Tax Policy Bulletin - April 2023

In other recent tax news 

• Inland Revenue has issued a draft public ruling on the tax treatment of cryptoassets when paid as remuneration to employees. The draft is in four parts including; salary and wages paid in cryptoassets; bonuses paid in cryptoassets; employer issued cryptoassets provided to an employee; application of the employee share scheme rules to employer-issued crypto assets provided to an employee.

• Inland Revenue has issued draft interpretation guideline PUB00464 on the deductibility of costs a taxpayer incurs in configuring or customising a supplier's application “software as a service” (SaaS) arrangement. This interpretation guideline considers the deductibility of the costs the taxpayer incurs in configuring or customising a supplier's application software in a SaaS arrangement.

• Inland Revenue has issued a draft interpretation statement on the deductibility of holding costs for land, and whether the land being taxed on sale is relevant to the deductibility. IR’s view is that holding costs incurred on land that is not revenue account property and is not rented out - but is taxed on sale - are not deductible. 

• Inland Revenue has released a special report on the build-to-rent exclusion from the interest limitation rules. The report provides early information on the build-to-rent exclusion from the interest rules included in the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Act 2023. 

• The use of money interest rates have increased. Raising the taxpayers’ paying rate of interest on unpaid tax from 9.21% to 10.39% per annum. The Commissioner’s paying rate of interest on overpaid tax is increased from 2.31% to 3.53% per annum. The Taxation (Use of Money Interest Rates) Amendment Regulations 2023 (SL 2023/28) come into effect on 9 May 2023. 

• Inland Revenue has released 5 draft public rulings on the tax consequences for New Zealand investors in a United States limited liability company. The drafts are a reissue of earlier rulings issued in 2020 which expire on 25 June 2023. 

• Inland Revenue has released determination AE 23/01 “Participating jurisdictions for the CRS applied standard”. The determination adds Jamaica, Marshall Islands and Niue to the list of participating jurisdictions. 

• Inland Revenue released a draft “Questions We’ve Been Asked” on unincorporated bodies not registered for GST (and not liable to be registered) that considers whether  individual GST-registered members claim input tax deductions for their:

  • Share of the costs incurred by the unincorporated body

  • Contributions to the unincorporated body

• Inland Revenue has released Determination EE004 which applies from 1 April 2023. It sets out the extent to which a payment made by an employer to an employee, to reimburse the additional expenditure that employees may face when they work from home and/or use their personal telecommunications tools and engage plans, is able to be treated as exempt income to the employee. 

• Inland Revenue has issued a Commissioner’s Statement on Inland Revenue’s Technical Issues Escalation Policy and Process. The intention of the policy is to ensure that Inland Revenue staff apply the legislation consistently. The statement sets out the obligations for all Inland Revenue staff but does not create any rights for customers to have issues reconsidered by IR. It also helpfully sets out examples of circumstances when the taxpayers can rely on a view from Inland Revenue as being the Commissioner’s interpretation of the law. 

• Inland Revenue has issued “International Tax Disclosure Exemption ITR34”. The scope of the 2023 disclosure exemption is the same as the 2022 disclosure exemption. The exemption applies for the income year corresponding to the tax year ended 31 March 2023.

• The High Court has entered summary judgement against the vendors of a property for breach of a goods and services tax (GST) warranty on the sale and purchase of a property. See a summary of the decision in Takapuna Residence Developments Ltd v Dixon [2023] NZHC 624 here. 

• Inland Revenue has issued QB 23/03 on the income tax treatment of payments made by parents to childcare centres. It was concluded that the payment must exceed $5 and be made voluntarily to benefit the centre where the parent or child does not gain any material benefit or advantage in return to qualify as a donation. The childcare centre must also be a donee organisation. 

• Inland Revenue has released a draft interpretation statement with guidance on the income tax treatment of government grants and subsidies paid to businesses. This interpretation statement provides guidance on how ss CX 47 and DF 1 of the Income Tax Act 2007 apply to payments of grants and subsidies to businesses. Where these provisions apply, a grant or subsidy paid by a local authority, public authority or public purpose Crown-controlled company to a business is not taxable and the expense funded by the grant is non-deductible.

• Inland Revenue has issued Determination DET 23/01: “Amortisation rates for landfill cell construction expenditure”. The determination sets out the amortisation rates for landfill cell construction expenditure.