Credit transfers
Operational statement - transfer of credits
A new Part XB has been inserted into the Tax Administration Act which sets out new rules for transferring excess tax. In particular these rules include transfer dates taxpayers can request.
The new transfer rules apply to:
- refunds for childcare and charitable donation rebates claimed on or after 17 October 2002
- GST on supplies made in taxable periods beginning on or after 1 April 2002
- tax deducted on behalf of another taxpayer that is paid on or after 1 April 2002 (eg PAYE deductions)
- dividend withholding payments and duties paid on or after 1 April 2002
- income tax paid for 2002/03 and subsequent years
- other overpaid tax where the excess arises from:
- an assessment or reassessment made on or after 17 October 2002 or
- an assessment or reassessment made on or after 1 April 2002 and before 17 October 2002, and the taxpayer notified the Commissioner that the new transfer rules were to apply.
Requests for transfers of excess tax that are not covered by these new rules will continue to be actioned according to the policy set out below.
Current Policy
The department's current policy is contained in the operational circular OC 95/2 (plus qualifying commentary which explained the effect of changes in the legislation, since O/C 95/2 was issued).
Legislation was enacted on 24 October 2001, to allow, in certain circumstances, transfers to a period where there was no outstanding liability for tax ("a nil period").
Inland Revenue has issued further operational instructions with the effect that transfers requested before 21 April 2001 are quarantined.
To clarify further the instructions contained in OC 95/2 the following instructions have been issued to staff.
Transfers between taxpayers
These instructions are to clarify OC 95/2, the Op Info item posted on 21 December 01 (transfers to the 2001-02 income tax year), and the flowchart and instructions prepared by the Institute of Chartered Accountants and distributed to staff on 18 January 2002.
This also expressly overrides and replaces any training that has been carried out recently on transfers.
Inland Revenue policy in respect of taxpayers considered to be in the "same economic entity" includes the following: (as stated in the Op Info posted 18 Jan 2002 (transfers to the 2001-2002 income tax year)
- companies in the same group (that is, companies that are at least 66 percent commonly owned);
- a shareholder employee and company;
- partners in the same partnership;
- family members within one degree of relationship (husband/wife, parent/child); and
- a family trust and a beneficiary.
The definition follows the "associated persons" definition set out in the Taxation (Relief, Refunds and Miscellaneous Provisions) Bill.
Where a taxpayer requests a transfer that is a transfer between taxpayers within the "same economic entity" the effective date of the transfer will be the later of:
- the payment date, or
- the day the credit is first available, usually the day after balance date or
- at the effective date requested by the taxpayer
This date is to be used for transfers between all revenues (except PAYE, child support, student loans employers account) eg transfer between Income tax and GST, Rebates to Income tax. It also is to apply if the destination period is in arrears, a current period, future period or back period. But it does not apply to the transfer of the UOMI portion of the credit; these should be transferred at today's date.
The effective date for transfers to PAYE, child support, student loan employer's account must follow the rules set out in OC 95/2, which in general is process date.
Where a request to transfer a voluntary overpayment of provisional tax is made after the date of assessment for that year, then the earliest date that the credit is available is the day after balance date. Where the request to transfer a voluntary overpayment of provisional tax is made before an assessment has been issued for that year then the earliest date the credit is available is date of the overpayment. Note in particular where the transfer request accompanied the tax return it must be treated as being made before assessment and must be actioned before the return is processed.
For the tax years 1995-96 to 2000-01 a transfer can only be made to a period where there is no outstanding liability for tax (a nil period) if the transfer is between income tax periods and the credit arises from an assessment or reassessment issued after 21 February 2001 (Section MZ 5(2) ITA94). Under section MZ 6 a transfer requested for excess tax arising from income derived in the 2001-02 income year can be applied to a date in a nil period that occurs after the date the excess tax is paid.
In effect a transfer between taxpayers within the "same economic entity" should be treated in the same way as a transfer within the same taxpayers account.
Transfers between taxpayers that are not within the "same economic entity" must be actioned at "process date".
This interpretation is to apply to any transfers requested on or after 21 April 2001. If any transfers have been rejected revisit the application.
Date published: 09 Nov 2004
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