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.
18 December 2024
Use of Money Interest Rates decreasing
- The Taxation (Use of Money Interest Rates) Amendment Regulations 2024 (SL 2024/254) were notified in the New Zealand Gazette on 12 December 2024 and come into force on 16 January 2025.
- Taxpayers’ paying rate of interest on unpaid tax will decrease from 10.91% to 10.88% per annum.
- The Commissioner’s paying rate of interest on overpaid tax will decrease from 4.67% to 4.30% per annum.
PwC publications
Take a look at PwC’s commentary on the Government’s Half Year Economic and Fiscal Update (HYEFU). The HYEFU highlighted a deterioration in the economic and fiscal outlook compared to Budget 2024 forecasts - economic growth is predicted to begin to recover from 2025. However, it will be slower than previously forecast. The fiscal outlook is weaker across all indicators compared to Budget 2024.
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Recent Inland Revenue publications
- TDS 24/23: Depreciation loss on asset no longer used. The taxpayer had shut down a part of their business due to a change in business direction and an asset could no longer be used. The Tax Counsel Office (TCO) found that the taxpayer did have an amount of depreciation loss under s EE 39 of the Income Tax Act, the general permission being satisfied and no general limitations applying to deny the deduction.
- TDS 24/22: Transitional residency and cryptoassets. Considered whether a taxpayer intending to return to New Zealand and establish a permanent place of abode qualified as a transitional resident, and whether amounts derived by the taxpayer from the sale of cryptoassets through overseas centralised exchanges or decentralised exchanges had a source in New Zealand.
- TDS 24/21: Accommodation provided to an employee. The taxpayer company was supplying accommodation to an employee as part of meeting its health and safety obligations. The TCO found that as the taxpayer was providing accommodation to the employee “in relation to” and “in connection with” their employment, it was required to pay PAYE on the value of the accommodation and return GST output tax.
- Submissions on scope of IR’s long-term insights briefing (LTIB): Inland Revenue received a total of 36 submissions on the consultation and has released a summary of the eight main themes that came through. There will be further opportunity to provide feedback when IR releases a draft of its second LTIB for public consultation in early 2025.
- Public Remedials Log launched: The Public Remedials Log was launched on 16 December 2024. It seeks to inform the public about remedial legislative issues that IR has considered and tracks the progress of each item through the legislative amendment process.
Open consultations
- PUB00458 - Income tax – Using the cost method to determine foreign investment fund (FIF) income. This draft statement explains when a New Zealand resident investor can choose to apply the cost method to calculate their foreign investment fund (FIF) income on shares held in foreign companies. It includes some examples of when an independent valuation may be required to apply the cost method, and how the cost method can be applied. Extension granted to 20 December 2024.
- Amendments to foreign investment fund (FIF) rules. Inland Revenue has launched consultation on policy proposals to address an aspect of New Zealand’s FIF rules. By imposing tax on unrealised income the current rules could be deterring some people from choosing to settle in New Zealand. The proposal suggests allowing some migrants to pay tax on dividends and realised gains. Consultation closes 27 January 2025.
- PUB00519: Can section CB 3 apply to amounts derived from the disposal of land? This draft QWBA considers whether s CB 3 of the Income Tax Act 2007 can apply to amounts derived from the disposal of land. Section CB 3 provides that an amount derived from an undertaking or scheme for the purpose of making a profit is income of a person. Consultation closes 14 February 2025.
- ED0263: Cash collateral is “money lent”. The Commissioner has previously taken the view that payments of money in the form of cash (cash collateral) as part of, and to secure obligations under, security lending and derivative transactions was not money lent, so there was no RWT or NRWT withholding obligation for the interest payments arising. This draft Operational Statement outlines a change of view by the Commissioner and sets out the new approach. Consultation closes 28 February 2025.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Recently closed
- PUB00483 - Tax residence. This draft interpretation statement will update and replace IS 16/03: Tax residence, to reflect various legislative and other changes that have been made since 2016. Accompanying the draft statement are three draft fact sheets – one each in respect of tax residence and individuals, companies, and trusts. There is also a reading guide to help readers understand, at a high level, the changes that have been made. Consultation closed 11 December 2024.
- PUB00495 - Tax residence – government service rule. This draft interpretation statement explains the government service rule whereby an individual is considered a New Zealand tax resident if they are personally absent from New Zealand in the service of the New Zealand Government. The discussion has also been expanded to touch on the articles of double tax agreements that may need to be considered if the government service rule applies. Consultation closed 11 December 2024.
- PUB00482 - Income tax – implications of a residential property moving between the standard tax rules and the mixed-use asset rules. This draft interpretation statement considers situations where a person’s use of their residential property has changed so the property moves from being under one set of income tax deduction rules to another. It explains how a person determines which income tax deduction rules apply and the consequences of moving between the standard tax rules and the mixed-use asset rules. Accompanying the draft interpretation statement are two draft fact sheets. Consultation closed 13 December 2024.
- PUB00462 - What is the income tax treatment of gift cards and products provided as trade rebates or promotions? This draft Question We’ve Been Asked (QWBA) explains the income tax treatment of gift cards and products provided by trade suppliers to trade customers (business to business) as trade rebates, promotions, or rewards for trade customers buying goods or services from trade suppliers. Consultation closed 18 December 2024.
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