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.
Click here to subscribe to our tax publications
Tax bill has received royal assent
The Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Act 2024 (the Act) received Royal Assent on 28 March 2024 and has now been enacted into law. The Act sets the annual rates of income tax for the 2023-24 tax year.
Other key items in the Act include the following:
Enacting an OECD-led global tax initiative aimed at ensuring large multinationals pay a minimum tax rate of 15% in participating countries.
Aligning the trustee tax rate with the 39% top personal rate (trusts with trustee income below $10,000 will continue to be taxed at 33%).
Restoring the bright-line test period to 2 years, and interest deductibility for residential properties.
Removing the ability to depreciate commercial buildings.
Changing the tax treatment of the disposal of trading stock at below market value.
Introducing a new gambling duty for offshore casinos.
Various remedial amendments relating to the GST “App Tax”.
Altering the tax treatment of ACC and MSD backdated lump sum payments.
Providing tax rollover relief and other tax measures in response to recent flood events.
These are discussed in more detail in our last Tax Tips article.
Government’s first 100 days - tax policy
In addition to the above items included in the Bill, the Government has also progressed other tax-related items on its 100 day plan:
The clean car discount scheme ended on 31 December 2023.
- The Auckland regional fuel tax will end on 30 June 2024.
Other tax related changes anticipated beyond 100 days:
- Personal tax cuts are still planned for the 2024 Budget in May. However, commentators are questioning whether the current fiscal climate will allow the full tax cuts promised in the National Party’s election manifesto.
- “FamilyBoost” package - The Government has announced its intention to introduce FamilyBoost payments as part of Budget 2024. The FamilyBoost payment will be in the form of a refund equal to 25% of early childhood education (ECE) fees paid by households, up to a maximum of $75. This will come into effect from 1 July 2024, with the first FamilyBoost refunds being made in October. Further information is expected as part of the Budget announcements in May this year.
Summary of recent IR tax publications:
Inland Revenue has published a special report on the trustee tax rate. This special report outlines the new rules for trusts, including measures to mitigate over-taxation and measures to buttress the 39% trustee tax rate by taxing beneficiary income derived by certain close companies at the 39% trustee tax rate.
Inland Revenue has published an update to its special report on GST on accommodation and transportation through online marketplaces. This special report provides information that explains the GST rules for marketplace operators involved in the supply of ride-sharing/ride-hailing and delivery services for food and beverages; as well as for marketplace operators and listing intermediaries involved in the supply of accommodation services. This special report has been updated following legislative changes that passed into law in March 2024.
Inland Revenue has published a special report on the Offshore Gambling Duty. This special report discusses the gaming duty which applies from 1 July 2024 to online gambling provided by offshore operators to New Zealand residents. From 1 July 2024, offshore operators will be required to pay a 12% gambling duty.
Inland Revenue has released technical decision summary TDS 24/07: Suppressed cash sales, GST and evasion shortfall penalties. The TCO determined that the taxpayer had under-reported its cash sales and that evasion penalties were correctly imposed for GST and income tax shortfalls.
Inland Revenue has released technical decision summary TDS 24/06: Sale of property and the bright-line test concerning the future sales of three sections of residential land, part of which was inherited by the applicant upon the death of the applicant’s spouse. The TCO found that the transactions did not give rise to potential bright-line taxing events.
Inland Revenue has released technical decision summary TDS 24/05: Sale of bare land when intended for a subdivision. The TCO found that the sale of units held by three taxpayers with other members in an unincorporated joint venture, which had acquired an undivided beneficial ownership interest in various assets including land, was income, as the taxpayers had acquired the land with the purpose or intention of sale.
- Inland Revenue has released a technical decision summary TDS 24/04: Receipt of a one-off payment. The TCO concluded that a one-off payment received by a real estate agent, as part of a contract entered into with an agency as a contractor, was not a loan. In addition, the TCO found that the payment was derived on receipt and should have been included in the relevant return.
Open consultations
Inland Revenue currently has five items open for consultation:
PUB00364: Employee Share Scheme. This draft statement addresses various technical issues related to the employee share scheme (ESS) rules. These range from what an ESS is and the taxing date, to whether employee share loan exclusions from FBT can be used by an employee’s associates when they take a loan to buy shares related to the employee’s job. Closes 26 April 2024.
PUB00367: Income tax - Partnerships (including limited partnerships) - general guidance. This interpretation statement provides general guidance on the income tax treatment of both general and limited partnerships. Closes 24 April 2024.
ED0252: Requests to change a balance date. This draft standard practice statement describes how the Commissioner will exercise a statutory discretion or deal with practical issues arising out of requests for a change of balance date for income tax purposes. Closes 3 May 2024.
Inland Revenue also had some consultation items recently close:
ED00251: The valuation of livestock. This describes the options available for taxpayers who are in the farming industry to value livestock they have on hand at balance date, including the national standard cost scheme and the herd scheme. It also provides details on key terms, requirements, restrictions and procedures related to these specific options. Closes 25 March 2024.
PUB00465: Charities - Business income exemption. This considers the extent to which business income that charitable entities derive is exempt from income tax. It states additional restrictions to business income may result in all of a tax charity’s business income not being exempt. Closed 15 March 2024.
ED00250: Tax Depreciation Rate for horticulture LED grow light systems. This sets a depreciation rate for horticulture LED grow light systems used for indoor farming operations, applicable for the 2023 and subsequent income years. Closed 29 February 2024.
ED00253: Tax Depreciation Rate for metal (scrap) recovery plant. This proposes a revised depreciation rate for metal (scrap) recovery plant and a change to the asset class description (Now, “Scrap metal shredder including sorting plant”), applicable for the 2024 and subsequent income years. Closed 29 February 2024.
PUB00427: When is a subdivision project a “taxable activity” for GST purposes?, clarifies when a subdivision project is an activity carried on “continuously or regularly” in the definition of “taxable activity” for GST purposes. It also sets out when the sale of subdivided land is a supply made in the course or furtherance of a taxable activity. Closed 18 December 2023.
For more information about upcoming consultations please see here for Tax Technical, and here for Tax Policy.
Case law update
Pepsico, Inc. v Commissioner of Taxation [2023] FCA 1490: The Federal Court of Australia recently looked at whether a payment made in consideration for beverage concentrate has an “embedded royalty” component.
