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.
Taxation (Annual Rates for 2024−25, Emergency Response, and Remedial Measures) Bill introduced to Parliament
On 26 August 2024, the Government introduced to Parliament the Taxation (Annual Rates for 2024 −25, Emergency Response, and Remedial Measures) Bill (the Bill).
In addition to the annual rates of tax, the Bill includes the following headline proposed policy changes:
a set of "generic" tax relief measures for future emergency events
adoption of the OECD's crypto-asset reporting framework (CARF) in NZ
changes to the taxation of transfers from overseas pension schemes
allowing retrospective registration for AIL in certain circumstances
increasing certain thresholds for exempt employee share schemes in line with inflation
In addition to the proposed policy changes above, the Bill proposes a significant volume of remedial changes to existing rules. These proposed remedial changes span a range of different tax types and regimes, including:
GST
trustee tax rate
partnerships
land rules
international tax
Research and development tax incentive (RDTI)
The commentary to the bill and other supporting documents can be accessed here.
Recent Inland Revenue publications
IS 24/06 - PAYE - How an employer funds the tax cost on an employee share scheme benefit. This interpretation statement explains an employer’s withholding and reporting obligations related to PAYE, student loans and KiwiSaver if an employer wants to fund the cost of tax (and student loan, if applicable) on an employee share scheme benefit provided in shares. Published 30 July 2024.
SPS 24/01 - Requests to change a balance date. The standard practice statement describes how the Commissioner of Inland Revenue will exercise statutory discretion or deal with practical issues. It explains how to apply for a change of balance date and how the Commissioner will use their discretion under s 38 of the Tax Administration Act 1994 to approve a change of balance date. Published 30 July 2024.
IS 24/05 - Employer obligations for employee share scheme benefits paid in cash. This interpretation statement explains an employer’s PAYE, student loan and KiwiSaver obligations when an employee receives a benefit under an employee share scheme that is paid in cash. Published 30 July 2024.
TDS 24/15 - GST - payment for participation in religious practice. How to treat payments made by members for participation in religious practices. Published 30 July 2024.
CS 24/01 - Determining the “market value” of shares that an employee receives under an employee share scheme. This Commissioner’s statement updates and replaces CS 17/01, in light of the legislative confirmation of the market value formula to value shares under an employee share scheme. Published 31 July 2024.
TIB Vol 36 No 7 - TIB August 2024. Includes QB 24/03 (FBT - employee share loans and associates), QB 24/04 (When is a subdivision project a taxable activity for GST purposes?), TDS 24/13 (GST - supply of accommodation), TDS 24/14 (Interest free loan and dividends). Published 31 July 2024.
SPS 24/04 - Extension of time applications from customers without tax agents. The standard practice statement sets out how the Commissioner will consider applications for an extension of time to file an income tax return from customers who do not have tax agents. Published 8 August 2024.
TDS 24/16 - Look-through company election. Company electing to be a look-through company and the liquidation of a wholly owned subsidiary. Published 8 August 2024.
TDS 24/17 - Deductibility of bonus payments. Deductibility of bonuses; whether issue of shares to fund bonuses are income; tax avoidance. Published 14 August 2024.
QB 24/05 - Do supplies of standing timber and other unsevered crops wholly or partly consist of land for the compulsory zero-rating rules. This ‘Questions We’ve Been Asked’ (QWBA) provides further guidance on the meaning of “land” for the purposes of the compulsory zero-rating rules. Published 14 August 2024.
IS 24/07 - Deductions for parties to employee share schemes. This interpretation statement considers what deductions employers can claim for income tax in relation to employee share schemes. It explains the need to satisfy the general permission and when the capital limitation might apply. Published 22 August 2024.
Open consultations
PUB00274 - Income tax – Identifying the relevant item of property for depreciation purposes. This statement provides general guidance on how to identify the relevant item of property when applying the depreciation rules in the income tax legislation. The relevant item must be identified to ensure it is a depreciable item and, if so, to determine the applicable depreciation method and rate from which amounts of depreciation losses may be calculated. In many cases, this will be relatively straightforward. However, in some cases it may be unclear whether an item is a standalone item of property or part of another item of property. Consultation closes 29 August 2024.
PUB00455 - Look-through companies and disposal of residential land under the bright-line test. This interpretation statement explains how the bright-line rules apply in various situations involving residential land and transfers involving a look-through company. It only applies to transfers on or after 1 July 2024. Consultation closes 23 September 2024.
PUB00454 - Income tax - share investments. These draft items are intended to provide guidance for individuals who invest in shares, and covers when an investor will have a tax liability for dividends, share sales and attributing interests in foreign investment funds. Consultation closes 24 September 2024.
Long-term insights briefing - Our tax system: Bases and regimes. Inland Revenue and the Treasury are required to produce a long-term insights briefing (LTIB) every three years on medium to long term trends, risks, and opportunities relating to New Zealand’s tax policy settings. This year’s LTIB explores the broad topic of the adequacy of the current tax bases and regimes (e.g. reliance on taxes on labour income and consumption), in the context of New Zealand’s ageing population and upcoming fiscal pressures (e.g. cost of superannuation). Consultation closes 4 October 2024.
ED0260 - Section 17B Notices. This draft statement outlines the procedures the Commissioner will generally follow when issuing notices, including to third parties, under s 17B of the Tax Administration Act 1994 (demand for information). Consultation closes 18 October 2024.
ED0258 - The Commissioner of Inland Revenue’s search powers. This draft statement outlines how the Commissioner will exercise his information gathering powers under ss 17, 17C and 17D of the Tax Administration Act 1994 and the Search and Surveillance Act 2012. The statement is intended to provide taxpayers and their advisors with information about what to expect when the Commissioner uses these powers, and the Commissioner’s expectations of taxpayers. Consultation closes 18 October 2024.
Recently closed:
PUB00480 - Income tax – Overdrawn shareholder loan account balances. This statement considers the implications of arrangements where companies provide benefits to shareholders who access overdrawn shareholder loan accounts. Concerns arise relating to FBT, the tax treatment of interest, withholding and information reporting obligations, and where the shareholder is relieved of the obligation to repay the balance. Closed 2 August 2024.
Draft for Consultation - Proposed modification to GST adjustment rules. Inland Revenue has become aware of a legislative error in the GST rules which prevents some taxpayers from using the simplified one step adjustment calculation when there was a permanent change of use of an acquired asset on or after 1 April 2023. The Minister of Revenue is considering recommending an Order in Council to modify the application of the law in these circumstances. Closed 12 August 2024.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
International tax updates
Double Taxation Relief (Austria) Amendment Order 2024 (SL 2024/153) amends the Double Taxation Relief (Austria) Order 2007 by adding a protocol agreed by the Governments of New Zealand and Austria on 12 September 2023. The protocol amends the Agreement between New Zealand and the Republic of Austria with respect to taxes on income and on capital. This comes into force on 29 August 2024.
- Double Tax Agreements (Slovak Republic) Order 2024 (SL 2024/154) gives effect to the agreement between New Zealand and the Slovak Republic for the elimination of double taxation with respect to taxes on income and the prevention of tax evasion and avoidance and protocol to the agreement. This comes into force on 29 August 2024.
