Inland Revenue - Tax policy Tax Policy

News and information about the Government's tax policy work programme, including:
- proposed changes to the laws that Inland Revenue is responsible for
- updates on the progress of bills through Parliament
- policy announcements

6 - The tax policy work programme – current projects


Items marked as New were initiated after the tax policy work programme was last published in November 2016.

This list will be updated from time to time on Inland Revenue’s tax policy website at http://taxpolicy.ird.govt.nz/work-programme

Enhancing tax policy within broad-base, low-rate (BBLR) tax settings

Project Description Regulatory system
Review of the tax framework for employee share schemes Reforming the tax treatment of employee share schemes to ensure appropriate and balanced outcomes. Income tax
Income protection insurance: a review The Financial Services Council is seeking a review of the income tax treatment of income protection insurance. There is a lack of clarity about the tax treatment of this form of insurance and inconsistencies across products offering similar benefits. Income tax
Deductibility of holding costs for revenue account property Considering the deductibility of holding costs for property. Income tax
Abusive tax position penalty Examining the application of the abusive tax position penalty in cases of tax avoidance, and whether any changes are needed to the penalty. Income tax
Demergers Considering an exclusion from dividend taxation for corporate demergers. Income tax
Petroleum mining decommissioning expenditure Replacing the existing ability to spread back petroleum mining decommissioning expenditure to earlier tax years with a refundable tax credit in the current year. Income tax
Review of bank account requirement for offshore persons’ IRD numbers The bank account requirement for an offshore person to obtain an IRD number continues to cause issues in practice. In particular, it is an obstacle in a number of cases to people being able to comply with their tax obligations. Income tax
Trust beneficiaries as settlors There are instances when beneficiaries of trusts who leave their beneficiary income in the current accounts with the trust become inadvertent settlors. This is not in accordance with the policy intent. Income tax
Financial arrangement issues There are a variety of financial arrangement taxation issues ranging from remedial to policy enhancements to ensure these rules work as intended. Income tax
Taxation of non-bank securitisation vehicles Extending the current securitisation regime to beyond banks. Income tax
Impact of case law on the “voting interest” test for corporate trustees Considering the impact of recent case law on the application of the voting interest test in the Income Tax Act 2007 and the Goods and Services Tax Act 1985 to corporate trustees. Income tax
Repeal adverse events income equalisation deposit regime This regime is, in practice, little used, because the main scheme offers more flexibility. However, its existence can cause some confusion. Income tax
Review of donee status applications Dealing with applications by organisations for donee status under schedule 32. Income tax
Treaty of Waitangi settlements Tax implications of Treaty settlements are addressed as required. Income tax
Feasibility and black hole expenditure (New) Reviewing the rules on deductions for the costs related to undertaking feasibility studies and other possible black hole expenditures. Income tax
GST on imported low value goods (New) Working with the New Zealand Customs Service to support the development of a regime to collect GST on low value imported goods. Consumption tax
Employee share schemes – deferral regime for start-up companies (New) Design of a deferral regime, whereby start-up companies may defer the payment of tax on employee share schemes to a future point in time when the valuation and liquidity problems are not as pronounced. Income tax

International tax and base erosion and profit shifting (BEPS)

Project Description Regulatory system
Hybrid instruments and entities Consideration of foreign hybrid instruments and entities in the context of BEPS. Income tax
Double tax agreement (DTA) work programme New Zealand is seeking to establish new and updated double tax agreements with a number of countries, including Norway, China, Korea, Slovak Republic, Portugal and Fiji. Income tax
Automatic exchange of information Domestic implementation of a new global standard on the automatic exchange of financial bank account information with treaty partners. Information sharing
Interest limitation rules Consideration of New Zealand’s interest limitation rules in light of OECD recommendations. Part of the BEPS Action Plan. Income tax
Multilateral instrument As part of the BEPS work, we have signed a multilateral instrument that simultaneously amends the double tax agreements of participating countries. The amendments to DTAs will address certain aspects of the BEPS project that have a treaty dimension, for example: treaty shopping and permanent establishment avoidance. Income tax
Foreign trust disclosures Policy recommendations arising from the Government Inquiry into foreign trust disclosure requirements. Information sharing
Inbound investment framework An officials’ paper outlining New Zealand’s approach to taxing foreign investment income has been prepared. It has been used as the basis for targeted consultation with private sector representatives, and has also been published on the tax policy website to facilitate a wide understanding of the trade-offs the Government faces in responding to BEPS. Income tax

Business Transformation and Better Public Services

Business Transformation

Project Description Regulatory system
Better administration of GST and PAYE Policy options to reduce compliance and administrative costs consistent with longer term business transformation thinking. Income tax
Consumption tax
Review of the Tax Administration Act Developing a framework for tax administration with an emphasis on the key roles of the Commissioner, taxpayers and tax agents, as well as the rules around information collection and tax secrecy which underpin their interactions. All regulatory systems
Individuals’ taxation Improving the tax system for individuals, including comprehensive pre-population of income information, collection of information, more efficient debt collection processes and the degree of interaction with the tax system. Income tax
Business taxation Improving the tax system for business, including the calculation of provisional tax, the collection of information and reviewing the penalties and interest rules. Includes researching additional measures that have potential to deliver further benefits to businesses, reduce compliance costs and make the tax system simpler. Income tax
Investment income information Streamlining the collection of information about investment income such as interest, dividends, PIE income and Māori authority distributions. Income tax
BT social policy Improving the social policy system for individuals and families, including alignment of definitions, reviewing assessment periods to improve accuracy and timeliness of payments, more efficient debt collection and prevention processes, and improving outcomes for customers with special or exceptional circumstances. All social policy regulatory systems

Better Public Services

Project Description Regulatory system
Information sharing agreement between Ministry of Social Development and Inland Revenue Information sharing with Ministry of Social Development to assist in determining entitlements to benefits, social assistance and other services. Information sharing
Information sharing between MBIE, the Companies Office and Inland Revenue (New) Information sharing between MBIE, the Companies Office and Inland Revenue. Information sharing

Social policy

Project Description Regulatory system
Financial Assistance for Live Organ Donors Bill 2015 Inland Revenue consulted by Ministry of Health on aspects that impact on Tax Acts, for example: child support, Working for Families, student loans, KiwiSaver, information sharing, and whether income replacement for donors proposed under the Bill should be treated as income for tax purposes. All regulatory systems
Encouraging student loan repayments and addressing debt of overseas-based borrowers in the PEN group Overseas-based student loan borrowers known as the “Penalty (PEN) Group” have overdue amounts growing faster than the rate at which borrowers in this group are becoming compliant. This is due to the compounding effect of late payment penalties (under the 1992 Act) and late payment interest. Ministers are interested in any further measures that could be developed to address the overdue debt of this group and the wider student loan borrower population. Student loans
Student loans – interest exemption Budget 2016 announced the International Connections for New Zealanders package, which extends student loan interest write-offs to borrowers studying overseas who are recipients of Government-funded scholarships. Student loans
KiwiSaver (New) A range of reforms reflecting recently announced changes to New Zealand Superannuation and Retirement Commissioner’s recent recommendations. KiwiSaver

Routine updates to regulations

Regulation Description Frequency
Taxation (Use of Money Interest Rates) Regulations 1998 Sets the rates of interest payable on underpayments and overpayments of tax. As needed
Income Tax (Fringe Benefit Tax, Interest on Loans) Regulation 1995 Sets the prescribed interest rate that is use to determine if a fringe benefit exists in relation to an employment related loan. If the interest rate increases, the new rate applies from the commencement of the next quarter. If the interest rate decreases, the new rate applies from the commencement of the quarter in which the rate decreases. Quarterly
Income Tax (Family Tax Credit) Regulations Increases the amount of the family tax credit. As needed – if the percentage movement in the CPI is 5% or more
Income Tax (Minimum Family Tax Credit) Regulations Increases the family tax credit threshold in section ME 1(3) of the Income Tax Act 2007. The credit ensures families do not suffer a reduction of income when moving off a welfare benefit into 30 hours or more of unpaid work. Annually
Income Tax (In-Work Tax Credit) Regulations Increases the amount of the in-work payment amount. The amount is only increased as a result of a review of the amount by the Minister of Revenue in consultation with the Minister of Social Development. Changes are made by Order in Council if the Minister makes a policy decision to do so. Every three years (the first review was undertaken in 2008)
Income Tax (Adverse Event Income Equalisation Scheme Rate of Interest) Regulation Sets the interest rate that is to be paid on deposits to the adverse events income equalisation scheme. As needed
Income Tax (Deemed Rate of Return, 20XX–20XX Income Year) Regulations Sets the deemed rate of return under the foreign investment fund (FIF) rules. The deemed rate of return is based on an average of the five-year government stock rates prevailing at the end of each quarter throughout the income year and adding a margin of 4%. Annual
Income Tax (Payroll Subsidy) Regulations 2006 Provides for the amount of the subsidy and the calculation of the payroll subsidy to be paid to PAYE intermediaries. As needed
SILNA (Conservation Payments) Regulations Provides for payments of money made in consideration of entering into a conservation covenant over specified Maori land (SILNA land) is not gross income of the recipient. Irregularly – as requested
Student Loan Scheme (Charitable Organisations) Regulation 2006 Allows charitable organisations to be listed for the purposes of the Student Loan Scheme Act. Under that Act, a student loan borrower who was personally absent from New Zealand because he or she was working as a volunteer or for token payment for a charitable organisation named in the regulations may be granted an exemption by the Commissioner of Inland Revenue entitling that borrower to a full interest write-off. As needed
Student Loan Scheme (Repayment Threshold) Regulations Sets the income threshold at which borrowers are required to commence making repayment obligations. Annually
Student Loan Scheme (Repayment Obligations of Overseas-based Borrowers) Regulations Sets the level of loan balance at which overseas-based borrowers must make repayments. As needed
Student Loan Scheme (Establishment Fee) Regulations Sets the amount of the student loan establishment fee that is charged to a borrower each time the borrower enters into a loan contract after 31 March 2012. As needed
Student Loan Scheme (Annual Administration Fee) Regulations Sets the amount of the annual administration fee charged if a borrower has a consolidated loan balance of $20 or over (note: not charged if a student loan establishment fee is charged in that tax year). As needed
Student Loan Scheme (Late Payment Interest Threshold) Regulations Sets the threshold for when late payment interest is charged (currently $334 and over). As needed
The Commissioner may charge taxpayers the service fee associated with using credit or debit cards to make payments The service fee is currently 1.42% of the amount paid, plus GST if any. The amount of the service fee can be changed by Order in Council. As needed
Taxation (Direct Credit Refund) Regulations Specify a tax refund type must be made by direct credit to a bank account nominated by the taxpayer entitled to a refund. As needed