Local authorities' change of accounting basis

Issue: Support for the transitional provisions for local authorities

Submission

(TaxTeam)

The submission supports the introduction of the transitional provision which mitigates the effects of the local authorities’ change to an invoice basis of accounting for GST.

Recommendation

That the submission be noted.

Issue: Bad debt write-offs

Submission

(Far North District Council, New Zealand Institute of Chartered Accountants)

Inland Revenue should alter the current policy for bad debt write-offs in relation to the eight local authorities referred to in the Goods and Services Tax (Local Authorities Accounting on Payments Basis) Order 2009. A full provision for the purpose of the bad debt recognition should be sufficient, in place of a bad debt write-off. (Far North District Council)

Local authorities should be able to write off rates related to Māori freehold land when there is a history of non-payment. (New Zealand Institute of Chartered Accountants)

Comment

Officials have concerns about changing the bad debt write-off rules for a very small group of taxpayers and the possible precedent it would create. The bad debt rules for tax purposes need a relatively high threshold for write-off to ensure that deductions can only be taken once all appropriate avenues have been explored.

The issue of a local authority’s inability to write off unpaid rates as a bad debt for six years would, in our view, be better addressed through consultation with the Department of Internal Affairs, or Te Puni Kokiri who have the expertise in the areas of rating and Māori land. Officials are happy to refer the submissions to those departments.

Recommendation

That the submission be noted.