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Inland Revenue

Tax Policy

Commencement and application for amending provisions

Issue: Amending provisions to include income years.


(Ernst & Young)

The submitter states that the Bill includes reference to various provisions coming into force on a specific date. The submitter believes that the application of many, if not all of those, should also refer to the relevant income (or imputation) years for which they take effect, or for which repealed provisions no longer apply. The submitter requests that all the application provisions should be further reviewed.


Standing Order 253(1) states that a bill must include a distinct clause stating when the bill comes into force. In this bill, the relevant clause is clause 2. The effect of clause 2 is to give the date or dates on which the text of a principal Act is affected by amendments in a clause of the bill. Such a date is often called the commencement date of the amendment.

For some amendments, a commencement date is sufficient to specify the intended effect of the amendment. If a provision is intended to apply to payments as they occur, for example, the text of the provision at the time of the payment will determine the tax treatment of the payment. The amended text will then apply to payments made on or after the commencement date for the amendment; the original text will apply to payments made before the commencement date.

Often, however, the effect of the amendment is intended to be more complex. A common example is an amendment intended to affect taxpayers for a specific income year and later income years. For two taxpayers with different income years, a particular day may occur in an affected income year for one taxpayer but in an earlier income year for the other taxpayer. A payment by one of the taxpayers on the day will be intended to have a different tax treatment from a payment made by the other taxpayer on the same day. But the text of the principal Act on that day will be the same for both taxpayers.

To produce the desired effect, the usual practice is to include a provision specifying the transitional effect of an amendment. Such a provision is expressed in terms of the way in which the amending clauses and subclauses apply and is commonly referred to as an application (sub)clause. Standing Orders do not specify the placement of application clauses in the Act and they are customarily included as a subclause in the clause to which they relate.

The need for an application subclause depends on the circumstances of the particular amendment being considered and there are usually some clauses in a tax bill that do not have an application subclause.

Officials note that the commencement dates and application provisions for amendments relating to specific topics are discussed elsewhere under those topics.


That the submission be declined.