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.
28 February
Tax Bill reported back
The Finance and Expenditure Committee (FEC) released its report back late last week in relation to the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Matters) Bill (the Bill). We outline some of the key recommendations below:
- Regarding the generic response to emergency events, some key recommendations included options for Orders in Council to specify the start dates of emergency events and specifying later dates for end dates of emergency event periods.
- Regarding the taxation of transfers from overseas pension schemes, key recommendations from the FEC include making “scheme pays” approaches optional for KiwiSaver providers, extending the timeframe for notification to a Qualifying Recognised Overseas Pension Scheme (QROPS) provider of the assessable withdrawal amount, and adding transfer scheme withholding tax to the list of taxes excluded from the knowledge offences exceptions under section 143A of the Tax Administration Act.
- Regarding the approved issuer levy (AIL) retrospective registration amendments, the FEC has recommended:
- amending the bill to remove the two-year time frame for retrospective registration and instead insert “duration of the delay in applying for the registration” as a factor that the Commissioner may consider when determining whether the delay was caused by an oversight;
- expanding the Commissioner’s discretion to allow retrospective registration so that it covers cases when the borrower made reasonable efforts to register the security on time but failed to do so;
- removing “whether the person is a natural person” from the list of factors the Commissioner may consider in determining whether the delay was caused by an oversight; and
- adding AIL to the list of taxes for which the Commissioner has the discretion to allow tax pooling to be used to satisfy new liabilities.
- Regarding the New Zealand Business Number information sharing with the Ministry of Business, Innovation and Employment (MBIE), the FEC has recommended specifying in the legislation that this would be carried out as a single transfer of data.
- Regarding the GST remedials, the FEC has recommended:
- Extending the zero-rating amendment to apply to a wider range of temporarily imported goods and commercial vessels.
- Clarify that section 21F(6) applies to “typical property development activities” (rather than retirement village operators who develop their own villages).
- Regarding the trust remedials, the FEC has recommended:
- Amending the bill to ensure that the minor beneficiary rule does not apply to beneficiary income derived from any discretionary trust, provided they otherwise meet the disabled beneficiary trust definition.
- Amending the bill so that the corporate beneficiary rule excludes foreign-sourced amounts of beneficiary income derived by a non-resident company if the company does not have a New Zealand resident shareholder.
- Regarding the partnership remedials, the FEC has recommended:
- Removing the requirement for a limited partnership to carry out a taxable activity for it to be eligible for resident withholding tax (RWT) exempt status.
- Amending the legislation to make it clear that the definition of voting interest applies specifically for the purposes of particular associated person tests under subpart YB of the Income Tax Act.
- Regarding the land rules remedials, the FEC has recommended amending the bright-line start date on partitions of land to the date the co-owner acquired their first interest in the undivided land.
- Regarding the international tax remedials, the FEC has recommended amending the effective date of the amendment to the standard commencement date after the bill receives royal assent to ensure that this change does not apply retrospectively.
- In addition to the above, the FEC has also made recommendations in relation to FamilyBoost, forestry emissions units, reimbursement payments for flu vaccines, deductibility of forestry releasing costs, and income derived from share-lending arrangements.
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.
Read more
Recent Inland Revenue publications
- DTC regime regulatory stewardship review findings and response. The review aimed to assess whether the donations tax credit regime is operating effectively, efficiently, is achieving its intended outcomes and remains fit for purpose and the future.
- TDS 25/02: Financing arrangement to fund the refurbishment of a capital asset. This technical decision summary considers a proposed financing arrangement to fund the refurbishment of a capital asset. The Applicants were two companies that were unable to source finance from traditional bank lending or by way of supplier financing.
Open consultations
- PUB00460: When is land acquired for a purpose or with an intention of disposal so that the amount derived from the sale is income? This draft QWBA provides guidance about the circumstances in which an amount derived from the disposal of land acquired with a purpose or intention of disposal is income under s CB 6. The QWBA explains how s CB 6 applies, and its relationship with the 2-year bright-line test. The proposed QWBA also discusses some common misconceptions about s CB 6 and includes examples illustrating when it will apply. This consultation is running in conjunction with PUB00488. Consultation closes 11 April 2025.
- PUB00488: The bright-line test for selling residential land. The Commissioner is seeking public feedback on changes to six existing QWBAs. The changes relate to the bright-line test for selling residential land. The only interpretive change is in the item concerning s CB 6 (PUB00460), which has been updated to state that “disposing” in s CB 6 (in terms of the required intention) is disposing of by way of sale or similar. Consultation closes 11 April 2025.
- PUB00467: GST - taxable activity: This draft interpretation statement sets out the Commissioner’s view on the meaning of “taxable activity” under the GST Act. The Commissioner has discussed this concept in numerous public items, but generally in a specific context such as subdivisions of land, horse racing or horse breeding. This statement is of more general application. Consultation closes on 4 April 2025.
- PUB00459: Income tax: Can I claim a deduction for expenses I incur on repairing a recently acquired capital asset? This QWBA considers whether a taxpayer can deduct for income tax purposes the amount of expenditure they have incurred to repair a capital asset that they have recently acquired so they can use it in their business or income-earning activity. Consultation closes on 28 March 2025.
- Taxation and the not-for-profit sector: This officials’ issues paper is part of a review to determine the effectiveness of certain tax concessions, both in meeting their objectives, and relative to alternative methods of providing assistance to charities. The review will consider a range of integrity measures as well as what improvements and simplifications can be made to some of the existing rules. Consultation closes on 31 March 2025.
- Consultation on employee share scheme timing issues. Inland Revenue has launched consultation on a policy proposal to address a taxation timing issue for employee share schemes offered by start-up companies. The proposal suggests deferring the taxation point for eligible schemes, as well as the company's deduction, until a liquidity event occurs to fund the tax on income. Officials seek views on the desirability and feasibility of such an approach. Consultation closes on 14 March 2025.
For more information about upcoming consultations please see here for Tax Technical and here for Tax Policy.
Recently closed
- 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 closed 28 February 2025.
- PUB00493: Income tax and GST – industries other than forestry registered in the Emissions Trading Scheme. This interpretation statement applies to industries registered in the Emissions Trading Scheme, other than forestry which is taxed differently. The statement sets out the conceptual framework for the income tax treatment of emission liabilities and emissions units (NZUs) in these sectors. It then explains how to calculate deductions for emission liabilities and it discusses the treatment of NZUs as income. Finally, there is a brief discussion of the GST treatment of NZUs. Consultation closed 27 February 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 closed 14 February 2025.
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