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Technical tax area
Te wahi mo te take hangarau

Taxation (GST and Remedial Matters) Act 2010

The Taxation (GST and Remedial Matters) Bill was introduced into Parliament on 5 August 2010. It received its first reading on 19 August, its second reading on 24 November and the third reading on 9 December.

The new legislation brings into effect changes to the GST rules to prevent "phoenix" fraud schemes, and clarifies the change-in-use rules and the GST boundary between residential and commercial accommodation.

Substantial additions to the bill were made by Supplementary Order Paper No. 187 after the bill's introduction. These measures, which were foreshadowed as part of the Government's Budget 2010 tax package, included measures to improve the integrity of social assistance programmes, reform the qualifying companies rules and clarify the depreciation rules for buildings.

The resulting Act received Royal assent on 20 December 2010.

The new Act amends the Goods and Services Tax Act 1985, Income Tax Act 2007, Tax Administration Act 1994, Income Tax Act 2004, KiwiSaver Act 2006, Stamp and Cheque Duties Act 1971, Income Tax Act 1994, Gaming Duties Act 1971, Local Government (Auckland Transitional Provisions) Act 2010, and certain regulations.

Changes to the GST rules

Sections 2(1), 3A, 3A(3B), 3A(3C), 5(15), 5(22), 5(23), 5(24), 8(4B), 9(2), 9(6), 10(7B), 11(1)(mb), 11(8B), 11(8C), 17(1B), 19D(2B), 20(2), 20(3), 20(3C-3K), 20(4), 20(4B), 21(1)-(4), 21A-H, 24(7B), 25, 43(1B), 43(1C), 51B(4)-(6), 60B, 75(3B), and 78F of the Goods and Services Tax Act 1985.

Budget 2010 foreshadowed amendments to the GST rules as part of a package of changes aimed at improving the integrity and fairness of the tax rules generally.

The Taxation (GST and Remedial Matters) Act 2010 principally strengthens the GST rules by preventing so-called "phoenix" schemes.

The new legislation also makes some useful changes to the GST rules more generally, to make it easier for taxpayers to understand their GST obligations. These include simplifying the change-in-use rules and providing greater clarity over when GST applies to residential and commercial accommodation.

Changes to the qualifying company rules and introduction of look-through company rules

Subparts HA and HB, and sections CB 32B, 32C, CX 63, DV 21 to DV 24, GB 25B, GB 29, HZ 4B to HZ 4D and YA 1 of the Income Tax Act 2007.

Changes to the qualifying company rules and the introduction of look-through company rules were added to the Taxation (GST and Remedial Matters) Bill by Supplementary Order Paper No. 187. The changes are part of Government announcements made in Budget 2010 aimed at improving the integrity of the tax system by preventing people from claiming losses against their personal income.

Working for Families Tax Credits: Definition of "family scheme income"

Sections MB 1, MB 7 to MB 13, YA 1, schedule 38 of the Income Tax Act 2007; sections 31C and 57B of the Tax Administration Act 1994.

The definition of "family scheme income" in the Income Tax Act 2007, which is used for determining entitlements to Working for Families (WFF) tax credits, has been broadened. The amendments are intended to improve the fairness and integrity of WFF by, for example, countering arrangements that have the effect of inflating entitlements beyond what people's true economic circumstances justify, and filling in gaps in the definition of "family scheme income".

Clarifying that certain building fit-out is depreciable property

Sections DB 65, EE 47(2) and YA 1 of the Income Tax Act 2007.

Changes have been made to the Income Tax Act 2007 to clarify that fit-out of commercial and industrial buildings remains depreciable. The changes also clarify the meaning of "plant" and "building" for the purposes of the tax depreciation rules. A transitional rule has been included, allowing certain building owners to claim a deduction for an amount of building fit-out embedded in the tax book value of their building.

Depreciation loading grandparenting

Sections EE 31 and EE 37 of the Income Tax Act 2007.

Depreciation loading was removed on a prospective basis as part of Budget 2010. The policy intention was that an item for which there was a commitment for its purchase or construction in place on or before 20 May 2010 would continue to be eligible for loading. However, while the legislation that gave effect to this grandparenting worked in most situations, its result could be unclear or inconsistent with the policy intention in other instances.

Remedial items

Amendments have been made to various Acts and tax rules.

Rewrite remedial items

Remedial changes have been made to the Income Tax Act 2007 and the Income Tax Act 2004 on the recommendation of the Rewrite Advisory Panel. The Panel lists submissions received on matters relating to the rewrite of the Income Tax Act and their recommendations on its website.

 

 


Date published: 16 Mar 2011

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