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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Budget 2024
The Minister of Finance delivered the Government’s annual Budget on 30 May 2024.
There were no surprises from a tax perspective, as the Government has delivered the personal tax cuts that it campaigned on during the 2023 general election:
Current Bracket |
New Bracket (31 July 2023) |
Rate |
0 - 14,000 |
0 - 15,600 |
10.5% |
14,001 - 48,000 |
15,601 – 53,500 |
17.5% |
48,001 - 70,000 |
53,501 – 78,100 |
30% |
70,001 - 180,000 |
78,101 – 180,000 |
33% |
180,001 - |
180,001 - |
39% |
The current brackets will apply for the first three months and 30 days of the 2024-25 tax year, and the proposed new brackets will apply for the remainder of the tax year. To reflect the change in brackets partway through the year, composite tax rates will need to be applied across the year.
Other tax changes announced as part of the Budget include:
Extending the income eligibility for the independent earner tax credit (IETC) from $24,000-$48,000 to $24,000-$70,000 per annum.
Increasing the In-Work Tax Credit (IWTC) for families with dependent children by $25 per week.
Increasing the income threshold for the Minimum Family Tax Credit (MFTC), which tops up the after-tax income of eligible families to a guaranteed minimum amount, to ensure that MFTC recipients benefit from the personal income tax changes and increase to the IWTC.
Establishing a new “FamilyBoost” tax credit of 25% of early-childhood education fees, up to a maximum of $150 per fortnight. The FamilyBoost scheme will be administered by Inland Revenue. To claim the FamilyBoost payments, all ECE invoices from 1 July onwards will need to be uploaded to myIR. FamilyBoost tax credits will be paid quarterly, calculated based on the applicants’ household income.
Increasing the base interest rate and late payment interest rate charged on overseas-based borrowers’ student loans, and for late repayments, by 1% from 1 April 2025 to 1 April 2030.
Inland Revenue has been allocated an additional $116m of funding over the next four years to increase “compliance activities on tax and student loan overseas-based borrowers”. The Government has forecast to collect $702m of additional revenue over the next four years due to this increased activity. This is broadly in line with the $8.92 of tax returned for every $1 spent on compliance activities in 2023 (per Inland Revenue’s annual report).
$16.8m has been provided to Inland Revenue over four years to develop and administer the OECD’s Crypto-asset reporting framework (CARF) in NZ. Inland Revenue previously consulted on NZ’s adoption of the CARF in late 2022. The Government has booked $50m of additional revenue from 2027-28 due to compliance and enforcement actions arising as a result of the CARF.
If you missed it, you can access PwC’s coverage of Budget 2024 here.
Summary of recent Inland Revenue publications:
DET 24/02 - GST on accommodation supplied through electronic marketplaces - opt-out agreement criteria. This determination sets special criteria for hostels and motels to enter into an opt-out from the new platform economy GST rules. The determination was made under s 60C(2BC) of the Goods and Services Tax Act 1985 and applies for taxable periods starting on or after 1 April 2024 and ending on or before 31 March 2025.
Deemed rate of return on FIF attributing interests - The Income Tax (Deemed Rate of Return on Attributing Interests in Foreign Investment Funds, 2023–24 Income Year) Order 2024 (SL 2024/119) comes into force on 6 June 2024. The deemed rate of return is set at 8.63% for the 2023-2024 income year, up from 8.15%.
QB 24/01 - If a person has two or more homes, which home is their main home for the purpose of the main home exclusion to the bright-line test? A person can only have one main home, being the one to which they have the greatest connection. This statement considers the factors relevant to determining a person’s connection to their main home.
- OS 19/04 - Inland Revenue has published the following kilometre rates for the business use of vehicles for the 2024 income year:
Vehicle Type |
Tier One Rate |
Tier Two Rate |
Petrol or Diesel |
$1.04 |
35 cents |
Petrol Hybrid |
$1.04 |
21 cents |
Electric |
$1.04 |
12 cents |
Open consultations
ED0257 - Authority to act for tax agents. This draft statement provides guidance on how a tax agent or representative can obtain authority to act on behalf of their clients, and the manner in which a person may nominate a person to act on their behalf with Inland Revenue. Consultation closes 28 June 2024.
PUB00474 - Do supplies of standing timber and other unsevered crops wholly or partly consist of land for the compulsory zero-rating rules? The draft statement considers whether various plants constitute an interest in “land” for the purposes of the compulsory zero-rating of land rules. This includes seeds, grains, and vegetables which produce an annual crop (fructus industriales) and forestry trees, fruit trees, and vines (fructus naturales). Consultation closes 19 July 2024.
Recently closed:
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. Closed 3 May 2024.
- 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. Closed 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. Closed 24 April 2024.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Case Law Update
TDS 24/09 - Transfer of property and whether income arises, concerning the transfer of shares in a company to a limited partnership as a capital contribution, and the transfer of a percentage interest in the limited partnership to two other limited partnerships as capital contributions. The taxpayer was a partner of both limited partnerships and argued (unsuccessfully) that the distribution did not give rise to income because they held the same rights in respect of the property after the transfer.
TDS 24/10 - Backdated GST registration. The Commissioner’s decision not to backdate a GST registration was upheld. In this particular case, the taxpayer’s failure to respond to requests for further information, and the additional administrative costs associated with backdating were relevant to the decision.
- TDS 24/11 - Permanent establishment. This decision concerned the use of a New Zealand subsidiary to provide services to an overseas parent company, and whether the overseas parent company had a permanent establishment in New Zealand. In this case, there was no permanent establishment on the basis that the New Zealand subsidiary was sufficiently independent from its overseas parent.
