Audio and visual transcript
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Title: Best of the rest webinar
Changes coming in April 2024
Narrator
My name is Helen Mitchell and with me today is Patrick Sawyer. We are both external relationship managers at Inland Revenue.
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Nau mai
Haere mai
Welcome
Title: Topics
- Cross-border workers
- Charities
- KiwiSaver
Narrator
Today we’ll be taking you through a range of changes that are proposed to come into effect on 1 April 2024. The topics we’ll cover are cross-border workers, charities and KiwiSaver.
Please note: The information in this presentation is current as at the 25th of March 2024 and may be subject to change.
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Title: Cross-border workers
Image: An open laptop computer on a table
Narrator
Let’s start with cross-border workers.
These changes address issues faced by employers and payers of non-resident contractors with a view to improving certainty, efficiency, and fairness in the tax system.
Most of these changes received royal assent as part of Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 and are effective 1 April 2024.
Please note, these changes work alongside other existing legislation which determine if a non-resident employer is required to register as an employer or if the employee is liable to account for their own PAYE in New Zealand as an IR56 taxpayer.
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Title: Cross-border workers
Sub-title: 60 Day grace for NRCT and PAYE for a cross-border employee
From 1 April 2024 changes enable an employer to meet or correct their NRCT, PAYE, FBT and ESCT obligations within a 60-day grace period, provided:
- they have taken reasonable measures to manage their employment-related tax obligations, and
- the employee is present in New Zealand for a period during which the employee no longer qualified for exemptions under the ITA, double tax agreement or received an unexpected PAYE income payment.
The 60-day period runs from the earlier of the date of the breach or payment, or the date on which the employer could reasonably foresee that a breach or payment would occur.
During the 60-day period the employer must make a reasonable effort to meet or correct the underpayment of tax in the next EI schedule.
Narrator
The 60 Day grace period for PAYE for a cross-border employee policy recognises situations change meaning it can be a difficult to know future obligations as contracts change. This will help to reduce the compliance and administrative burden of voluntary disclosures - provided the employer/payer acts promptly to correct the under payment.
From 1 April 2024 changes enable an employer to meet or correct their NRCT, PAYE, FBT and ESCT obligations within a 60-day grace period, provided they:
- have taken reasonable measures to manage their employment-related tax obligations, and
- the employee is present in New Zealand for a period during which the employee no longer qualified for exemptions under the ITA, double tax agreement or received an unexpected PAYE income payment.
The 60-day period runs from the earlier of the date of the breach or payment (whichever is applicable) or the date on which the employer could reasonably foresee that a breach or payment would occur.
During the 60-day period the employer must make a reasonable effort to meet or correct the underpayment of tax, by accounting for this in the next Employment Information (EI) schedule.
If this correction is not made within the 60 days, normal procedures for correction of the underpayment apply.
Note: IR56 taxpayers are also eligible to use this 60-day grace period provided they meet the same criteria.
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Title: Cross-border workers
Sub-title: Nominated taxpayer
From 1 April 2024, a non-resident contractor may enter an arrangement with a person resident in New Zealand in relation to the non-resident contractor’s New Zealand employer related tax obligations.
The nominated taxpayer must notify Inland Revenue that they act on behalf of the contractor for the tax year in relation to the payment. The nominated taxpayer is permitted to discharge the non-resident contractor’s employer related obligations on their behalf.
The nominated taxpayer can:
- provide compliance history for the purpose of obtaining a NRCT exemption
- apply for a NRCT exemption if the nominated person authority includes income tax.
Narrator
Now let’s move on to the ability for a “Nominated taxpayer” to act on behalf of a non-resident contractor to simplify the process of meeting NRCT obligations.
From 1 April 2024, changes confirm that a non-resident contractor may enter into an arrangement with a person resident in New Zealand in relation to the non-resident contractor’s New Zealand employer related tax obligations.
A nominated person authority must also be received from the non-resident contractor to then allow the person resident in New Zealand to elect to be a nominated taxpayer.
The nominated taxpayer must notify Inland Revenue that they act on behalf of the contractor for the tax year in relation to the payment. When this occurs, the contractor must not make any separate assessments or returns unless they are not part of the arrangement.
The nominated taxpayer can:
- provide compliance history for the purpose of obtaining a NRCT exemption
- apply for a NRCT exemption if the nominated person authority includes income tax.
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Title: Cross-border workers
Sub-title: Nominated taxpayer
Each person in the arrangement is jointly and severally liable for the amount of tax in the following situations:
- employer obligations where these have been discharged by the person resident in New Zealand
- income tax obligations where the compliance history of the person resident in New Zealand has been used for the purpose of obtaining an NRCT exemption.
Narrator
Each person in the arrangement is jointly and severally liable for the amount of tax in the following situations:
- employer obligations where these have been discharged by the person resident in New Zealand
- income tax obligations where the compliance history of the person resident in New Zealand has been used for the purpose of obtaining an NRCT exemption.
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Title: Cross-border workers
Sub-title: Backdating a NRCT exemption
To improve the flexibility of exemptions available to non-resident contractors there is the ability to back date exemption for up to 92 days before the date of the application for exemption (the date received by Inland Revenue).
This means that if the exemption is issued after the date of the first contract payment, the exemption can cover payments made before its issue date.
Narrator
To improve the flexibility of exemptions available to non-resident contractors there is the ability to back date exemption for up to 92 days before the date of the application for exemption (the date received by Inland Revenue).
This means that if the exemption is issued after the date of the first contract payment, the exemption can cover payments made before its issue date.
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Title: Cross-border workers
Sub-title: Annual PAYE arrangements
A change to the annual PAYE arrangement enables an employer of a class of cross-border employees in special circumstances to apply to the Commissioner for an agreement that the tax due for a PAYE income payment may be made by 31 May following the end of the tax year.
Examples of special circumstances could include:
- Short-term international business travellers.
- Tax equalised individuals.
- Trailing compensation payments eg FBT benefits, bonus/share payments.
Employment income information is due at the same time. Guidance is being drafted regarding the special circumstances.
Narrator
A change to the annual PAYE arrangement enables an employer of a class of cross-border employees in special circumstances to apply to the Commissioner for an agreement that the tax due for a PAYE income payment may be made by 31 May following the end of the tax year.
Examples of special circumstances could include:
- Short-term international business travellers.
- Tax equalised individuals.
- Trailing compensation payments eg FBT benefits, bonus/share payments.
Employment income information is due at the same time. Guidance being drafted regarding the special circumstances.
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Title: Cross-border workers
Sub-title: Employer contributions to foreign superannuation schemes
Employers will have flexibility in the taxation of employer contributions to foreign superannuation schemes where those contributions are made for the benefit of a cross-border employee.
FBT treatment is the default treatment for contributions to a foreign superannuation scheme. However, an employer may choose to apply ESCT treatment to cash contributions to a foreign superannuation scheme.
This includes contributions to sickness, accident, or death benefit funds within that scheme (so that apportionment of the contribution is not required).
Narrator
Now let’s look at what’s changing for employer contributions to foreign superannuation schemes for cross-border workers.
Employers will have flexibility in the taxation of employer contributions to foreign superannuation schemes where those contributions are made for the benefit of a cross-border employee aligning closer to legislation for New Zealand tax residents.
FBT treatment is the default treatment for contributions to a foreign superannuation scheme. However, an employer may choose to apply ESCT treatment to cash contributions to a foreign superannuation scheme. This includes contributions to sickness, accident, or death benefit funds within that scheme (so that apportionment of the contribution is not required).
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Title: Charities
Image: Boxes with food and drink in them
Narrator
That brings us to the end of our changes for cross-border workers, now we will cover some changes that relate to charities.
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Title: Charities
Sub-title: Deregistration tax exclusion
When an entity is deregistered under the Charities Act 2005 and does not re-register within one-year, certain net assets may be subject to income tax, under a ‘de-registration tax’.
Currently an exclusion from the de-registration tax exists if assets are disposed of or transferred to another entity with charitable purposes to effectively keep assets within the charities sector.
The proposed change will tighten this exclusion by changing the wording.
from - another entity with charitable purposes
to - another registered charity or a New Zealand tax exempt entity where the assets will continue to be used for charitable purposes.
This does not include assets transferred to overseas charities.
Applies to charities that deregister on or after the 1 April 2024.
Narrator
When an entity is deregistered under the Charities Act 2005 and does not re-register within one-year, certain net assets may be subject to income tax, under a ‘de-registration tax’.
Currently an exclusion from the de-registration tax exists if assets are disposed of or transferred to another entity with charitable purposes to effectively keep assets within the charities sector.
The proposed change will tighten the exclusion by changing the wording from ‘another entity with charitable purposes’ to ‘another registered charity or a New Zealand tax exempt entity where the assets will continue to be used for charitable purposes’. (An example of New Zealand tax exempt entity is a local council).
This does not include assets transferred to overseas charities.
Applies to charities that deregister on or after the 1 April 2024.
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Title: Charities
Sub-title: Charitable trust definition
References to "Charitable Trust" in the income tax trust rules will be changed to reference “trust that is a tax charity".
Clarifies that for a Trust to derive exempt income under the Income Tax Act (2007) you need to be a “trust that is a tax charity”.
Will apply from Royal assent.
Narrator
References to "Charitable Trust" in the income tax trust rules will be changed to reference “trust that is a tax charity".
This clarifies that for a Trust to derive exempt income under the Income Tax Act (2007) you need to be a “trust that is a tax charity” as not all charitable trusts registered under the Charitable Trust Act are tax charities.
This will apply from Royal assent.
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Title: KiwiSaver
Image: A person putting a coin in a piggy bank
Narrator
In closing we will cover changes relating to KiwiSaver.
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Title: KiwiSaver
Sub-title: Contributions
Payment of KiwiSaver government contribution to PPL recipients.
Parents who choose to have KiwiSaver deducted from their paid parental leave payments will receive a three percent Government contribution to their KiwiSaver fund.
The contribution would be liable for employer superannuation contribution tax (ESCT). This would take effect from 1 July 2024.
Narrator
Payment of KiwiSaver government contribution to paid parental leave recipients.
Under the proposed amendment, parents who choose to have KiwiSaver deducted from their paid parental leave payments will receive a three percent Government contribution to their KiwiSaver fund.
The contribution would be liable for employer superannuation contribution tax (ESCT). This would take effect from 1 July 2024.
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Title: KiwiSaver
Sub-title: Information sharing
Allowing death information to be provided to KS scheme provider.
The Commissioner of Inland Revenue and KiwiSaver providers can share information related to a deceased KiwiSaver member’s estate.
This includes information such as the estate administrator or executor’s name and contact details.
Narrator
Allowing death information to be provided to KS scheme provider
The Commissioner of Inland Revenue and KiwiSaver providers can share information related to a deceased KiwiSaver member’s estate.
This includes information such as the estate administrator or executor’s name and contact details.
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Image: Inland Revenue logo
www.ird.govt.nz/April-Release
Thank you
Narrator
That brings us to the end of today’s presentation.
If you want to find out more about the other webinars we’re going to be running, go to www.ird.govt.nz/April-Release
Thank you for watching.