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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Incoming coalition Government’s tax policy
On 24 November, a coalition agreement was reached between the National Party, ACT and New Zealand First to form a new Government. Shortly thereafter, the incoming Ministers were sworn in and the Government announced its priorities for the first 100 days in office. We have summarised the headline news from a tax perspective below.
The coalition agreements provide that the National Party’s tax and fiscal plan will go ahead, other than specific exceptions agreed by the parties in the respective coalition agreements. This implies that depreciation for commercial buildings will still be removed; the bright-line period for disposals of residential property will go back to two years; and there will be tax reform in some form for offshore online gambling operators.
The Prime Minister and Minister of Finance have suggested that some of National’s tax plan may not go ahead. For example, the new GST rules for platforms will stay (National campaigned on repeal) and changes to the Working for Families abatement threshold may not go ahead as proposed.
Personal tax cuts (income tax bracket adjustments) will go ahead from 1 July 2024.
The foreign buyer tax (a proposed 15% tax on residential properties sold to non-residents for more than $2 million) will not proceed, under the National/New Zealand First agreement.
The repeal of interest limitation for residential properties will be sped up under the National/ACT agreement (60% deductibility in the 2023-24 income year, 80% in 2024-25 and 100% in 2025-26).
There will be increased funding for Inland Revenue tax audits under the National/New Zealand First agreement, to "urgently expand the IRD tax audit capacity, minimise taxation losses due to insufficient IRD oversight, and to ensure greater integrity and fairness in our tax system."
Under the National/ACT agreement, the Government will "consider sharing a portion of GST collected on new residential builds with councils."
Fuel excise taxes will eventually be repealed for all vehicles, to be replaced with electronic road user charging - starting with electric vehicles. In its first 100 days, the Government will cancel the 6 cent/litre increase to fuel excises proposed by the previous Government.
The Auckland Regional Fuel Tax (RFT) will be repealed and looks to be replaced by congestion charging.
The Clean Car Discount scheme will be repealed by 31 December 2023.
The new Minister of Revenue will be Simon Watts. Nicola Willis is Minister of Finance and Casey Costello (New Zealand First) is Minister of Customs.
The coalition agreement with New Zealand First can be found here and the agreement with ACT here.
Tax treaties
New Zealand has signed the Second Protocol with Austria to update their existing double tax agreement (DTA). This follows the activation of a “most favoured nation” clause after New Zealand reduced dividend withholding rates with the US and Australia. The update offers Austria similar tax treatment and incorporates OECD's latest anti-abuse provisions.
Separately, a new DTA was signed with the Slovak Republic, supporting New Zealand's trade benefits under the EU Free Trade Agreement and integrating OECD anti-abuse standards. Both agreements will take effect following completion of domestic formalities, including New Zealand's Order in Council.
Digital Services Tax
The previous Government introduced the Digital Services Tax Bill to Parliament in August 2023. The Bill proposes to tax the digital economy unilaterally if sufficient progress toward a global solution to the taxing of digital profits is not made. The Bill has now lapsed and will need to be reinstated by the incoming Government. If enacted, this could potentially come into effect from 1 January 2025. Please see our last Tax Tips article for further detail.
In other recent tax news:
Inland Revenue has released technical decision summary TDS 23/14: Omitted income, shortfall penalties. The Tax Counsel Office ruled a taxpayer liable for evasion penalties on unreported deposits. This followed Inland Revenue's reassessment of undisclosed incomes involving family business and trust transactions. The decision validated Inland Revenue's reassessment approach and established the taxpayer's evasion penalty liability, excluding dividend and beneficiary income.
Open consultations
- Inland Revenue's draft QWBA clarifies that taxpayers can choose their Foreign Investment Fund (FIF) calculation methods, even if they fail to declare the income in a tax return and later file a voluntary disclosure, or fail to file a tax return by the due date and later provide one including the income. This includes voluntary disclosures post-omission or delayed tax returns. The guidance also outlines the Commissioner's actions if no return is filed, particularly relevant for natural persons and eligible trustees. Consultation closes 7 December 2023.
- Inland Revenue’s draft QWBA sets out when a subdivision project is an activity carried on “continuously or regularly” as part of a “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. Consultations close 18 December 2023.
Case law update
Better Public Media Trust v Attorney-General [2023] NZCA 553 (CA) - The Court of Appeal has ruled that the Better Public Media Trust, formed to support public media like Radio New Zealand and TVNZ 7, meets the criteria for charity status under the Charities Act 2005. This decision follows the Supreme Court’s decision in the Greenpeace case which recognised that advocacy could be a charitable purpose - particularly as, in this case, the Court of Appeal recognised that the Better Public Media Trust’s advocacy (research, public lectures, commentary, and promoting the concept of public media) was carried out in a “balanced and measured” manner.
