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Inland Revenue

Tax Policy

PUBLISHED 18 September 2009

Major tax bill passes

The Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill has passed its final stages in Parliament. Introduced in July 2008, the omnibus tax bill gives effect to a number of business tax reforms. They include the reform of the tax rules relating to the offshore income of controlled foreign companies, reform of the taxation of the life insurance business, introduction of a payroll giving scheme for charitable donations, updating the petroleum mining tax rules, clarifying the law relating to employer payments for relocation and overtime meal allowances and strengthening the definitions of "associated persons" in income tax law. For more information see the Revenue Minister's media statement. The new legislation will be available here once it has received Royal assent, which is expected in a few days' time.

Hon Peter Dunne
Minister of Revenue


Dunne welcomes passage of major tax bill

Revenue Minister Peter Dunne has welcomed the passage today of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, which was introduced in July 2008.

"I am very pleased that this omnibus taxation bill, which gives effect to a number of important business tax reforms, has passed its final stages in Parliament," Mr Dunne said.

"The reforms are aimed variously at reducing tax costs for businesses, bringing tax law up to date with today's commercial environment, protecting our revenue base, ensuring the law works as effectively as possible, or supporting a culture of charitable giving in New Zealand.

"The most far-reaching change is the reform of the tax rules relating to the offshore income of our controlled foreign companies. It results in better alignment of our tax rules with those of comparable countries, especially Australia, and removes a tax cost for our controlled foreign companies that similar companies in many other countries do not face. The reform applies to income years beginning on or after 1 July 2009

"The tax rules relating to the life insurance business have been updated to ensure that term insurance business is taxed on actual profits, as other businesses are taxed, and to extend the tax benefits of the PIE rules to people who save through life products. These changes generally take effect from 1 July 2010, with term insurance products sold before that date subject to transitional rules.

"The eagerly awaited payroll giving scheme for charitable donations, which will operate through the tax PAYE system, will come into being three months from the date the new legislation receives Royal assent, which probably means before Christmas. Under the scheme, people whose employers sign up for the scheme will receive the tax benefits of their donations each payday, without having to present donation receipts.

"The new legislation also makes life easier for volunteers and community groups by clarifying the tax treatment of reimbursements and honoraria, to make it easier for volunteers to meet their tax obligations and reduce the associated compliance costs. Those changes will apply from 1 April 2009.

"A change to the KiwiSaver law allows families of members who die to have quick access to funds in the dead member's account. With effect from 1 July 2007, up to $15,000 from a dead member’s account can be paid out directly to nominated persons, without their having to await probate if the member left a will, or letters of administration if the member died intestate," Mr Dunne said.

Other changes

Other important reforms in the new legislation include:

  • Employer payments and allowances: The law has been clarified to ensure employer payments for relocation and overtime meal allowances are tax-free, thus removing long-standing uncertainty in the law and saving time and money for everyone involved.
  • Petroleum mining: The tax rules have been updated to remove possible disincentives to further investment in oil and gas exploration and development in New Zealand, and to safeguard New Zealand's taxing rights on its petroleum resources.
  • "Associated persons": the definitions of "associated persons" in income tax law, especially in relation to land sales, have been strengthened to prevent people circumventing the law because of the closeness of the relationships of the parties involved.
  • Films and government funding: The deductible expenditure of film companies that receive Large Budget Screen Production grants will be reduced by the amount of the grant, to prevent the creation of artificial tax losses. Also, the immediate deduction incentive will be turned off for films that receive the 40 percent Screen Production Industry Fund grants.
  • Tax pooling: The provisional tax pooling rules have been extended to include reassessments of all taxes.
  • Migrant workers: Changes have been made to reduce the tax compliance costs faced by migrant workers and to ensure the correct amount of tax is deducted from their pay.
  • Non-disclosure: A change to the Tax Administration Act allows the right of non-disclosure in tax matters to apply to discovery and similar processes that occur during litigation.
  • GST and loyalty points: Certain loyalty programme operators will be allowed to defer imposing GST until loyalty points are redeemed, to ensure that GST is paid at the correct rate.

"These are some of the changes in this major taxation bill, one of the most significant to have come before Parliament in many years," Mr Dunne said. "Its passage is, indeed, an important achievement."

Mark Stewart - Press Secretary, Office of Hon Peter Dunne
Cell +64 21 243 6985