to statements that must be filed with the Commissioner in relation to:
- research and development loss tax credits under the Income Tax Act 2007 that a person claims for the tax year.
- research and development repayment tax that a person must pay for the tax year.
In other recent tax news
- Use of money interest rates have increased from 17 January 2023. The taxpayer’s paying rate of interest on unpaid tax has increased from 7.96% to 9.21% per annum. The Commissioner’s paying rate of interest on overpaid tax is increased from 1.22% to 2.31% per annum.
The fringe benefit tax rate for low interest loans has increased from 1 January 2023. The rate has increased from 4.78% to 6.71%. - Inland Revenue has finalised its interpretation statement on tax avoidance in IS 23/01 “Tax avoidance and the interpretation of the general anti-avoidance provisions sections BG 1 and GA 1 of the Income Tax Act”. The final version takes into account the recent Supreme Court decision in Frucor Suntory New Zealand v C of IR. The statement sets out the Commissioner’s approach to applying section BG 1. The statement also explains how the Commissioner, under section GA 1, may counteract any tax advantage that a person obtains from or under a tax avoidance arrangement.
- The Government announced the extension of the cost of living support on 1 February 2023. This includes the following:
- 25 cents per litre petrol excise duty cut is extended to 30 June 2023;
- the Road User Charge discount will be re-introduced and continue through until 30 June 2023;
- half-price public transport fares are extended to the end of June 2023, and
- half price public transport will be made permanent to around 1 million Community Service Card holders, including tertiary students, from 1 July 2023.
- Inland Revenue’s draft “questions we’ve been asked” (QWBA) poses the question: does a person have a choice of calculation methods for foreign investment fund (FIF) income when they make a voluntary disclosure or file a late return? Although a person usually has a choice of up to 5 methods for calculating FIF income (depending on the person and the investment), if a natural person or a trustee fails to declare FIF income in a tax return and later makes a voluntary disclosure; or fails to file a tax return by the due date and later provides one with FIF income, then the person must use a default method. Consultation on this draft QWBA closed on 10 February 2023.
- Inland Revenue’s recent QWBA poses the question: can a close company deduct interest payable on a shareholder loan account in its tax return if the exact amount is not known until after the balance date? A close company can do so if it has a legal obligation to pay the interest on the shareholder loan account based on a previously agreed formula or method. Companies need to keep records of the method used to determine how much interest is owing.
- Inland Revenue has published a new issue of the Tax Information Bulletin (Vol 35, No 1) which covers new legislation, rulings, determinations, revenue alerts, QWBA and more.
Open consultations
Tax treatment of reimbursing payments made to employees that work from home and/or payments made for an employee’s use of their personal telecommunications tools and/or usage plans in their employment - Consultation closes 17 March 2023.
New cases/decisions
- CSUM 22/05: Inland Revenue has published its case summary of the Supreme Court’s decision in Frucor in relation to tax avoidance and shortfall penalties for taking an abusive tax position.
- TDS 22/22: The TCO decided that the taxpayer was not entitled to a partial write-off of their final tax liability.
