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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.

This remedial Act also amends a number of minor drafting matters that have been brought to the attention of the Rewrite Advisory Panel. In general, these amendments are corrections of cross-references, spelling, punctuation, terminology, and consistency of drafting. The Rewrite Advisory Panel publishes lists of these maintenance items on its website


At the time of reporting back the Income Tax Bill 2002, the Finance and Expenditure Committee expressed concern that the new, rewritten, legislation could contain unintended policy changes. To alleviate that concern, the committee recommended that a panel of tax specialists review any submission that rewritten income legislation contains an unintended policy change.

An unintended policy change is one that gives rise to a different outcome from the corresponding provision in the previous Income Tax Act. The Rewrite Advisory Panel performs this review function. The process for making a submission to the Panel is set out in its statements, RAP 001 and RAP 002 which are published on the Panel’s website.

In general, the Panel recommends that a provision is:

  • amended to counter the effect of an unintended change; or
  • identified as an intended change in the schedule of intended changes in the 2004 or 2007 Acts; or
  • contains no change in outcome when compared with its corresponding provision in the earlier Act.

The Finance and Expenditure Committee also noted in its commentary on the Income Tax Bill 2002 that there may be situations in which:

... the Government of the day decides to retain the rewritten law without retrospective amendment.

The Committee went on to say:

Such a decision would be a change in policy, and the Inland Revenue Department would be obliged to require taxpayers to meet any increased tax. The department has advised us that it intends to inform taxpayers through an appropriate publication that, in such cases, where taxpayers rely on the transitional provisions, they will be required to meet the tax obligation but will not be subject to penalties, and any use of money interest incurred will be remitted. The taxpayer must have taken reasonable care and adopted a reasonable tax position under the old law. We agree with this approach ...

Inland Revenue has published two standard practice statements setting out how it will apply the penalty and interest rules within the context of the comments of the Finance and Expenditure committee referred to above. Those two statements are SPS 08/03, issued in relation to the 2007 Act (published in the Tax Information Bulletin, December 2008) and SPS 05/02, issued in relation to the 2004 Act (published in the Tax Information Bulletin, June-July 2005).

Accommodation benefits

The Rewrite advisory Panel has agreed with a submission that, in the 2004 and 2007 Acts, section CE 1 incorrectly includes the full value of accommodation in the income of an employee; and omits to refer to accommodation allowances.

Threshold for application of interest apportionment rules

The Rewrite Advisory Panel considered this provision contains an unintended change in outcome. The unintended change in outcome is that section FF 4(1)(a) of the 2007 Act incorrectly provides that a conduit tax relief company is required to perform a "thin-cap" interest allocation (deductible/non-deductible interest) if its conduit tax credits exceed $50,000, even if the relevant debt percentage in the foreign group is less than or equal to 66%.

When amalgamating companies are a party to a financial arrangement

The Rewrite Advisory Panel concluded that section FO 18 of the 2007 Act contains an unintended change in outcome. The unintended change is that an insolvent amalgamating company is treated as providing the market value of the financial arrangement when it is deemed to discharge its financial arrangements on any amalgamation.

FDP credits derived by person receiving exempt dividend

The Rewrite Advisory Panel has concluded that section LF 8(1) does not permit a person who derives dividends as exempt income to obtain a refund of a foreign dividend payment (FDP) credit. The corresponding provision in the 2004 Act permitted a person deriving dividends as exempt income to obtain a refund of FDP paid on the exempt dividend.

Remittance of PAYE to Commissioner

The Rewrite Advisory Panel agreed that section RD 4(2) contained an unintended change in outcome. The change in outcome is that an employee could be liable to account for PAYE on their own salary if the employer withholds PAYE from salary or wages, but had not paid the PAYE to the Commissioner.

Land investment company

The definition of "land investment company" in section YA 1 is the rewritten definition of portfolio land company. A land investment company is defined in a way to ensure it is a PIE that owns predominantly assets consisting of real property.

Low or nil interest loans provided to a shareholder or an employee

The Rewrite Advisory Panel considered that sections CD 28(9)(b) and NE 1E(2) of the 2004 Act contain an unintended change in law. The unintended change identified is that the provisions permit fully imputed dividends and exempt dividends to be offset against the balance of low or nil interest loans provided to a shareholder of a company or an employee, if the dividend was an exempt dividend paid to a shareholder of a qualifying company or if the dividend was a fully imputed dividend.

Rewrite maintenance items

The following provisions, most of which come into force on 1 April 2008, have been amended as follows.