Omnibus tax Bill introduced
The Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill (130-1) was introduced to Parliament on 3 May 2016. The Bill proposes to improve, strengthen and update the rules for closely held companies, non-resident withholding tax and the approved issuer levy, and the GST rules. It also proposes a large number of technical changes to ensure the tax rules work as intended and adds 14 charities to the list of donee organisations in sch 32.
The taxation omnibus Bill introduces amendments to the following enactments:
• Income Tax Act 2007
• Tax Administration Act 1994
• Goods and Services Tax Act 1985
• Stamp and Cheque Duties Act 1971
• Student Loan Scheme Act 2011
• Income Tax Act 2004
• Goods and Services Tax (Grants and Subsidies) Order 1992.
A brief summary of the policy measures contained in the Bill is as follows:
• Changes are proposed to the look-through company (LTC) rules and the dividend rules as they apply to closely held companies to simplify the rules to reduce compliance costs.
• Changes are proposed to the non-resident withholding tax (NRWT) and approved issuer levy (AIL) rules as they apply to interest paid on debt provided by non-residents. The amendments are necessary to ensure that the tax (whether NRWT or AIL) applies consistently to transactions that are economically similar and easily substitutable consistent with the underlying policy.
• Several amendments are proposed to the Goods and Services Act 1985 to address various issues such as capital raising costs, agreed alternative methods for applying the apportionment rules, secondhand goods and gold and services connected with land. Several GST remedial amendments are also proposed.
• Changes are proposed to the treatment of debt remission, including remission by the capitalisation of debt, when the lender and borrower are related.
• It is proposed to allow a loss company, or another company in a commonly owned group, to transfer imputation credits to a profit company in conjunction with a loss grouping transaction. The imputation credit transfer will allow the profit company to pay a fully imputed dividend despite engaging in loss grouping.
• Proposed amendments seek to improve the consistency of income tax legislation with the fresh-start principle of insolvency law under which a person released from all debt under insolvency law is encouraged to start afresh with minimal assets.
• Amendments are proposed to the timing of aircraft engine overhaul deductions to provide certainty and produce a better alignment of deductions and income arising from the use of aircraft.
• It is proposed to clarify that the empowering provision for New Zealand’s double tax agreements (DTAs) does not prevent the anti-avoidance rules contained in the income tax legislation from applying to a tax advantage arising under a DTA. A remedial change to this provision is also proposed to ensure that it operates as intended in relation to the process for bringing DTAs into force.
• 14 New Zealand donee organisations with overseas purposes are proposed to be added to the list of donee organisations in sch 32 of the Income Tax Act 2007.
• An exemption from the land tainting rules is proposed for organisations controlled by, or associated with, a local authority. The exemption does not apply to entities associated with a local authority under the tripartite relationship test in s YB 14 of the Income Tax Act 2007. The exemption also does not apply to entities outside the council group that are associated with a developer of land, unless that association occurs under s YB 14.
• Changes are proposed to effectively restore the position as it was prior to amendments effective from 1 April 2014 by allowing mineral miners to utilise the benefit of losses incurred by non-mining companies within the same group of companies. Mineral miners will continue to be unable to make losses available to, or receive subvention payments from, non-mining companies within the same group of companies.
• A number of Working for Families tax credits (WFFTC) remedial amendments are proposed. A review of the parental tax credit legislation indicated areas where the legislation could be clarified to ensure the policy intent for entitlement to and abatement of payments of parental tax credit (PTC) is clear.
• It is proposed to extend the exception to tax secrecy in s 81A of the Tax Administration Act 1994 that allows the Commissioner to share personal information with an identifiable individual under an approved information sharing agreement (AISA) made under Pt 9 of the Privacy Act 1993 so that it allows the sharing of non-personal information under an AISA.
• Changes are proposed to s 108 of the Tax Administration Act 1994 to clarify that the time bar applies to ancillary taxes including PAYE, fringe benefit tax, resident withholding tax and non-resident withholding tax, and the approved issuer levy.
• The Bill sets the annual rates of income tax for the 2016-17 tax year at the same rates that apply for the 2015-16 tax year.
• A number of remedial matters are also addressed in the Bill.
Marilyn Hay, Consultant Editor