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Taxation KiwiSaver Student Loans and Remedial Matters Bill

Appendix

Summary of recommendations

SUMMARY OF RECOMMENDATIONS

KiwiSaver

Rec # Recommendation description Submitter Page #
1. Defer changing contribution rates through a scheme provider or Inland Revenue 4 submitters 18
2. That employers should not have to provide ESCT rate information to IRD and that KiwiSaver income information should only be required for new employees 3 submitters 24
3. Remove the requirement to provide the employer’s name and address for certain situations Officials 31
4. Align employee address requirements with the Tax Administration Act 1994 Officials 33
5. Remove the potential separation between the application for withdrawal and the date the withdrawal takes place 2 submitters 35
​6. Require a certificate from a registered medical practitioner as part of the new early withdrawal grounds 2 submitters 35
7. Clarify that people can withdraw under the new category even if subject to the five-year lock-in period 2 submitters 36
8. Clarify the definition of “life-shortening congenital condition” 2 submitters 38

Student loans

Rec # Recommendation description Submitter Page #
9. Repeal the requirement for loan repayments to be deducted from schedular, election-day and casual agricultural income Officials 44
10. Replace the underestimation penalty with a shortfall penalty Officials 44
11. Allow repayment obligations to continue to be made until the consolidated loan balance is repaid Officials 45
12. Lower the adjusted net income threshold from $1,500 to $500 Officials 46
13. That repayment deductions should be credited on the employee’s payday Officials 46
14. Align the write-off rules for tax and student Loans Officials 47
15. Do not impose and write off interest for reassessments of periods prior to 1 April 2020 for New Zealand-based borrowers Officials 47
16. Payments should be allocated against the oldest unpaid period first, and then against interest and then principal Officials 48
17. Allow early assessments of student loan adjusted net income to be completed Officials 49
18. Clarify that borrowers can apply to be treated as New Zealand based for previous periods Officials 49

Research and development

Rec # Recommendation description Submitter Page #
19. Change the name of the cap from “payroll-tax based cap” to “refundability cap” Officials 57
20. Allow payroll taxes paid in year one to be applied when cashing out carried forward non-refundable credits 3 submitters 60
21. Certain types of exempt income should not make entities ineligible for the tax credit 5 submitters 64
22. Clarify that foreign tertiary education organisations are ineligible for the tax credit Officials 72
23. Allow businesses that became associated with or controlled by a growth grant recipient before the restrictions were announced to access the tax credit 2 submitters 73
​24. Make Callaghan Innovation ineligible for the R&D tax credit Officials 75
25. Make general approval binding on the Commissioner Officials 76
26. Clarify the scope of general approval in relation to supporting activities Officials 77
27. Make criteria and methodologies approval mandatory for those that opt out of the general approval regime Officials 78
28. Only allow entities capable of core R&D activities to become approved research providers Officials 81

Other policy and remedial changes

Rec # Recommendation description Submitter Page #
29. Allow overpaid PIE tax to be refunded David McLay 87
30. Allow Inland Revenue to notify PIEs of investors’ PIR when Inland Revenue holds sufficient information Officials 89
31. Clarify a number of technical drafting issues 2 submitters 94
​32. Clarify the definition of corpus 4 submitters 100
33. Source rules for capital gains should also apply for losses 2 submitters 101
34. Clarify taxable distributions not subject to the ordering rule New Zealand Law Society 102
35. Include a reference to non-natural person trustees in section HC25(2)(c) New Zealand Law Society 104
​36. Clarify the application of the rules for settlement by acts of associates 5 submitters 106
37. Ensure the interest rate is either the prescribed rate or the market rate 3 submitters 107
38. Allow retrospective election to pay New Zealand tax on world-wide trustee income 2 submitters 108
39. Limit notification requirements for non-active trusts New Zealand Law Society 108
40. Change “RIT estimate” to “expected RIT” to avoid confusion EY 113
41. Move the provision clarifying the application of the use-of-money rules to the Tax Administration Act 1994 Chartered Accountants Australia and New Zealand 116
42. Allow taxpayers who have short paid their instalments by small amounts to access the safe harbour concessions 3 submitters 119
43. The truncation amendment should apply retrospectively to the 2017-18 income year Tax Management New Zealand Limited 121
44. Clarify the points at which truncation occurs Officials 122
45. The change for taxpayers with a non-standard number of provisional tax instalments should apply from 2017-18 and later income years Chartered Accountants Australia and New Zealand 124
46. Clarify the drafting for removing tax agents, representatives and nominated persons Officials 127
47. Clarify the rules that allow for the self-correction of certain errors in subsequent returns Officials 128
48. Ensure payments for the grant of a land right are taxable Officials 130
49. Clarify that section CW26C(8) applies where shares are acquired for nil consideration 2 submitters 135
50. Revise the drafting of CW26C(8) Chartered Accountants Australia and New Zealand 135
51. Correct an unintended change to CW 26C from the 2004-2008 rewrite Deloitte 136
52. Update the list of overseas donee organisations Officials 138
53. Make improvements to the CPI calculation and application of a change to the transitional relief for level premium life insurance policies sold before 1 July 2010 3 submitters 139
54. Clarify the application of the bright-line test for settlements of relationship property Officials 142
55. Remove the word unsecured from section GC 16(5) 3 submitters 143
56. Change “shareholder that is a member of the group” to “shareholder’ in section FE 16B(1)(b) Deloitte 143
57. Clarify the drafting of clause 83 Officials 144

New matters raised at Select Committee

Rec # Recommendation description Submitter Page #
58. Clarify the residential income that residential property deductions can be used against Officials 147
​59. Clarify that amounts of residential income can only be counted once Officials 147
60. Ensure that unused excess deductions that are not released on sale are carried forward Officials 148
​61. Ensure the interposed entity rules operate as intended Officials 149
62. Clarify that the interest paid should be within 12 months of the end of the income year under Section HC27(6) nsaTax 152
63. Ensure the reverse charge only applies when the recipient imports goods of less than $1,000 and does not pay GST to Customs or the supplier of the goods Officials 153
​64. Clarify the interaction of the marketplace rules with the existing agency rules Officials 153
65. Expand the knowledge offences in the Tax Administration Act 1994 for consumers and suppliers providing incorrect or misleading information to avoid paying GST Officials 154
66. Only require suppliers to include their GST information in import documentation if GST is required to be charged on the goods Officials 155
​67. Remove the requirement for suppliers of low-value imported goods to include the amount of GST charged on receipts issued to consumers Officials 156
68. Allow GST deductions for capital raising costs associated with issuing participatory securities Officials 159
69. Clarify that all types of payments by the Government to social housing providers to provide social housing are exempt from GST Officials 159
70. Amend the disregarded hybrid payment rule to allow a deduction that reimburses third party expenditure of a group member 3 submitters 161
71. Allow an exemption from the hybrid and branch mismatch rules for transitional expenditure related to making an opaque election Deloitte 161
72. Adjust due date for some Working for Families tax credit recipients Officials 164
73. Allow current Working for Families tax credits to be used to repay prior overpayments Officials 165
74. Correct an interpretation issue with sections RC13(3), RC14(2) and RC9(9) Deloitte 167
75. Correct minor errors in the drafting of section 22H of the Tax Administration Act 1994 Officials 169
76. Ensure section 120C(1)(iib) applies to both qualifying individuals and individuals who are treated as qualifying individuals Officials 169
77. Clarify section 89C of the Tax Administration Act 1994 Officials 170
78. Repeal redundant section 141JA of the Tax Administration Act 1994 Officials 171
79. Correct the application date of an amendment to schedule 8 of the Tax Administration Act 1994 Officials 172
80. Clarify section MD1 of the Income Tax Act 1994 and 2004 Officials 172
81. Allow overpaid tax from 1 October 2004 to 1 April 2005 to be refunded in certain situations Officials 173
82. Ensure section 25G of the Tax Administration Act applies to dividends paid by a listed PIE Officials 173
83. Add a definition of “custodial institutions” Officials 174
84. Treat foreign custodial institutions as an end investor for investment income withholding and reporting purposes Officials 175
85. Clarify how the withholding and reporting obligations for investment income will pass from the payer to a custodial institution Officials 176
86. Relax the investment income reporting requirements for custodial institutions Officials 177
87. Clarify the error correction rules for the approved issuer levy Officials 178
88. Allow payers and custodians to withhold and report investment income at the foreign exchange rate on the transaction date Officials 179
89. Repeal an information sharing provision between Inland Revenue and the Serious Fraud Office to avoid conflicting legislation Officials 179
​90. Amend sections RC29 and RC33 of the Income Tax Act 2007 to ensure that provisional tax is correctly calculated Officials 182
91. Standardise the term “person with an initial provisional tax liability” Officials 182
92. Ensure that the definition of “taxable activity” includes partners in a partnership and members of unincorporated bodies Officials 183
93. Ensure the early payment discount applies as intended Officials 183
94. Clarify that provisional tax includes late payment penalties on that tax in section 120L Officials 184
95. Align the treatment of overpaid tax by a company using the accounting income method (AIM) with tax paid on behalf of AIM shareholders Officials 184
96. Allow taxpayers who underpay their provisional tax by small amounts to still access the safe harbour rules Officials 185
97. Include the Release 4 tax types in the definition of “START tax type” Officials 186
98. Allow reserve schemes and unclaimed monies to be directly refunded Officials 187

Maintenance items

Rec # Recommendation description Submitter Page #
99. Remove an unnecessary maintenance amendment Chartered Accountants Australia and New Zealand 191
100. Make additional maintenance changes Officials 191