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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Tax Bill reported back
The Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No 2) (the Bill) was reported back to Parliament on 2 March 2023. We previously covered the key proposals contained in this Bill in our September 2022 Tax Tips article and as such we have not summarised the original proposals in detail here.
There has been significant public interest in this Bill, which is reflected in the length of the officials’ report on submissions received (over 400 pages). The Finance and Expenditure Select Committee (FEC) recommended changes to the following aspects of the Bill, based on feedback received from public submissions:
Information reporting with the platform economy
Deferring the start date for the proposed “extended model reporting standard for digital platforms” (for operators of digital platforms that facilitate the sale of goods and rental of vehicles)
Extending the deadline to report information once the rules come into effect
Technical changes to definitions and thresholds
Proposed GST obligations for platform operators
Changes to the criteria for platform operators to opt-out of the GST rules
Technical changes to the application of the “flat-rate credit scheme” which compensates non-GST registered underlying sellers for irrecoverable GST
GST apportionment and adjustment rules
Principal purpose test for GST deductions relating to assets acquired for $10,000 or less will be optional
Cross-border workers and tax arrangements
It is proposed that employers be primarily liable for ESCT and FBT reporting, regardless of their presence in NZ, with an option for the employee to take on the reporting obligations instead
Optionality as to whether employer contributions to foreign superannuation schemes are taxed under the PAYE or FBT rules
Removal of the non-resident contractors’ tax (NRCT) reporting requirements - Inland Revenue will conduct further consultation on this matter
Extension of the 60-day grace period for meeting / correcting NZ tax reporting obligations, to circumstances where an employee who is a NZ resident was working outside NZ for a period and unexpectedly receives PAYE income
- Addressing integrity issues with dual resident companies
- Bikes and scooters to be exempt from FBT - see press release from the Minister here
Please contact your usual PwC tax advisor if you’d like any further details on the Bill or the changes summarised above.
Supplementary Order Paper in response to Flooding and Cyclone Gabrielle
Supplementary Order Paper No 319 to the Bill (the SOP) proposes tax relief in response to the North Island flooding and Cyclone Gabrielle.
The SOP proposes tax relief for employers’ welfare contributions and accommodation provided to employees (in line with similar measures introduced following the Canterbury Earthquakes). These tax changes are specific to the areas affected by the “North Island Flooding Events”, which is now defined as the geographical districts and regions that were affected by:
Cyclone Hale, which crossed the North Island of NZ during the period starting on 8 January 2023 and ending on 12 January 2023 (being Coromandel, Gisborne, Northland, Wairarapa, and Wairoa)
The heavy rainfall starting on 26 January 2023 and ending on 3 February 2023 (being Auckland, Bay of Plenty, Northland, and Waikato)
Cyclone Gabrielle, which crossed the North Island of NZ during the period starting on 12 February 2023 and ending on 16 February 2023 (being Auckland, Bay of Plenty, Gisborne, Hawke’s Bay, Northland, Tararua, and Waikato)
What’s available?
Tax exemption for ex-gratia welfare cash contributions to affected employees made within 8 weeks of the first date of the relevant event, as follows:
Up to $5,000 in cash or benefits (refer below); and
Unlimited accommodation
FBT exemption for certain non-cash benefits for 8 weeks from the first date of the relevant event:
Benefits provided to an employee that, along with any ex-gratia cash payment, do not exceed $5,000 in total; and
Sundry benefits (e.g. an employer provides the ‘benefits’ to a recovery centre and it is hard to identify what benefits a specific employee has received). In this situation there is no specified limit
Tax exemption for accommodation expenditure for employees on limited duration projects
The proposal extends the standard period from 3 to 5 years to remove the impacts of employees relocating to assist the recovery and rebuild after the floods and cyclone and provides relief for employers providing employees with accommodation, with no monetary limit, and up to $5,000 in cash.
Other tax relief announced in response to adverse weather events:
Interest charged on late tax payment will be written off until 30 June 2023
An extension of time for donated trading stock relief until 31 March 2024
An extension of time to file for R&D Tax Incentive until 31 March 2023
Potential tax relief measures around the tax consequences of damaged and destroyed assets are also being considered
International Fiscal Association (IFA) Tax Conference held on 23-24 February 2023
The Associate Minister of Revenue (Hon Dr Deborah Russell) spoke at the annual IFA Tax Conference in Queenstown, as did National deputy leader and Finance Spokesperson Nicola Willis.
The Associate Minister of Revenue announced a range of tax relief measures for taxpayers impacted by Cyclone Gabrielle and the Auckland Floods. She also provided an update on the current economic conditions (challenging but in a relatively strong position). Finally, she provided an update on the Government’s key tax policy priorities, including the High Wealth Individuals (HWI) Research Project on the amount of tax paid by HWIs; and various measures included in the Bill including the proposals requiring platform operators in the gig and sharing economy to collect GST in relation to sales made through their platforms.
Nicola Willis’ speech criticised the Government’s economic management and the increased cost of living, before summarising the key points of difference between National and Labour’s tax policy agenda heading into the election:
Repealing the proposed GST rules in this Bill relating to platform operators in the gig and sharing economy (the “apps tax”);
Repeal of the Clean Car Standards (“ute tax”);
Removing the Auckland Regional Fuel Tax;
Reverting the 10 year bright line test for rental properties back to 2 years;
Removal of interest deductibility for rental properties;
Tax bracket adjustments for personal income tax, as set out in the table below.
In other recent tax news
Inland Revenue has released an updated practice statement concerning disputes between the Commissioner and taxpayers, SPS 23/01, “Disputes Process”, combining two prior statements into one.
The fringe benefit tax interest rate for employment related loans has increased from 1 April 2023. The rate has increased from 6.71% to 7.89%.
Inland Revenue has released three public rulings (BR PUB 23/01, 23/02, and 23/03) around the GST treatment of fees paid to directors and board members - considering whether professional directors are eligible to be registered for GST. The Commissioner has prepared an Operational Position (OP 23/01) giving guidance on the application of these rulings for professional directors who have incorrectly taken the view that they are carrying on a taxable activity.
Deadlines have been extended for research and development tax credit filing by Order 2023 (SL 2023/11) for taxpayers whose ability to meet the filing deadlines is significantly affected by either or both of the January flooding and February cyclone events.
Inland Revenue has published Technical Decision Summary TDS 23/01 determining that settlement payments are considered taxable employment income.
Inland Revenue is seeking feedback on Determination ED0246 regarding the tax treatment of reimbursing payments made to employees that work from home, payments made for an employee’s use of their personal telecommunications tools and usage plans in their employment.
Open consultations
GST - Registered members of unregistered unincorporated bodies - closes 18 April 2023.
For more information about upcoming consultations please see here.
