Contents

Making Tax Simpler – employment income information

• Overview
• Repeal of the payroll subsidy and the listed PAYE intermediary status
  • Issue: Retention of payroll subsidy
  • Issue: Retention of listed PAYE intermediary status
  • Issue: Redesign of the subsidy to be a service payment
  • Issue: Subsidy should be paid direct to employers
• Payday provision of employment income information
  • Issue: Support for moving to payday provision
  • Issue: Inland Revenue should provide a free basic software package
  • Issue: Setting electronic and non-electronic filing requirements
• Implementation dates
  • Issue: Support for application dates
  • Issue: Longer implementation timeline
• Employers (and PAYE intermediaries) to file digitally within two working days of payday (online group)
• Reporting ad hoc irregular and other unusual payments
  • Issue: Out-of-cycle (ad hoc) payments of salary or wages
  • Issue: Reporting of schedular payments
  • Issue: Shadow payrolls for internationally mobile employees
• Consequential changes to employer reporting of employee share scheme benefit information
  • Issue: Support for the proposals
  • Issue: Frequency of employee share scheme benefit information reporting
  • Issue: Length of deferral of the recognition of ESS benefits 18
  • Issue: Clarification as to how the deferral of the recognition of benefits will be treated if the deferral bridges the end of the tax year
• Employers able to file non-digitally
  • Issue: Requirement to provide information within seven working days of payday
  • Issue: Definition of payroll software
  • Issue: Support for electronic filing threshold
  • Issue: Electronic filing threshold should remain at $100,000 of PAYE and ESCT
  • Issue: Electronic exempt group and new employers group
  • Issue: Extending the six month period to file paper returns
  • Issue: Timeframe for employment income information reporting by employees
• New and departing employee information
  • Issue: Support for proposal
  • Issue: New and departing employees – contact details
  • Issue: Departing employee information
  • Issue: Date of birth and contact information
  • Issue: Consolidation and simplification of new employee information
  • Issue: Providing a timely response on new employees
  • Issue: Using employee-provided information to make deductions if validation has not occurred before the first payday
  • Issue: Employer must have access to the same information that Inland Revenue holds
  • Issue: Notification when employer ceases to employ
• Employment income information – error correction and adjustment mechanisms
  • Issue: Regulation making power for matters relating to the correction of errors
  • Issue: Public consultation on regulations
  • Issue: Application date of regulation making power
• Tax codes and PAYE record keeping
  • Issue: Requirement to provide a name to the employer
  • Issue: Grace period to provide tax file number for new employees
  • Issue: Restructuring of existing provisions
  • Issue: Process for changing tax codes
• Remittance of PAYE and related deductions
  • Issue: Retention of current remittance rules
  • Issue: Remittance threshold changes by Order in Council
• Penalties
  • Issue: Late filing and non-electronic filing penalties to remain monthly
  • Issue: Maximum penalty for non-electronic filing
  • Issue: Shorten the period for resetting the good behaviour penalty reduction in section 141FB of the Tax Administration Act 1994
  • Issue: Focus during the period of transition to the new rules should be on education
• Employee share scheme transitional provisions
  • Issue: Support for the proposals
  • Issue: Meaning of “ESS deferral date” during the transitional period
• Other matters raised
  • Issue: Accelerating the transfer of KiwiSaver contributions
  • Issue: Information sharing with other Government agencies
  • Issue: Employer should not become an intermediary/messenger between Inland Revenue and the employee
  • Issue: Implementation of proposed rules
  • Issue: Voluntary payday reporting from 1 April 2018 limited to payday reporting via digital systems
  • Issue: Declaration of entitlement to work in New Zealand
  • Issue: Employers reporting information for special tax codes or special tax rates
  • Issue: Record keeping requirements for employment income information
  • Issue: Schedular payment drafting
  • Issue: Employment income information – transitional provisions
  • Issue: Definition of KiwiSaver status
  • Issue: Reporting of employment income information: other particulars as required by the Commissioner

Making Tax Simpler – investment income information

• Overview
• Investment income information generally
  • Issue: General support for amendments to investment income information
  • Issue: The costs and benefits of monthly reporting
  • Issue: Support for application date of investment income provisions
  • Issue: Application date for provision of investment income information should be deferred
  • Issue: Engagement and partnership between Inland Revenue and investment providers
• Measures to reduce compliance costs
  • Issue: Provision of information that is not easily accessible
  • Issue: Optionality for provision of combined or separate information
  • Issue: Flexibility to provide cumulative or month by month information
  • Issue: End-of-year withholding tax certificates
  • Issue: Streamlining information reporting
  • Issue: Overlap with other investor information collection regimes
• Portfolio investment entities
  • Issue: Six monthly reporting of Prescribed Investor Rates (PIRs) by multi-rate Portfolio Investment Entities (PIEs)
  • Issue: Advancing the filing deadline from 31 May to 15 May for non-locked in PIEs
  • Issue: Further information as required by the Commissioner – PIEs
  • Issue: PIE filing due date – incorrect application date
• Error correction
  • Issue: Support for error correction proposals and extending them to PIEs
  • Issue: Error correction notification
  • Issue: Error correction mechanisms
  • Issue: Error correction threshold
  • Issue: Correction of errors in the following year
  • Issue: Error correction mechanism for excess amounts
  • Issue: Tax payments arising from an error
• Dividends
  • Issue: Application to deemed and non-cash dividends
  • Issue: Company dividend statement
  • Issue: Deemed dividends and public unit trusts
  • Issue: Dividend information and foreign companies
  • Issue: Reporting requirements for dividends between wholly-owned companies
• RWT filing deadline (transitional provision)
  • Issue: Advancing the filing deadline from 31 May to 15 May for RWT and NRWT
  • Issue: Transitional provision
  • Issue: Application date of transitional provisions
• RWT-exempt status
  • Issue: Provision of information relating to RWT exempt payers
  • Issue: RWT-exempt status
  • Issue: The information published on the electronic register of RWT-exempt status should be limited
  • Issue: The methods for determining RWT-exempt status
  • Issue: Tertiary education subsidiaries and RWT-exempt status
  • Issue: RWT-exempt status – electronic register
• Financial arrangements
  • Issue: Interaction of financial arrangement rules
  • Issue: Accruals-based tax system and cash-based reporting
  • Issue: Information on financial arrangements
• Electronic filing
  • Issue: Encouraging electronic filing
  • Issue: Non-electronic filing penalty
• Approved issuer levy
• Joint accounts
  • Issue: Information on joint account holders
  • Issue: Joint investments – splitting investment income
• Provision of investment income information by Māori authorities
• Measures to identify taxpayers
  • Issue: Measures to encourage the provision of IRD numbers
  • Issue: Sharing IRD number data
  • Issue: Date of birth
• Miscellaneous
  • Issue: Interest and dividends between associated parties in the small and medium enterprise (SME) sector
  • Issue: Responsibility for providing correct information
  • Issue: Method of reporting information
  • Issue: Provision of investment income information by financial intermediaries
• Drafting
  • Issue: Notified investor rates
  • Issue: Evidential requirements for tax credits
  • Issue: Terms not defined
  • Issue: Incorrect cross-reference
  • Issue: Information on dividends

Making Tax Simpler – other items

• Exemptions from electronic filing requirements
  • Issue: Clarifying the reasons for granting an exemption
  • Issue: Specifying the status of the exemptions granted
  • Issue: Statement of reasons for exemptions granted
  • Issue: Expiry of exemptions after a specific period of time
  • Issue: Aligning the non-electronic filing exemption for investment income information
• Tax treatment of advance payments of holiday pay or salary or wages
  • Issue: Support for the proposal
  • Issue: Alternative proposal
  • Issue: Inland Revenue should provide examples for employers
  • Issue: Need for payroll systems to have the functionality to enable employers to easily switch between options
• Application of legislated rate and threshold changes
  • Issue: Support for the proposal
  • Issue: ACC earners’ levy alignment
• Remedial holiday pay payments
• Penalties and interest amendments
  • Issue: Setting a new due date for default assessments, date interest starts and the date an excess credit arises
  • Issue: Aligning the due dates for default assessments – application date for clauses 273 and 274
  • Issue: Date interest starts and excess tax is available – application date for clauses 263 and 276
• Electronic filing requirements for GST returns
  • Issue: Support for the proposal
  • Issue: Imposition of non-electronic filing penalty

Employee share schemes

• Overview
• General issues
  • Issue: Support for reforms
  • Issue: Proposals increase complexity and uncertainty
  • Issue: The policy framework is fundamentally flawed
  • Issue: Employee share schemes are a valuable economic tool and the rules should not discourage their use
  • Issue: Proposals result in double taxation
  • Issue: Issues with consultation process
  • Issue: Additional guidance on share valuation
• Income tax treatment of employees
  • Issue: Clarification of terms used in Bill
  • Issue: The definition of employee share scheme is too wide
  • Issue: The proposals result in tax on capital gains
  • Issue: Should impose fringe benefit tax on any downside risk protection
  • Issue: The proposals are not a neutral framework for taxing income
  • Issue: Future employment conditions should not delay the taxing point
  • Issue: Effect of proposals on small and medium enterprises
  • Issue: There is a lack of certainty under the proposals
  • Issue: There should be an allowance for black-out periods and other sale restrictions
  • Issue: Clarification of “bad leaver” exclusion
  • Issue: Social policy and compliance cost implications
  • Issue: Support for apportionment rule
  • Issue: The apportionment rule should be extended to all remuneration
• Deductions for employers
  • Issue: Support for the proposal
  • Issue: Employer should be able to claim a deduction for actual costs
  • Issue: Deduction proposal is practically unworkable
  • Issue: Clarification of deduction formula required
  • Issue: Bill should confirm that costs of setting up an employee share scheme are deductible
  • Issue: Clarification as to timing of deduction
  • Issue: Deductions will be fiscally costly to the Government
  • Issue: Financial reporting adjustments will be required
• Exempt schemes
  • Issue: Support retaining and modernising schemes
  • Issue: Support for repeal of the notional 10% interest deduction
  • Issue: Support for the increased threshold for amount that can be spent purchasing shares
  • Issue: The threshold should be regularly reviewed in future
  • Issue: The threshold should be higher
  • Issue: There should be no limit on the minimum purchase price if an employee is required to buy shares
  • Issue: Share purchase schemes should be renamed “exempt schemes” in the legislation
  • Issue: Loans to employee should not have a minimum repayment schedule
  • Issue: Can payment by “regular instalment” include regular purchase of parcels of shares?
  • Issue: Support the reduction of eligible employees participating from all to 90 percent
  • Issue: Support requirement to notify Commissioner of Inland Revenue (CIR) of scheme rather than request CIR approval
  • Issue: Support the removal of the trustee requirement
  • Issue: Support removing the deduction as the benefit is exempt
  • Issue: Do not support removing the deduction for providing exempt benefits
  • Issue: Deductions should not be denied from date of introduction of the Bill
  • Issue: Period of restriction should be clarified
  • Issue: Employers should report annually in respect of exempt schemes
  • Issue: Clarification that employees in existing schemes can benefit from increased limits under the new rules
  • Issue: Do existing exempt schemes have to notify CIR when grants are made?
  • Issue: Deductibility of set-up costs
• Available subscribed capital
  • Issue: Do not support proposal
  • Issue: The ASC proposal should be simplified
  • Issue: Support for the proposal
  • Issue: No dividend should arise if a reimbursement payment that is greater than ASC is made to parent company
  • Issue: Clarification of existing ASC rules needed
• Employee share scheme trusts
  • Issue: Support for proposal that employee share scheme trusts be ignored
  • Issue: Use “trustee of a trust”, not “trust”
  • Issue: The effect of trustee nominee provision is unclear
  • Issue: Should deem income and expenditure of trustee to be that of the company
• Transitional rules
  • Issue: Transitional period should be 12 months rather than six months
  • Issue: There should be a fixed application date for exempt scheme changes
• Miscellaneous technical issues
  • Issue: Support for cost base proposal
  • Issue: Support for exclusion from foreign investment fund rules
  • Issue: Do not support specific anti-avoidance rule
  • Issue: Support the amended definition of “tax shortfall”
  • Issue: Trustee definition should allow for single or multiple trustees

Other policy matters

• Annual setting of income tax rates
• Demergers – company splits by listed Australian companies
  • Issue: Support for the proposal, with some reservations
  • Issue: Proposed demerger rules should also apply to New Zealand companies and other company demergers generally
  • Issue: Application date
  • Issue: Treatment of ASC
  • Issue: Proportion of shareholding requirements
  • Issue: Scope of the proposed amendments
  • Issue: Technical matters
  • Issue: Inland Revenue to provide guidance to taxpayers
• Bank account requirement for IRD numbers
  • Issue: Support for the proposed amendment
  • Issue: Guidelines
  • Issue: Location of the amendment in legislation
  • Issue: Exclusion of PAYE amounts and schedular payments from penal non-declaration rates
• Petroleum mining decommissioning
  • Issue: Replacing spread-back with a refundable credit
  • Issue: Removal of link with relinquishing a permit
  • Issue: Planning for decommissioning
  • Issue: Alignment with current “removal or restoration operations” definition
  • Issue: Definition of commercial wells
  • Issue: Exploration wells in a mining permit
  • Issue: Exploration wells used in the production process
  • Issue: Part of an arrangement
  • Issue: Geologically contiguous
  • Issue: Plugged and abandoned terminology
  • Issue: Ongoing monitoring
  • Issue: Alignment with royalty regime
  • Issue: Shareholder continuity
  • Issue: Imputation debits for refund
  • Issue: Minor drafting issues
  • Issue: Notification requirements
• Recipients of charitable or other public benefit gifts
  • Issue: Against Malaria Foundation (New Zealand)
  • Issue: Child Rescue Charitable Trust
• Trustee capacity amendments
  • Issue: General support for the trustee capacity amendments
  • Issue: Application date should be retrospective
  • Issue: The two High Court decisions would have been decided the same, even if the proposed amendments were in place
  • Issue: Inherent jurisdiction of the courts
  • Issue: Location of section YA 5 in the Income Tax Act 2007
  • Issue: Drafting of section YA 5 may not achieve policy intent
  • Issue: Single notional person
  • Issue: Clarify what will happen if there is a change in trustee
  • Issue: Definition of “close company”
  • Issue: The amendment to section HD 15 should not proceed
  • Issue: Clauses 172(5) and 172(35) should be amended
  • Issue: Section 2A of the Goods and Services Tax Act 1985 should be rewritten
  • Issue: Definitions of “market value interest” and “voting interest” in section 2A(3) of the Goods and Services Tax Act 1985
  • Issue: Application to unit trusts
  • Issue: Further clarifying amendments
  • Issue: Further guidance
• PHARMAC rebates and GST
• Lloyd’s of London – tax simplification
• Extending the financial arrangement reporting method concessions
• Transfer of overpaid tax from AIM taxpayer to shareholders – extension of the agency mechanism
• FBT due date under close company option during the co-existence of two Inland Revenue software platforms

Remedial amendments

• Employee meal allowances and definition of employer’s work place
• PIE remedials
  • Issue: Online registration process
  • Issue: Notification requirement cross-reference
  • Issue: Consistency of notification requirements
• CFC remedials
  • Issue: Insurance business CFC amendment – minor drafting issue
  • Issue: Insurance business CFC amendment – extension to New Zealand sourced premiums
  • Issue: Insurance business CFC amendment – extension to fee income for administering and managing funds
  • Issue: Non-attributing Australian CFCs – Australian unit trusts
  • Issue: Foreign tax credits – support for proposal
  • Issue: Foreign tax credits – drafting
  • Issue: Foreign tax credits – tax paid by other CFCs
  • Issue: Foreign tax credits –Australian unit trust CFCs and FIFs
  • Issue: Use of part-year accounts for accounting standards method – support for proposal
  • Issue: Use of part-year accounts for accounting standards method – extension to the default test and attribution calculations
  • Issue: Deductible foreign equity distributions and apportioned funding calculations
• GST remedials
• Trading gains of non-resident investment funds
  • Issue: Support for trading gains of non-resident investment funds proposal
  • Issue: Cross-referencing amendments in relation to trading gains of non-resident investment funds proposal
• Non-exempt charities: taxation of tax exempt accumulations
  • Issue: Clarify the definition of “assets”
  • Issue: Application of section HR 12 to deregistered entities that are still exempt under section CW 42
  • Issue: Application of new section HR 12 to entities wholly or partly tax-exempt under section CW 42
  • Issue: Application date of the proposed amendments – savings provision
  • Issue: Potential over-taxation of charitable assets where members of a charitable group deregister
  • Issue: Disposal of assets by a charitable group for market value
  • Issue: Tax on assets held before an entity had tax exempt status
• Consolidated groups and local authorities
• Residential land withholding tax (RLWT) rules – remedial amendment
• Tax rate for extra pays paid to non-resident seasonal workers and employees on non-notified tax codes
  • Issue: Support for the proposal
  • Issue: Tax rate for extra pays made to employees who have not received any PAYE income payments in the previous four weeks
• Resident withholding tax and non-cash dividends
• Consolidated group’s imputation credit accounts and use of pre-consolidation imputation credits
• Trustee’s requirement to file income tax returns
• Small amounts of penalties and interest not charged
• Clarify the definition of “provisional tax associate”
• Clarify that taxpayers who have a transitional year can use the concessionary provisions of section 120KBB of the Tax Administration Act 1994
• Remove new provisional taxpayers who have a transitional year from the ability to use the concessionary provisions of section 120KBB of the Tax Administration Act 1994
• Accounting income method and student loans
• Employee tax codes
• Withholding tax treatment of back-dated remedial payments of employment-related entitlements
• Transferring PAYE credits to shareholder-employees
• Closely-held companies remedial amendments
• Aircraft overhaul expenses
• Allocation of resident withholding tax credits by a trustee
• Available capital distribution amount and depreciable assets
• Available capital distribution amount and disregarded FIF income
• Donation tax credits for donations to community housing entities
• Multiple statements and co-existence within START