Overview of the Bill
The Taxation (Annual Rates, Modernising Tax Administration, and Remedial Matters) Bill modernises the revenue system by making tax simpler and easier for individuals and simplifying rules and processes.
The flagship measures of this Bill build on the enhancements to the collection of more frequent, better quality employment and investment income information contained in the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018, enacted on 29 March 2018.
The proposals in this Bill were the subject of three recent public consultation documents:
- Making Tax Simpler – Proposals for modernising the Tax Administration Act;
- Making Tax Simpler – Better administration of individuals’ income tax; and
- PAYE error correction and adjustment – an officials’ issues paper.
Submissions on these documents have helped shape the final proposals contained in this Bill.
Proposals relating to individuals mean that most people will pay what they need to and get what they are entitled to during the year without having to do anything. For instance, the changes for individuals in this Bill mean from April 2019:
- refunds will be automatically paid out – where Inland Revenue is reasonably confident it has information about all a person’s income and the tax they have paid on it;
- Inland Revenue can use the better information it has to help people pay and receive the right amounts during the year; and
- Inland Revenue will automatically finalise end-of-year refunds or bills to pay for as many people as possible without them having to do anything.
It will be easier for people to understand their obligations and entitlements and will take them less time to ensure they pay and receive the right amounts.
Proposed improvements to the Tax Administration Act will help shift the tax system to be more taxpayer-focussed. The improvements range from streamlining how information is collected, used and shared, to simplifying the provision of tax advice to make it more accessible to small and medium enterprises.
Minor amendments to PAYE error correction and adjustment supplement the proposed error correction regulations aimed at simplifying and clarifying how errors can be corrected.
This Bill also enhances the new provisional tax option – the Accounting Income Method (AIM) which started on 1 April 2018. It allows taxpayers to join AIM from some other provisional tax options during an income year, making it more accessible to customers.
These legislative changes, combined with the technology improvements being made as part of Inland Revenue’s business transformation, are intended to deliver significant benefits to taxpayers. They will, when transformation is complete, produce a fundamentally different revenue system that:
- is based around taxpayers’ needs;
- is easy to understand and interact with;
- produces and uses near real time information;
- is digital and highly automated;
- uses systems and software do most of the work;
- is more responsive, flexible and certain for taxpayers;
- is future proofed to accommodate change; and
- delivers services with others inside and outside government.
In addition to the tax administration improvements, this omnibus Bill also introduces a number of other policy measures including:
- introducing two new contribution rates for KiwiSaver;
- opening up KiwiSaver to over 65s;
- clarifying the tax status of crown controlled companies and the tax rules for deregistered companies;
- adding 13 charities to schedule 32 of the Income Tax Act 2007 (those with overseas donee status);
- amending the definition of market interest that banks and other money lenders can elect to use for valuing the fringe benefit of a loan provided to an employee; and
- extending to the securitisations regime in the Income Tax Act 2007.
The Bill also sets the annual tax rates for 2018–19 and implements a number of minor remedial changes to existing legislation.