New law brings tax debt relief, greater certainty for taxpayers
Legislation enacted today will provide relief for many people who get into tax debt, introduce fairer instalment arrangements for paying off tax debt, and give Inland Revenue greater flexibility in dealing with taxpayers' debt problems.
"The new Taxation (Relief, Refunds and Miscellaneous Provisions) Act clarifies, for both the public and Inland Revenue, the appropriate treatment for taxpayers who are finding it difficult to pay their tax bills," Revenue Minister Michael Cullen said.
"The problem of spiralling tax debt was a recurring theme in the findings of the Finance and Expenditure Committee's 1999 inquiry into the powers and operations of Inland Revenue. This goes a long way towards meeting those concerns, and complements reductions in late payment penalties legislated for last year.
"Underlying these changes is the principle that tax laws that are too lenient or too harsh discourage voluntary compliance, which is the backbone of the modern tax administration. The new law strikes a sensible balance," Dr Cullen said.
The new Act also:
- introduces comprehensive new rules governing the transfer of overpaid tax within a taxpayer's account or to another taxpayer, changes that give taxpayers greater certainty;
- removes the risk that warranty agreements by offshore warrantors will attract GST twice, a change that is particularly important to importers of motor vehicles and other goods under warranty;
- clarifies the law relating to the tax treatment of wage-related provisions when a business is sold and employees are transferred;
- introduces changes to prevent the over-taxation of widely held unit trusts and "Category A" group investment funds, resolving a longstanding tax problem for the unit trust industry;
- introduces further measures aimed at simplification of the tax system and reduction of tax-related compliance costs;
- clarifies the law to ensure that charities and other non-profit bodies can claim GST refunds on all their activities except exempt activities, such as the sale of donated goods.
Contact: Patricia Herbert [press secretary]471-9412 or 021-270-9013. Technical inquiries to Michelle Davie [tax adviser Minister's office] 471-9728
More Time For Business Recommendations Become Law
The first cluster of tax simplification recommendations from the 'More Time For Business' discussion document have become law with the enactment of the Taxation (Relief, Refunds and Miscellaneous Provisions) Act earlier this week.
"Tackling business compliance costs, especially for small business owners, is a major focus for this government and this Act is another step in the right direction," said Associate Minister of Revenue and Minister for Small Business Paul Swain.
"One measure that will particularly help small business owners is the removal of the requirement to value amounts of trading stock of less than $5,000. This will save small business owners that don't hold much stock, a fish and chip shop owner or part-time tradesperson for example, time and worry about getting it exactly right when they don't actually need to."
A second cluster of 'More Time For Business' recommendations is in the Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) Bill, currently before Parliament.
As well as the the trading stock rule-change the other measures enacted this week are:
- The threshold below which individuals who are provisional taxpayers are removed from the use-of-money tax rules has been raised from $30,000 to $35,000 of residual income tax.
- Banks and other financial institutions will have more flexibility in how they communicate resident withholding tax information to interest earners.
- The requirement to file a tax return or request an income statement on behalf of a taxpayer who dies, but who would not have had to file a return or request a statement had they lived, has been removed.
- Companies will no longer have to file multiple imputation returns to obtain income tax refunds.
- Changes to the family tax credit will allow better targeting and make the application process easier.
- The determination of family assistance entitlements has been simplified by removing the need to make a number of complex adjustments when calculating them.
- Taxpayers with income totalling $200 or less from which tax has not been withheld will no longer have to file a tax return.
"Simplifying the tax system is a complex task and there is no one-size-fits-all solution that reduces tax-related compliance costs for everyone," said Mr Swain. The most effective approach is to tackle the problem by making incremental changes targeted at different problems. The measures in this bill reflect that approach to tax simplification."
A more detailed commentary on the changes is available on the web site of the Inland Revenue's Policy Advice Division at:
Andrew Janes - Press Sec for Paul Swain - 04 4719889/021 270 9106 or [email protected]
For other releases by Paul Swain: www.beehive.govt.nz
For business information from the government: www-nzbusiness.govt.nz [site no longer available - see Internet Archive for archived version]