Remedial items

Amendments have been made to various Acts and tax rules.

KiwiSaver

Amendments have been made to the KiwiSaver Act 2006.

Overseas donee status

Several organisations have been granted overseas donee status from the 2011-12 tax year. Schedule 32 has also been amended to reflect the name change of the Volunteer Service Abroad (Incorporated) to Te Tuao Tawahi: Volunteer Service Abroad Incorporated.

Cap on shortfall penalties

Section 141JAA of the Tax Administration Act 1994, which caps some shortfall penalties, has been clarified so it does not apply if the taxpayer makes a disclosure at the time the tax position is taken (that is, a disclosure under section 141H of the Tax Administration Act 1994).

Joint bank accounts

The provisions in some Inland Revenue Acts which allow deductions of tax from amounts payable to a defaulting taxpayer have been amended to allow the Commissioner of Inland Revenue to require a bank to deduct and pay to Inland Revenue funds from joint bank accounts. The amendments allow deductions from a joint bank account if the defaulting taxpayer can make withdrawals from that account without the signature or other authorisation of the other person. The changes ensure consistency of treatment for deductions from joint bank accounts.

Independent earner tax credit and residual income tax

An amendment has been made to add the independent earner tax credit (IETC) to the list of tax credits under the definition of "residual income tax" in section YA 1 of the Income Tax Act 2007.

Amendments to the GST transitional rules

Minor amendments have been made to the transitional rules in the Goods and Services Tax Act 1985 and the Tax Administration Act 1994 to accommodate the GST rate change that became effective from 1 October 2010.

Non-resident seasonal workers

As a result of recent changes to personal tax rates, the tax rate that applies to non-resident seasonal workers has been reduced from 15% to 10.5%. In addition, a number of changes have been made to the tax legislation to clarify that non-resident seasonal workers are not required to file a tax return at the end of the year but may do so if they choose to. The measures were introduced by Supplementary Order Paper No. 187 during the passage of the Taxation (GST and Remedial Matters) Bill.

FBT "on premises" exemption

The amendment clarifies the scope of the exemption from fringe benefit tax (FBT) for benefits that are provided on the premises of the employer, contained in section CX 23 of the Income Tax Act 2007.

Section DB 2 - reverse charge rules

Generally, expenditure incurred in deriving assessable income is available as a deduction. Sometimes GST paid can be a real cost to business, even if they are GST-registered. The amendment clarifies that irrecoverable output tax incurred on reverse charge supplies since the introduction of the reverse charge rules is able to be deducted for income tax purposes.

Section 17 - special returns

The amendment clarifies the due date for payment of tax when a special return is filed and corrects an ambiguity that arose from a previous change made in 2007.

Approved issuer levy: Technical changes

Some technical changes have been made to the rules for the approved issuer levy in the Stamp and Cheque Duties Act 1971 and the Tax Administration Act 1994. The purpose of the amendments is to clarify the relationship between domestic law and treaty law for interest derived from New Zealand by foreign banks. The intention is to make the law more transparent rather than to substantively alter its effect.

Consequential R&D amendments

Technology Development Grants and Technology Transfer Vouchers were two new R&D incentives announced in Budget 2010. Several consequential amendments have been made to the special income tax rules for grants to make the tax treatment of these incentives clear and to deal with a compliance issue.

PIE credit impairment provisions

Amendments have been made to the portfolio investment entity (PIE) rules to ensure that multi-rate PIEs are able to claim deductions for credit impairment provisions. The amendments will also ensure that multi-rate PIEs have sufficient authority to claim deductions for expenses and pay tax for income when these are reflected in the PIE's unit price or in its financial statements. The changes are intended to clarify uncertainty in the timing rules over when deductions can be made or income declared.

Other amendments to the PIE rules

A number of amendments have been made to the tax rules for portfolio investment entities (PIEs). These amendments are to ensure the PIE rules operate effectively and as intended.

Emissions Trading Scheme amendments - income tax

Amendments have been made to the income tax treatment of the allocation of emissions units to businesses in those sectors which qualify for allocation under the New Zealand Emissions Trading Scheme (NZETS) (see the description of Industrial Allocation at www.climatechange.govt.nz/emissions-trading-scheme/participating/industry/allocation/eligible-activities). The new provisions align the recognition of income to the business's entitlement to receive emissions units under amendments made to climate change legislation in 2009.

Emissions Trading Scheme amendments - GST

Amendments have been made to the rules under which certain transactions which include a supply of emissions units are zero-rated for GST purposes. These amendments correct an earlier error which inadvertently zero-rated transactions which were intended to be standard-rated.

Auckland Council restructuring amendment

Section 186 of the Amendment Act amends section 83 of the Local Government (Auckland Transitional Provisions) Act 2010, which provides transitional tax relief on the amalgamation of Auckland local authorities into one Council. It provides that for the purposes of the financial arrangement rules in the Income Tax Act 2007, when the new Auckland Council enters into an acknowledgement of debt with a council-controlled organisation (CCO) without paying the principal to the CCO, the Auckland Council is deemed to have advanced the amount of the principal to the CCO.

Treatment of superannuation schemes administered by the National Provident Fund

The application of the taxation rules for life insurance business has been clarified in connection with superannuation schemes administered by the Board of Trustees of the National Provident Fund. The change ensures that the schemes administered by the Board and constituted under the various National Provident Fund Acts are not subject to the life insurance rules in the Income Tax Act 2007.

Extending the redundancy tax credit

The redundancy tax credit ceased for redundancy payments made on or after 1 October 2010. This was as a result of the income tax rate changes in Budget 2010 and, in particular, the introduction of the 33% tax rate.

Further remedial changes to the taxation rules for life business

Technical changes have been made to the recently enacted reforms for taxing life insurance business.

Taxation of general insurance business

Changes have been made to the definition of "outstanding claims reserve" (OCR) to clarify that that the amount calculated should be net of amounts receivable for reinsurance or non-reinsurance recoveries. The change ensures that amounts calculated for financial reporting purposes can be used for taxation purposes.

Consequential changes to the Māori authority tax rate

As a consequence of the changes to personal tax rates arising from Budget 2010, the Māori authority tax rate has been lowered from 19.5% to 17.5%, to align it with the individual statutory rate of the majority of Māori authority members.

Date published: 18 Apr 2011

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