Technical changes: tax treatment of payments and services provided to Members of Parliament

Clauses 12, 13, 102 and 103

Issue: Expiry date for the application of the Income Tax Act 2007 amendments

Submissions

(Ernst & Young, New Zealand Institute of Chartered Accountants, Parliamentary Service)

There should be no expiry date for the application of the Income Tax Act 2007 amendments. (Ernst & Young)

We support the amendment. (New Zealand Institute of Chartered Accountants)

The period of application of the amendments should be extended. (Parliamentary Service)

Comment

A retrospective amendment is being made to correct an anomaly that has arisen in the tax legislation following the rewrite of the fringe benefit tax provisions. The amendment will ensure that only the private element of any payments provided to MPs under the Civil List Act 1979 is taxed, as was always the intention.

The expiry date for the application of these amendments needs to tie in with the commencement date for the prospective correction which is being made through the Members of Parliament (Remuneration and Services) Bill. The commencement date for the measure in that bill is currently uncertain and it is likely that the expiry date for the retrospective amendments will have to change in order to tie in.

Recommendation

That Inland Revenue continue to liaise with officials working on the Members of Parliament (Remuneration and Service) Bill over the appropriate date for expiry of the amendments.

Issue: Taxation of the value of accommodation provided to members of Parliament

Submissions

(Ernst & Young, New Zealand Institute of Chartered Accountants, Parliamentary Service)

The proposed amendments may not achieve the stated objective where accommodation is provided, as distinct from a monetary accommodation allowance. (Ernst & Young)

An amendment should be made to section CE 1(1B) to clarify that only the private element of accommodation allowances or an accommodation benefit is taxable to an employee. (New Zealand Institute of Chartered Accountants)

The anomaly which taxes the full value of accommodation provided to members of Parliament should be corrected. (Parliamentary Service)

Comment

The proposed amendment is a technical change to correct an anomaly that has arisen in the tax legislation. The submissions go beyond that and would make changes to the tax treatment of provided accommodation and accommodation allowances.

The tax treatment of accommodation allowances and accommodation provided to employees is being considered as part of a more general review of employee allowances and other employee expenditure payments. Consultation on an officials’ paper, Reviewing the tax treatment of employee allowances and other expenditure payments, closed in February and submissions are currently being considered. That would be the appropriate arena for considering any matters relating to the taxation of the valuation of accommodation or accommodation allowances provided to members of Parliament.

Recommendation

That the submissions be declined.

Issue: The taxation of the private element of services provided to members of Parliament

Submission

(Parliamentary Service)

The legislation should be amended to allow for reasonable estimates of any private element of services provided to members of Parliament.

Comment

The proposed amendment would correct a further anomaly in the tax legislation affecting the fringe benefit tax treatment of services provided under the Civil List Act 1979. The administrative practice to date has been to make an apportionment of services between private and work-related services based upon a reasonable estimate. It has recently become apparent that this practice is not supported in law. The proposed amendment would allow this apportionment method to continue.

Recommendation

That the submission be accepted.