Application date
Issue: Change to application date
Submission
(35 – PricewaterhouseCoopers, 53 – Ernst & Young, 68A – Corporate Taxpayers Group, 70 – Deloitte)
Given that the bill will not have been enacted before the commencement of the
2009–10 income year and is unlikely to be enacted before 1 April 2009, we submit that the application dates be deferred.
Comment
The associated persons amendments in the bill currently generally apply for the
2009–10 and subsequent income years. However, for the purposes of the land provisions, except for section CB 11, the reforms apply to land acquired on or after 1 April 2009. For the purposes of section CB 11, the reforms will apply to land on which improvements are begun on or after 1 April 2009. These application dates were set when it was expected that the July bill would be enacted before 1 April 2009.
The Minister of Revenue has asked the Committee to consider a change to the application date for the associated persons reforms as a result of the bill being enacted later than originally expected. In particular, the general application date for the associated persons reforms (excluding the land provisions) should be changed to the 2010–11 and subsequent income years. In the case of the land provisions, except for section CB 11, the reforms should apply to land acquired on or after the date of enactment. For section CB 11 (disposal within 10 years of improvement: building business), the reforms should apply to land on which improvements are begun on or after the date of enactment.
The suggested changes to the application date will ensure that the associated persons reforms do not have retrospective effect.
Recommendation
That the submission be accepted, subject to officials’ comments.
Issue: Deferral of application date to allow further consultation
Submission
(32 – KPMG, 32A – KPMG)
The associated persons amendments should be deferred until further consultation can occur. The significant impact on taxpayers and transactions of the proposed changes means they should not be rushed through without proper regard for the consequences. Further work is needed to refine the proposals.
Comment
The associated persons reform has been developed in accordance with the generic tax policy framework. This has included a full consultation process. In particular, an issues paper was released in March 2007 which provided an opportunity for people to comment on the proposals. Significant modifications were made to the proposals in response to the extensive submissions received. Officials have also continued to engage in discussions with interested parties since the 2007 issues paper’s release. In response to submissions on the bill, further modifications have been recommended by officials to the proposals in the bill.
The current submission would require the associated persons reforms to be removed from the bill to allow a further round of consultation. Given the extensive consultation that has been undertaken throughout the associated persons reform process, officials do not support this suggestion.
Recommendation
That the submission be declined.
Issue: Application date of replacing related person definition with associated person definition
Submission
(35 – PricewaterhouseCoopers)
The proposed replacement of the related person definition with the associated persons definition should not have retrospective application to any transaction with an associated person (who is not currently a “related person”) that has occurred since 31 March 1988.
Comment
Officials agree that the legislation should be clarified to ensure that the replacement of the related person definition with the associated person definition has prospective application only. In particular, it should apply only to transactions with associated persons occurring on or after the application date of the new associated person reforms.
Recommendation
That the submission be accepted, subject to officials’ comments.