Changes to the Income Tax (Depreciation Determinations) Regulations 1993

(Clauses 171 to 175)

Summary of proposed amendment

The bill proposes that the fees payable for depreciation determinations made by Inland Revenue be increased to take into account the increased costs of providing determinations, and be expressed as plus any GST. The bill also proposes that a new additional consultation reimbursement fee be added, which relates to applications for determinations of provisional rates under section 91AAG of the Tax Administration Act 1994. The initial fee and processing fee will both be increased, and the $300 cap on the departmental consultation reimbursement fee will be removed. The fees will be expressed as “plus GST (if any)”.

Cross-references in the regulations will be updated to include reference to the new additional consultation reimbursement fee.

The fee waiver provision will be amended to provide the Commissioner with greater flexibility to waive fees in circumstances where it is considered fair and reasonable to do so.

Application date

The amendment will apply from the date of enactment.

Key features

The fees which are payable for depreciation determinations made by Inland Revenue are set out in Regulation 9 of the Income Tax (Depreciation Determinations) Regulations 1993. The fees currently comprise an initial fee of $50, a processing fee of $30 per hour (or part-hour) beyond the first two hours spent in processing of the application, a departmental consultation reimbursement fee, and an additional consultation reimbursement fee.

The initial fee will be increased to $150 plus any GST and the processing fee will be increased to $75 plus any GST per hour (or part hour) beyond the first two hours.

The consultation reimbursement fee which an applicant is liable to pay Inland Revenue is currently capped at $300. This $300 cap will be removed, so the departmental consultation fee will be equal to the amount of fees paid by the Commissioner to consultants. The wording will also change from “paid by the Department” to “paid by the Commissioner”.

The bill also proposes that an additional consultation reimbursement fee be added. An applicant for a determination of a provisional rate will be liable to pay this fee if the Commissioner has declined to issue a determination, or has issued a determination which is unfavourable to the applicant and the applicant requests further work. Similarly, an additional consultation reimbursement fee will apply following a conference if the applicant requests further work and the extra work or the conference do not cause the Commissioner to issue a determination which is favourable to the applicant.

Regulation 12 currently provides that the fees prescribed in the regulations include goods and services tax. This will be revoked as the GST treatment of the fees will be addressed in Regulation 9.

The cross-references in Regulation 10(1) and 10(2) of the Income Tax (Depreciation Determinations) Regulations 1993 will be updated to include a reference to the new additional consultation reimbursement fee.

The current fee-waiver provision only permits the fees for a depreciation determination to be waived in whole or in part in “exceptional circumstances”. The new fee-waiver provision will allow more flexibility based on what the Commissioner considers is fair and reasonable.

Background

Fees for determinations made by Inland Revenue were set on the basis of full-cost recovery when they were introduced in 1993. The fees have not increased since the regulations came into force, although the costs involved in providing depreciation determinations have increased substantially. Increasing the fees and removing the cap on the departmental consultation reimbursement fee will better reflect the costs to Inland Revenue of providing the service.

Taxpayers can apply for determinations on provisional rates, special rates and a higher maximum pooling value. Fees are currently not payable on determinations of provisional rates. The proposed new additional consultation reimbursement fee will mean that some fees may be payable for determinations of provisional rates. Currently, a taxpayer who has had their application for a provisional rate determination declined, or who has received a determination which is unfavourable to their position, can request further work, even when there is little chance of their application being successful. Fees may be payable in these instances to reflect the costs to Inland Revenue of any further work undertaken.

The fee-waiver provision in the Income Tax (Depreciation Determinations) Regulations 1993 is not currently used as the fees do not come close to recovering the costs to Inland Revenue in providing determinations. As the fees are being increased to a level which will better reflect the costs to Inland Revenue in providing determinations, the fee- waiver provision is being amended to offer greater flexibility to the Commission to waive fees in circumstances where it is considered to be fair and reasonable to do so.

The current fee-waiver mirrors the former fee-waiver provision in the Tax Administration (Binding Rulings) Regulations 1999 which was amended in 2010 to provide greater flexibility based on what the Commissioner considers is fair and reasonable. It is proposed in this bill to similarly amend the fee-waiver provision in the Income Tax (Determinations) Regulations 1987.