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Taxation (Tax Administration and Remedial Matters) Act 2011

The Taxation (Tax Administration and Remedial Matters) Bill was introduced into Parliament on 23 November 2010. It received its first reading on 7 December 2010, its second reading on 14 July 2011 and the third reading on 16 August 2011.

The new legislation brings into effect improvements to the tax administration system, abolishes gift duty, makes improvements to the tax disputes process and clarifies the tax pooling rules. It also reduces tax for non-residents investing through New Zealand portfolio investment entities.

Several changes to the bill were made by Supplementary Order Papers Nos 220, 254 and 263 following the bill’s introduction, mainly to deal with tax issues arising from the Canterbury earthquakes of 2010 and 2011.

The resulting Act received Royal assent on 29 August 2011.

The new Act amends the Income Tax Act 1994, Income Tax Act 2004, Income Tax Act 2007, Tax Administration Act 1994, Goods and Services Tax Act 1985, New Zealand Superannuation and Retirement Income Act 2001,

Gift duty abolition

The new legislation abolishes gift duty for dispositions of property made on or after 1 October 2011.

Disputes process

These provisions have been amended or repealed to reflect the fact that the right to have a dispute heard before the small claims jurisdiction of the Taxation Review Authority (TRA) has been removed.

Changes to the secrecy and information sharing rules

Amendments have been made to the Tax Administration Act 1994 to:

  • relax the taxpayer secrecy rules for tax administration purposes; and
  • facilitate the sharing of tax information between Inland Revenue and other government agencies.

Foreign investment PIEs

These new rules for foreign investment PIEs aim to align the tax treatment of non-resident investors in PIEs with the tax treatment of direct investors. Resident investors in a foreign investment PIE will continue to be taxed as if they were in an ordinary PIE.

Provisional tax pooling

A number of amendments have been made to the provisional tax pooling rules to ensure the legislation is simpler, fairer and is applied consistently across different tax types. A number of these changes either legislate operational concessions that previously applied to the tax pooling rules prior to amendments being made in 2009 or more correctly reflect the policy intent of the rules than they do currently.

Deductibility of use-of-money interest

The amendments clarify that use-of-money interest (UOMI) payable to Inland Revenue is deductible for tax purposes and the deduction is made in the year the UOMI is paid.

Listed PIEs - grouping of tax losses

The Act has amended the loss grouping tax rules in order to restrict a listed PIE (a type of portfolio investment entity that is a listed company) to grouping only with its own wholly-owned subsidiaries.

Shareholder continuity: Directors' knowledge provision

Amendments have been made to the directors' knowledge provision under the shareholder continuity tax rules (section YC 15 of the Income Tax Act 2007 and section OD 8(5) of the Income Tax Act 2004). The amendments exclude minor "off-market" transactions from the scope of the provision in order to provide more certainty and clarity when applying the provision.

Corporate spinouts

Section YC 13(1)(c) has been amended to allow the corporate spinout rules to apply if the original parent company holds more than 50% of the voting interests and, if a market value circumstance exists, market value interests in the spun-out company immediately before the spinout.

Working for Families - dependent child's income

Section MB 11 of the Income Tax Act 2007 is amended to prevent double counting of a dependent child’s passive income when calculating family scheme income.

Timing of base price adjustment (BPA) when changing from fair value method to another method

Section EW 29(13) has been amended to clarify when a base price adjustment is calculated.

Business interruption insurance: Timing of derivation

New section CG 5B clarifies that amounts received under a business interruption insurance policy are generally derived in the income year in which the amount can be reasonably estimated.

Foreign shares held by active insurance CFCs

Section EX 58(7) amends the controlled foreign company rules so that an active business exemption for insurance companies will apply in respect of related holdings of foreign shares. This change is retrospective, to ensure affected taxpayers do not have an unintended tax liability.

Extending the amalgamation tax rules to building societies

Amendments have been made to the Income Tax Act 2007 and the Tax Administration Act 1994 to ensure that building societies that transfer all of their engagements under the Building Societies Act 1965 are subject to the tax amalgamation rules, like ordinary companies.

Canterbury earthquake relief measures

The Tax Administration Act has been amended to relieve certain use-of-money interest for foreign workers in New Zealand following the Canterbury earthquakes.

Relief from use-of-money interest for foreign workers in New Zealand after the Canterbury earthquakes

The Tax Administration Act has been amended to relieve certain use-of-money interest for foreign workers in New Zealand following the Canterbury earthquakes.

Qualifying companies transitioning to look-through company rules

The legislation introduces an amendment to the transitional rules for a qualifying company (QC) or a loss-attributing qualifying company (LAQC) which is transitioning to become a look-through company (LTC).

Defined benefit funds and employer superannuation contribution tax (ESCT)

A change has been made to the Income Tax Act 2007 to allow employers making employer's superannuation cash contributions to a defined benefit fund to deduct employer's superannuation contribution tax (ESCT) at a rate of 0.33 cents.

New definition of "document"

The definition of "book and document" in section 3 of the Tax Administration Act 1994 has been replaced with a new definition of "document". The new definition removes references to redundant technology.

Rearrangement of forestry interests to facilitate a treaty settlement

Income tax legislation is amended to provide for the exemption of any income which arises when a forestry interest is extinguished and re-granted solely for the purposes of facilitating a Treaty of Waitangi claim settlement process. These amendments were introduced by Supplementary Order Paper No. 254 during the passage of the Taxation (Tax Administration and Remedial Matters) Bill.

Authority for the Commissioner of Inland Revenue to impose fees for credit card payments

Section 226C of the Tax Administration Act is a new section which allows the Commissioner of Inland Revenue to offer a credit card facility for payment of all tax and social liabilities subject to an appropriate credit card transaction fee if taxpayers choose to use this facility.

GST amendments

GST amendments

GST treatment of certain emissions unit transactions

Amendments are made to enable fully taxable parties to agree the value of emissions units supplied in the future when those emissions units are part of the consideration for another taxable supply.

Overseas donee status

The following organisations have been granted overseas donee status from the 2012–13 tax year.

Remedial matters