Hon Peter Dunne
MP for Ohariu Belmont
Minister of Revenue
Associate Minister of Health
PIE rules start date to align with KiwiSaver
Revenue Minister Peter Dunne has recommended deferring the application date of the proposed changes to the tax rules on portfolio investment entities from 1 April to 1 October 2007, to fit in with the new KiwiSaver start-up date announced today.
The tax changes, which are part of a bill currently before the Finance and Expenditure Committee, will apply to New Zealand-based savings vehicles – such as managed funds – that meet certain criteria. The new rules will remove a number of tax distortions that favour investing directly over investing through New Zealand managed funds.
"The Minister of Finance and I have written to the chairman of the Finance and Expenditure Committee to notify him that we have instructed officials to recommend to the committee an amendment to the bill that will delay the application date of the portfolio investment entity rules until 1 October 2007," Mr Dunne said.
"The original KiwiSaver start date was the driver for setting the start date of the portfolio investment entity rules, so it makes sense to align the two.
"The two initiatives – KiwiSaver and the portfolio investment entity rules – are intimately linked in that the new tax rules, though generally optional, will be compulsory for KiwiSaver default funds.
"Delaying the application date of the portfolio investment entity tax rules also gives savings providers more time to prepare for their implementation, which should deal with some of the timing concerns expressed by the industry.
"Under the new tax rules, savings vehicles that qualify as portfolio investment entities will not be taxed on realised gains made on shares in New Zealand and Australian companies.
"Portfolio investment entities will also pay tax on the investment income on the basis of investors' tax rates, capped at 33%. That removes an enormous obstacle to lower income people investing through managed funds – and participating in KiwiSaver," he said.
Contact: Ainslie Fenwick, Tax advisor, Tel: 04 471 9728