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PUBLISHED 3 May 2016

Omnibus tax bill introduced

The Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill was introduced today. The bill proposes to improve, strengthen and update the rules for closely held companies, non-resident withholding tax and the approved issuer levy, and the GST rules. It also proposes a large number of technical changes to ensure the tax rules work as intended and adds 14 charities to the list of donee organisations in schedule 32. For more information see the media statement, the bill and its commentary, and the regulatory impact statements.

Hon Michael Woodhouse
Minister of Revenue

3 May 2016

Media statement

Tax Bill to improve, strengthen tax rules

A wide-ranging tax Bill introduced today proposes technical changes to improve, strengthen and update our tax rules so they continue to work well for taxpayers, says Revenue Minister Michael Woodhouse.

“The Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill continues the Government’s work in making sure our tax system remains fit for purpose,” Mr Woodhouse says.

“Changes in the economic environment and business practices can result in unintended consequences such as unfairness, inefficiencies, complexities or uncertainty for taxpayers.

“That is why it is vital to ensure that tax rules continue to be responsive to change, work well in practice and that compliance costs are minimised.”

The first suite of measures in the Bill proposes changes to the ‘look-through’ company rules and the dividend rules as they apply to closely held companies.

These measures aim to simplify the current rules to reduce compliance costs and ensure that the rules remain robust and true to their intended purpose.

“While closely held companies typically have just a few shareholders, they are also a significant proportion of the total number of companies in New Zealand.  It is important that the tax rules apply as intended and that the decision to convert a small business to a company is not driven by tax considerations,” Mr Woodhouse says.

“The result will be a much more workable set of rules.”

The second suite of measures in the Bill proposes changes to bolster the rules around the tax treatment of interest earned in New Zealand by non-residents.  Proposed changes to the non-resident withholding tax rules (NRWT) and approved issuer levy (AIL) rules will ensure the rules apply consistently.

The third suite of measures proposes various changes to the GST rules to ensure the rules continue to work as intended.  They include taxpayer-friendly changes such as enabling businesses to deduct GST associated with the costs of raising capital, and allowing partially exempt businesses to use an alternative apportionment method.

The Bill also adds 14 charities to the list of donee organisations in schedule 32 and sets the annual rates of income tax for the 2016–17 tax year.  The new charitable organisations to be added to schedule 32 can be found at www.taxpolicy.ird.govt.nz.

Charites added to schedule 32 of the Income Tax Act 2007

The Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Bill adds these 14 charities to the list of donee organisations in schedule 32 of the Income Tax Act 2007:

  • Astha Childrens Home (Nepal/New Zealand)
  • Cambodia Trust (Aotearoa-New Zealand)
  • Destiny Rescue Charitable Aid Trust
  • First Steps Himalaya
  • Fountain of Peace Children’s Foundation New Zealand
  • GC Aid
  • Hornsby Pacific Education Trust
  • Mercy Mission of New Zealand Trust Board
  • Microdreams Foundation New Zealand Humanitarian Trust
  • NPH New Zealand Charitable Trust
  • Orphans Refugees and Aid (ORA International) of New Zealand Charitable Trust
  • Siphala Foundation
  • Solomon Outreach Society
  • Toraja Rural Development Charitable Trust