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Taxation (savings investment and miscellaneous provisions) Act 2006 and Taxation (annual rates of income tax 2006-07) Act 2006

These received Royal assent as of 16 December 2006.

New tax rules for offshore portfolio investment in shares

The Income Tax Act 004 has been amended to provide new rules for taxing offshore portfolio investment in shares.

Tax rules for portfolio investment entities

From 1 October 2007, entities that meet the definition of a "portfolio investment entity" will be able to elect into new tax rules under which they will not be taxable on gains on shares in New Zealand and certain Australian companies.

New rules for the tax treatment of expenditure on geothermal wells

New rules for business environmental expenditure were enacted on 21 June 2005 to ensure that all business operating costs, including those for dealing with environmental concerns, are taken into consideration in calculating taxable income, and that the timing of such deductions is appropriate.

Australian superannuation fund exemption

A new exemption has been added to the foreign investment fund (FIF) rules. The exemption applies to interests in specified Australian superannuation schemes held by an individual.

New rules for selecting SSCWT rates

The rules for selecting Specified Superannuation Contribution Withholding Tax (SSCWT) rates under the progressive scale have been changed so that the rate selected is based on an employee's salary or wages and employer superannuation contributions, instead of being based on an employee's salary or wages alone.

Allowing documents to be removed for inspection

Changes have been made to the Tax Administration Act 1994 and the Tax Administration (Form of Warrant) Regulations 2003 to give the Commissioner the power to remove and retain documents for full and complete inspection.

Exemption for allowances paid to military and police personnel serving in operational areas

Amendments have been made to section CW 19 of the Income Tax Act 004 to exempt from income tax allowances paid to members of the New Zealand Defence Force or the Police, which are directly and solely paid for serving in operational areas.

New rules for spreading income on the sale of patents

This amendment allows taxable income from the sale of patent rights to be spread evenly over three income years, at the vendor's election.

Organisations approved for charitable donee status

The following organisations have been granted charitable donee status from the 2006-07 tax year.

Consolidated groups and foreign losses

The law has been amended to make the loss rules for consolidated groups consistent with the rules for nonconsolidated groups. This will prevent losses from being used in two different jurisdictions by a consolidated group.

Assessments by the Commissioner

Circumstances in which the Commissioner may make an assessment without having first issued a Notice of Proposed Adjustment (NOPA) have been extended.

GST and financial services

Changes have been made to section 3(1) of the Goods and Services Tax Act 1985 to treat certain activities involving investments in equity securities and participatory securities as supplies of financial services.

GST on fringe benefits

A change to section 10(7) of the Goods and Services Tax Act 1985 extends the circumstances in which fringe benefits are not subject to GST.

GST grouping rules

Section 55, which governs the treatment of GST groups, has been amended to allow companies to form a GST group even if all of the members are not GST-registered.

Taxation of business environmental expenditure

New rules for business environmental expenditure were enacted on 21 June 2005 to ensure that all business operating costs, including those for dealing with environmental concerns, are taken into consideration in calculating taxable income, and that the timing of such deductions is appropriate.

Family assistance provisions

Several remedial amendments have been made to the family assistance provisions in the Income Tax Act 2004.

Rewrite amendments

Remedial changes have been made to the Income Tax Act 2004 on the recommendation of the Rewrite Advisory Panel.

Tax depreciation treatment of patents

A number of remedial changes have been made to new tax depreciation rules for patents and plant variety rights, which were enacted as part of the Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005.

Fringe benefit tax

Significant changes were made to the FBT rules in early 2006, including the methods that an employer can use to value the fringe benefit arising from an employee's private use of an employer-provided motor vehicle.

Depreciation formula - apportionment of business and private use

Two new formulas to allocate losses on disposal for depreciable property, when the property is used for both business and private purposes and is purchased and disposed of in the same income year, have been added to the Income Tax Act 2004.

Economic rate of depreciation of certain aircraft and motor vehicles

The rule covering the setting of depreciation rates for certain aircraft and motor vehicles has been clarified.

Calculating depreciation rates for assets with high residual rates

The rules covering the method for calculating depreciation rates on assets that have a residual value of more that 13.5 percent of cost have been corrected.

Election to depreciate plant and equipment at old rates

The rules covering the election to continue to depreciate plant and equipment at the old depreciation rates have been clarified for plant and equipment that has its depreciation rate set under a method other than section EE 25B.

Temporary exemption for transitional residents

The rules for the temporary exemption for transitional residents have been amended to correct certain technical difficulties identified after the original legislation introducing the exemption had been enacted.

Death and asset transfers

Remedial changes have been made to ensure that provisions relating to death and asset transfers in the Taxation (Base Maintenance and Miscellaneous Provisions) Act 2005 reflect their policy intention.

New GST due date for March taxable periods

To provide more time for businesses and tax agents to comply with their GST obligations and, from next year, to comply with their provisional tax obligations, the due date for the March GST returns has been extended to 7 May.

Limit on refunds and allocations of tax

The imputation rules have been amended to extend the circumstances when tax overpaid before a breach in shareholder continuity can be refunded.

The imputation system and companies treated as not being resident under a double tax agreement

Section ME 1(2)(b) of Income Tax Act 2004 has been amended to clarify that companies cannot maintain an imputation credit account if they are treated as not being resident in New Zealand under a DTA.

Reverse takeovers

Concessionary continuity rules, which apply to carrying forward losses and imputation credits when there is a change in a company's shareholding.

Changes in GST taxable periods

Two amendments have been made to correct legislation already enacted to align provisional tax payments with GST payment dates.

Miscellaneous technical amendments

A remedial amendment has been made to the changes enacted in 2006 to the research and development (R&D) tax rules. An amendment to section EJ 21 of the Income Tax Act 2004 clarifies that when a company has had a breach of shareholder continuity the amount of R&D tax deductions allocated to an income year is the lesser of the R&D income in that year and the R&D deductions that have not been allocated to earlier income years.