Announcements
PUBLISHED 25 March 2009

Minister seeks application date deferral

Revenue Minister Peter Dunne is in favour of deferring the application dates of a number of tax reforms contained in the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, many of which come into force on 1 April 2009. The bill, introduced in July 2008, is under consideration by Parliament's Finance and Expenditure Committee and is not expected to pass before August. Mr Dunne said he had written to the chairman outlining his concerns and asking the committee to give serious consideration to deferring the proposed application dates of a number of reforms. For more information see the Minister's media statement and his recommended changes to application dates.


Hon Peter Dunne
Minister of Revenue

Media Release
Annex: Recommended application date changes


MEDIA RELEASE

Dunne: tax reform application dates should be deferred

Revenue Minister Peter Dunne is in favour of deferring the application date of a number of forthcoming tax reforms, many of which come into force on 1 April, although the bill is not expected to pass into law before August.

The changes are part of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, introduced last July and currently under consideration by Parliament's Finance and Expenditure Committee.

"As 1 April approaches, many business people and their tax advisors are becoming increasingly concerned about the problems of working in accordance with complex tax reforms that have still to be enacted.

"My view is that it's simply not realistic to stick to all the application dates as originally proposed, and that Parliament should consider deferring the application dates of those large reforms that are particularly problematic for compliance with and administration of the new rules.

"The application dates of most concern are those for the reforms relating to our international tax rules, the taxation of the life insurance business, definitions of associated persons, and payroll giving for charitable donations.

"There are practical problems here. For example, provisional taxpayers who get it wrong in second guessing the final form of the changes to the international tax rules may well face penalties and interest for their mistakes.

"Likewise, employers who want to get payroll giving under way on 1 April will find they have no legislative basis on which to make charitable donations from their employees' pay.

"I have therefore written a letter to the chairman of the select committee, outlining my concerns and asking the committee to give serious consideration to a number of deferments, in whole or in part, of application dates in the bill.

"I am announcing my recommendations today to give greater certainty to affected businesses, although it is the select committee that will recommend any changes to the proposed legislation.

"For the international tax changes, I have recommended that the application date remain at the 2009-10 income year only for taxpayers who have balance dates on or after 30 June, the date of the bill is expected to be reported back to Parliament. For all others, the application date would be the 2010-11 income year.

"For the reform of the rules on taxing the life insurance business, I have recommended that the application date of the new rules be deferred until a date to be determined following further discussion with the industry.

"For the changes to the associated person rules, I have recommended a one-year deferment, to the 2010-11 income year, except for the land provisions, which would be deferred from 1 April 2009 to the date of enactment.

"For payroll giving, a change keenly awaited by charities but requiring changes to employers’ payroll systems, I have recommended that the application date be deferred from 1 April 2009 to three months after enactment.

"I have also recommended deferrals of the application dates of a number of other, smaller changes, many of which are taxpayer-friendly or which simply clarify the rules. For example, changes to rules on provisional tax pooling would be deferred from 1 April to the date of enactment," Mr Dunne said.

Ends

Attached: Recommended application date changes

Mark Stewart | Press Secretary | Office of Hon Peter Dunne
Cell +64 21 243 6985 |


Annex: Recommended application date changes

This document is also available in these formats:

  Application date in current bill Recommended application date
(where changes are recommended these are shown in bold)

MAJOR REFORMS

International tax changes
Active income exemption for CFCs, exemption for foreign dividends and associated base maintenance measures

Income year 2009-10

2009-10 income year only for balance dates on or after 30 June; 2010-11 income year for other taxpayers

Life insurance business
Reform of outdated rules

Applies to life insurance products sold after 1 April 2009

New rules for life insurance business and changes to PIE rules apply from first income year from 1 April 2009

The new rules for life insurance products and life insurance business and the changes to the PIE rules to be deferred. Discussions with the industry will help inform judgment on the appropriate implementation date

Associated persons provisions
Addressing deficiencies in the associated persons rules

Land provisions (except section CB 11) - land acquired on or after 1 April 2009. For section CB 11 (disposal within ten years of improvement: building business) - land on which improvements are begun on or after 1 April 2009.

Other provisions apply from the 2009-10 income year

For land provisions (except section CB 11) - land acquired on or after the date of the bill's enactment. For section CB 11 (disposal within ten years of improvement: building business) - land on which improvements are begun on or after the date of the bill's enactment

Other provisions - from 2010-11 income year

Payroll giving
Voluntary payroll giving scheme to allow employees to donate to charities and receive an immediate tax benefit

1 April 2009

Three months after date of enactment

TAXPAYER-FRIENDLY, TECHNICAL AND OTHER MEASURES

GST and remedial amendments

Deferring GST and loyalty points until redemption

Zero rate exported second-hand goods (scrap metal)

Public Authorities and GST- confirms that Parliamentary service and Office of Clerk are required to charge GST

 

Date of enactment for GST on loyalty points

Date of enactment for second-hand goods

1 April 1986 for amendments relating to Parliamentary service

1 August 1988 for amendments relating to Office of the Clerk

 

No change recommended

No change recommended

No change recommended

No change recommended

KiwiSaver amendments
Remedial amendments

Range from 1 July 2007 to date of assent

The amendment to section 13 of the KiwiSaver Act will have a date of assent application rather than 1 October 2008

Niue development
Relax loss grouping requirements for Niue development projects

This is an Order-making power. Currently, the Bill states that the provision is treated as coming into force on 1 April 2008, but this is meaningless because the Order still cannot be made before enactment

Change commencement to the date of the Royal assent

Non-disclosure right to discovery
Extension to existing right of non-disclosure available to approved tax advisors to the discovery stage

Applies to challenges commenced after date of assent

No change recommended

Offshore portfolio share investment funds
Remedial amendments

1 October 2007 PIE amendments (Inc land owning PIEs)

1 April 2007 or 1 April 2008 offshore portfolio amendments

No change recommended

Petroleum mining
Reform of outdated rules

Amendments to remove 'disincentives', applying to expenditure incurred on or after 1 April 2008

Remedial amendment to 'correct' an anti-avoidance provision - applies from 1 December 2007

No change recommended

Portfolio investment entity rules
Remedial amendments

1 April 2009 for rewrite provisions

Remedial amendments generally apply from 1 October 2007

Change application date for rewrite provisions to 1 April 2010

R&D tax credit rules
Removing option for partnerships to file claims on behalf of partners; requiring a detailed statement to be filed before claim processed; amendments to align legislation with policy for the year the credit is in force

2008-09 income year

No change recommended

Recognised seasonal workers
Reduced compliance costs for seasonal migrant workers, including changes in rates of tax deducted by employers

1 April 2009

Change application date for tax rate change to date of assent

Other changes apply from 1 April 2009

Reimbursement and honoraria paid to volunteers
Exempting reimbursement payments and clarifying certain honoraria are subject to PAYE

Applies to reimbursements received by volunteers on and after 1 April 2009; and to honoraria paid on and after 1 April 2009

No change recommended

Relocation payments and overtime meal allowances
Exempting certain allowances from tax

2002-03 income year

No change recommended

Tax depreciation rules
Remedial amendments

Application dates range from 1 April 1993 and from the 1993-94 and subsequent income years through to 1 April 2008 and from the 2008-09 and subsequent income years.

The other amendments add two categories to the list of depreciable land improvements.

No change recommended

Tax recovery arrangements
Allows Inland Revenue to collect foreign tax debts where required under a DTA

1 April 2008

No change recommended

Tax pooling rules
Extending regime to reassessments of tax and enable funds to be transferred between intermediaries

Date of assent for transferring funds

Other provisions 1 April 2008

Recommend changing application date to date of assent for all provisions

Charitable donee status
Extents charitable donee status to certain entities

2008-09 tax year

No change recommended

Films
Screen Production Incentive Fund film tax deduction timing

1 July 2008

Officials and Ministers agreed in August 2008 that the application date be changed to 1 January 2010. This revised date for implementation remains appropriate

Transitional ICA penalties
Submissions have been made that this penalty, which is intended to ensure that companies do not deliberately over-impute dividends, applies too widely

Not part of the bill as introduced

It is recommended that transitional ICA penalties should only apply to dividends paid out after the earlier of:

  • The date the company's 2007-08 tax return is filed; or
  • The date of this announcement

This will fully address points raised in submissions

Banking continuity
Provisions to prevent unintended taxation consequences where banks undertake reconstruction without changes in economic ownership

1 April 2008

No change recommended

Emissions trading
Tax treatment of transactions in emissions units

1 January 2009

No change recommended

General insurance
Deduction for movement in the outstanding claims reserve

Applies from first year taxpayer adopts IFRS or 2009-10 income year.

No change recommended

BASE MAINTENANCE MEASURES

Stapled stock (supplementary order paper)
Base maintenance treating debts "stapled" to ordinary shares as equity

Applies to debt securities stapled to a share on and after 25 February 2008

No change recommended

Ring fencing of expenditure incurred by overseas branches of petroleum mining companies
Prevents tax payable on income from the exploitation of New Zealand's oil and gas being reduced by companies taking deductions against their overseas operations

Applies to expenditure incurred on or after 4 March 2008

No change recommended