Credit transfers
Transfer rules
New rules came into force on 17 October 2002 that significantly alter the way Inland Revenue carries out requests for the transfer of excess tax.
These rules are set out in the new Part XB of the Tax Administration Act 1994.
You can now specify the date you want excess tax transferred, provided the date is a date allowed by the legislation (see Transfer dates).
Application dates
The new 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.
Transfer requests that fall outside the above application dates will continue to be actioned in accordance with the following Operational statements:
| Title and summary | |
|
Definition of same "economic entity" Following discussions with The Institute of Chartered Accountants of New Zealand, the definition of taxpayers that are considered to be in the same "economic entity" has been amended. | DOC | 32kb | 1 page |
A full explanation of the new rules will be provided in an upcoming Tax Information Bulletin.
Transfer dates
The transfer rules allow you to choose the date you want excess tax to be transferred on, provided it is not earlier than the dates set out in the legislation. This enables you to choose the date that is best in each case.
The transfer dates set out in the legislation differ depending on the relationship between the transferor and transferee. Transfers within either a taxpayer's own accounts or transfers between certain "associated" taxpayers are treated differently than transfers between other taxpayers.
Associated taxpayers
Associated taxpayers are:
- companies in the same group of companies
- a shareholder-employee and a company
- partners in the same partnership
- a trustee of a family trust and a beneficiary
- relatives (includes parent and child husband and wife de factos, and same sex partners).
Transfers within a taxpayer's own accounts or to an associated person
Transfers within a taxpayer's own accounts and transfers between associated taxpayers can be transferred at any date requested, provided it is not earlier than the following:
| Overpaid tax | Earliest transfer date |
|---|---|
| GST refund |
|
| Tax deducted on the taxpayer's behalf | For taxpayers with:
|
| Rebate for childcare or charitable donations | The later of:
|
| Credit use-of-money interest |
|
| Overpaid tax in any other case |
|
Transfers to non-associated taxpayers
Transfers between all other taxpayers can also be made at any date requested, provided it is not earlier than the following:
| Overpaid tax | Earliest transfer date |
|---|---|
| GST refund Tax deducted on the taxpayer's behalf Overpaid tax in any other case |
The later of:
|
| Rebate for childcare or charitable donations | The later of:
|
| Credit use-of-money interest |
|
Overpaid provisional tax
Excess tax that is paid directly to Inland Revenue can be transferred within a taxpayer's own accounts or to associated taxpayers at the date the tax was overpaid. Generally, it will be clear when the tax was overpaid, for example, when GST was paid.
It is less clear for provisional tax, so the transfer rules contain three separate formulae for determining the dates when provisional tax was overpaid. Two of these formulae apply before tax is assessed. The other applies after assessment. The main effect of the formulae is that overpaid provisional tax can be transferred at the payment date(s), as opposed to the day after the balance date, which was the practice previously.
A full explanation of the different formulae along with examples will be provided in an upcoming Tax Information Bulletin.
No transfer date specified
If a transfer date is not specified when a transfer is requested, section 173O allows Inland Revenue to transfer the credit at an appropriate date. We will transfer the credit at a date allowed by the legislation that either maximises credit use-of-money interest, or minimises debit use-of-money interest and/or late payment penalties.
However, you can subsequently request a different transfer date allowed within the transfer rules.
Transfers requested on returns
Transfers of overpaid income tax and rebate claims can be requested on income tax returns and rebate claim forms. Currently there is no provision on these forms to specify a transfer date. Where a transfer is requested on a return, we will use the following transfer dates.
2002 returns
- Where the transfer is within the taxpayer's own accounts, the transfer date will be the later of the day after balance date and the earliest due date of the destination period, irrespective of whether or not any tax is actually outstanding at this date.*
- Where the transfer is within the taxpayer's own accounts and the taxpayer has an early balance date, the transfer date will be the later of 1 April (following the balance date) and the earliest due date of the destination period, irrespective of whether or not any tax is actually outstanding at this date.*
- Transfers to all other taxpayers (regardless of the degree of association) will be done as at the day after the return was filed.
2003 returns
- Where the transfer is within the taxpayer's own accounts or to an associated taxpayer, the transfer date will be the later of the day after balance date and the earliest due date of the destination period, irrespective of whether or not any tax is actually outstanding at this date.*
- Where the transfer is within the taxpayer's own account or to an associated taxpayer, and the taxpayer has an early balance date, the transfer date will be the later of 1 April (following the balance date) and the earliest due date of the destination period, irrespective of whether or not any tax is actually outstanding at this date.*
- Transfers to all other taxpayers will be done as at the day after the return was filed.
* Where the later of the two dates is a date in the future, the process date will be used for the transfer.
Where an overpayment is transferred to a previous year, (eg to offset arrears) the transfer date will be the day after the balance date (or 1 April for an early balance date) for the year of the return.
If the transfer date used by Inland Revenue is not the date you want, you can subsequently request the transfer be redone at a different transfer date allowed within the transfer rules.
Future dates
Transfers can be requested at a date in the future. However, due to current limitations within Inland Revenue's FIRST computer system, it is not possible to action transfers at a future date. Therefore any requests for future dated transfers may initially need to be actioned with a transfer date of the process date. You may then need to notify Inland Revenue once the future date has passed.
Date published: 09 Nov 2004
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