Contents

Overview

KiwiSaver

• General submissions
  • Issue: Support for the proposed amendments to KiwiSaver
  • Issue: Greater consultation expected
  • Issue: Recovering unpaid employer contributions from scheme providers
  • Issue: Aligning the provisional and holding periods with the opt-out period
  • Issue: More education about KiwiSaver residence requirements
  • Issue: Calculating interest on contributions not received

• Changing contribution rates through a scheme provider or Inland Revenue
  • Issue: Support for the proposal
  • Issue: Proposal creates compliance costs
  • Issue: Proposal should not be deferred
  • Issue: The first pay period that the contribution rate change applies to
  • Issue: Contribution rate information should be sent to scheme provider
  • Issue: Certainty about when contribution rate change processed
  • Issue: Timeliness of providing information to employers
  • Issue: Scheme providers should share contribution rate information with employers
  • Issue: Guidance about implementing the proposal

• Collecting KiwiSaver income and ESCT rate information
  • Issue: Support for the proposal
  • Issue: Compliance costs on employers
  • Issue: Reporting ESCT rate information on a payday basis
  • Issue: Include the value of accommodation with the definition of “salary and wages” for KiwiSaver
  • Issue: General comments on greater information gathering capabilities

• Reducing the KiwiSaver transfer period
  • Issue: Support for the proposal
  • Issue: Exception to 10-day transfer rule sought

• Other KiwiSaver matters
  • Issue: Insufficient information provided to employers around KiwiSaver opt-outs
  • Issue: Entitlement to Government contribution ceasing at 65
  • Issue: Entitlement to compulsory employer contributions for under 18 year olds
  • Issue: Flexibility of employee contribution rates
  • Issue: “Lock-in” of QROPS funds in KiwiSaver schemes
  • Issue: ESCT rate for employee with secondary tax code should be the same as base tax rate
  • Issue: Reporting employer’s name and address to Inland Revenue
  • Issue: Aligning employee address requirements in the KiwiSaver Act 2006 with the Tax Administration Act 1994

• New early KiwiSaver withdrawal category for people with life-shortening congenital conditions
  • Issue: Support for the proposals
  • Issue: Definition of life-shortening congenital condition taken to be a life expectancy below the New Zealand superannuation qualification age
  • Issue: KiwiSaver providers may have a grace period for updating disclosure information
  • Issue: Application process
  • Issue: Operational matters requiring clarification
  • Issue: Clarification of ability to work following withdrawal under the new category
  • Issue: Drafting matters
  • Issue: Impact of withdrawal on social assistance payments

Student loans

• Matters raised by submitters
  • Issue: Limiting the ability to reopen repayment obligations prior to 1 April 2013
  • Issue: Allowing Inland Revenue to notify employers when an employee’s loan balance is close to zero
  • Issue: Loan put on hold for those with life-shortening congenital conditions

• Matters raised by officials
  • Issue: Repeal the requirement for loan repayments to be deducted from schedular, election-day, and casual agricultural income
  • Issue: Underestimation penalty
  • Issue: Repayment obligations limited to loan balance
  • Issue: Lowering the adjusted net income threshold from $1,500 to $500
  • Issue: Date repayment deductions are deemed to be made
  • Issue: Aligning the write-off rules
  • Issue: Interest for New Zealand-based borrowers
  • Issue: Payment ordering rules
  • Issue: Early assessment of student loan adjusted net income
  • Issue: Notification of income by overseas-based borrowers applying to be treated as New Zealand-based

Research and development

• General support
  • Issue: Support for the R&D tax credit regime
  • Issue: Effect on innovation and investment
  • Issue: Long-term sustainability is important
• Issue: Support for stakeholder engagement on proposals before Bill introduced

• Refundability
  • Issue: Support for broader refundability
  • Issue: Support for refundability cap
  • Issue: Changing the name of the cap
  • Issue: Contractors and sweat equity
  • Issue: Cashing out non-refundable year one credits in year two

• Wider R&D support mechanisms
  • Issue: Wider R&D funding landscape
  • Issue: Tax barriers to innovative activity

• Tax-exempt entity exclusion
  • Issue: Entities that derive small amounts of exempt income should be eligible
  • Issue: Rationale for tax-exempt entity exclusion acknowledged
  • Issue: Eligibility of charities
  • Issue: Credits carried forward by excluded entities and definition of levy body researcher
  • Issue: Eligibility of Māori enterprises

• Administration
  • Issue: Timeframe for completing disputes process
  • Issue: Challenging the Commissioner’s decisions
  • Issue: Allocating credits to joint venture members
  • Issue: Cost of claiming credits

• Entity eligibility criteria
  • Issue: Tertiary education organisation exclusion
  • Issue: Fixed establishment and in-business requirement
  • Issue: Excluding Growth Grant recipients
  • Issue: Callaghan Innovation ineligible for the R&D tax credit

• In-year approval
  • Issue: R&D certifier approvals and applications
  • Issue: General approval binds the Commissioner
  • Issue: Clarifying the scope of general approval in relation to supporting activities
  • Issue: Criteria and methodologies approval mandatory for significant performers

• Other R&D submissions
  • Issue: Eligibility of software
  • Issue: Approved research providers
  • Issue: Internal software development expenditure
  • Issue: Eligibility of expenditure on creating depreciable tangible property

Other policy and remedial changes

• Refunding overpaid PIE tax
  • Issue: No symmetry between overpayment and underpayment of PIE tax

• Widening the Commissioner’s power to put people on the correct prescribed investor rate
  • Issue: Support for the proposal
  • Issue: Further widening the Commissioner’s powers to put people on correct prescribed investor rate
  • Issue: 1 April 2020 application date should be deferred
  • Issue: Clarification about liability for under and over paid tax for investors on Commissioner advised rate
  • Issue: Increased engagement about operationalisation of proposal
  • Issue: Notifying an investor of a change to the PIR
  • Issue: Ultimate responsibility for determining the PIR
  • Issue: Process required where Inland Revenue recommends the wrong rate
  • Issue: Require PIEs to report PIR information to Inland Revenue on a semi-regular basis
  • Issue: Technical drafting issues
  • Issue: Process for investor being listed in part A of schedule 29
  • Issue: Extension of new PIE transitional period

• Taxation of trusts
  • Issue: Remedial amendments to trust rules supported
  • Issue: Residence of co-trustees as a single notional person
  • Issue: Corpus
  • Issue: Drafting relating to trustee income
  • Issue: Source of capital gain
  • Issue: Taxable distribution not subject to the ordering rule
  • Issue: Foreign-sourced income of a resident trustee – distributions
  • Issue: Foreign-sourced income of a resident trustee
  • Issue: Foreign-sourced income of resident trustees – a trust that has no settlor
  • Issue: Foreign-sourced minor beneficiary income drafting
  • Issue: Settlement by acts of associates
  • Issue: Value of deferral and non-exercise
  • Issue: Election to pay New Zealand tax on world-wide trustee income
  • Issue: Taxation of distributions from a trust that has elected to become a complying trust

• Māori authority tax credits
  • Issue: Correction of unintended legislative change in the rewrite of the provision into the Income Tax Act 2007

• Removal of the requirement to estimate at final provisional tax instalment date
  • Issue: General support for the measure
  • Issue: Relationship between sections RC 7 and proposed sections RC 10(5) and (6) should be clarified to avoid the confusion of terms
  • Issue: A subsequent change is required to account for early balance date taxpayers
  • Issue: The practical implications of the change to eliminate estimating the final instalment should be fully considered

• Clarifying the “lesser of” calculation for standard uplift taxpayers
  • Issue: General support for the amendment
  • Issue: The proposed amendment should be located in the Tax Administration Act 1994

• Removing the ability for provisional taxpayers to allocate payments to particular instalments
  • Issue: Disagree with the proposed amendment
  • Issue: The Government should add a review of the coherence of the interest and penalty rules

• Clarifying the way in which provisional tax instalments are truncated to whole dollars
  • Issue: General support for the amendment
  • Issue: Legislation should be altered to deal with taxpayers who have short paid their instalments by small amounts
  • Issue: Example in the commentary
  • Issue: Inland Revenue should provide further guidance
  • Issue: The proposed amendment is in the wrong section
  • Issue: The amendment should apply retrospectively to the 2017 - 18 income year
  • Issue: Additional truncation

• Clarifying the application of late payment penalties applicable from the final provisional tax instalment date
  • Issue: Concerned about unintended consequences for a taxpayer who has residual income tax of less than the amount due to settle the liability

• Non-standard provisional tax instalments
  • Issue: Support for the amendment
  • Issue: Application date of this clause should be amended

• The effect of regular amendments to provisional tax
  • Issue: Constant changes provide a negative impact to the provisional tax rules

• Tax administration matters
  • Issue: Support for permitted disclosure relating to representatives
  • Issue: Support for remedial amendments relating to the binding rulings regime
  • Issue: Clarifications to the legislative drafting for removing tax agents, representatives, and nominated persons
  • Issue: Clarification to the rules that allow for the self-correction of certain errors in subsequent returns
  • Issue: Self-correction of certain errors in subsequent returns – guidance and changes to the test for GST errors

• Consideration for grant of an easement
  • Issue: Transitional rule
  • Issue: Payments for the grant of a land right

• Employee share schemes
  • Issue: General support

• Employee share schemes – definition of market value
  • Issue: Refreshed valuation statement should be released
  • Issue: Section CE 2(4) should be amended

• Employee share schemes – flexibility to allow employees to keep shares if they leave employment
  • Issue: Use of the word “purchase” does not allow for nil consideration
  • Issue: Proposed section CW 26C(8) is unclear
  • Issue: Potential unintended change in the 2004-2008 rewrite

• Overseas donee status – schedule 32
  • Issue: Updates to the list

• Taxation of life insurance business – transitional relief
  • Issue: Implementation concerns

• Bright-line main home exclusion
  • Issue: Support for the proposal
  • Issue: Suggestion for different period
  • Issue: Settlements of relationship property

• Interest limitation
  • Issue: Restricted transfer pricing – optional credit rating method
  • Issue: Non-debt liabilities – shareholder loans
  • Issue: Dividend paid out of previously attributed income

New matters raised at Select Committee

• Ring-fencing residential property deductions
  • Issue: Residential income that deductions can be used against
  • Issue: Clarifying that amounts of residential income can only be counted once
  • Issue: Unused excess deductions not released on taxable sale of portfolio or property
  • Issue: Operation of the interposed entity rules

• Taxation of trusts
  • Issue: Generic tax policy process not followed
  • Issue: Definition of trust and trustee
  • Issue: Trusts taxed twice on New Zealand sourced income.
  • Issue: A person treated as a settlor under section HC 27(6) of the Income Tax Act 2007

• GST on low-value imported goods
  • Issue: Reverse charge – GST-registered recipient returns the GST
  • Issue: Interaction of marketplace rules with existing agency rules
  • Issue: Knowledge offence for consumers and underlying suppliers providing incorrect or misleading information
  • Issue: Requirement to include GST information in import documentation
  • Issue: Requirement to include amount of tax charged on receipt

• Other GST issues
  • Issue: Removing a GST barrier to buying homes using co-ownership and rent-to-buy arrangements
  • Issue: GST deductions for capital raising costs – remedial reference to participatory securities
  • Issue: Clarifying the scope of an exemption for certain government grants provided to social housing providers

• Hybrid and branch mismatch rules
  • Issue: Disregarded hybrid payment rule – no deduction denial for reimbursement of external group costs
  • Issue: Opaque election – exemption for transitional expenditure
  • Issue: Defensive branch rule – counteraction should be for margin on branch charge rather than gross amount
  • Issue: Defensive branch rule – limitation of scope to foreign offset situations
  • Issue: Exemption from hybrid and branch mismatch rules for small businesses

• Working for Families tax credit matters
  • Issue: Adjusting payment due dates for some Working for Families tax credit recipients
  • Issue: Use of current Working for Families tax credits entitlement to repay prior year overpayments

• Application of section 120KBB guidance
  • Issue: Further guidance would be desirable

• Clarification for taxpayers who pay provisional tax in one or two instalments
  • Issue: An interpretation issue exists with sections RC 13(3), RC 14 (2) and RC 9(9)

• Clarifying the amount on which interest and late payment penalties are applied
  • Issue: Inland Revenue’s systems are not calculating interest in accordance with legislation

• Other matters
  • Issue: Clarification to the filing rules for individuals
  • Issue: Clarifying when interest starts for individuals
  • Issue: Clarifying when the Commissioner is required to issue a notice of proposed adjustment
  • Issue: Repealing a redundant provision that relates to “non-filing” taxpayers
  • Issue: Minor amendment to the write off rules for individuals
  • Issue: Minor amendments to the refund rules for back years
  • Issue: New provision required to be added to the Income Tax Act 1994 – refund rules
  • Issue: Investment income reporting – dividends paid by a listed PIE
  • Issue: Definition of “custodial institution”
  • Issue: End investor treatment of foreign custodians and aggregation of the underlying investors
  • Issue: Transfer of investment income withholding and reporting requirements for RWT and NRWT
  • Issue: Relaxation of investment income reporting requirements for custodial institutions
  • Issue: Clarification of the investment income error correction rules in relation to approved issuer levy
  • Issue: RWT – additional foreign exchange rate
  • Issue: Repeal of information sharing legislative provision
  • Issue: Fringe benefit tax and private vehicle use
  • Issue: The number of remedial amendments
  • Issue: Securitisation vehicle amendments
  • Issue: Amend sections RC 29 and RC 33 to ensure provisional tax is correctly calculated
  • Issue: Standardise the term “person with an initial provisional tax liability”
  • Issue: Ensure the definition of “taxable activity” includes partners in a partnership and members of unincorporated bodies
  • Issue: Ensure the early payment discount applies as intended
  • Issue: Clarify the definition of “provisional tax”
  • Issue: Align the treatment of overpaid tax by a company using the accounting income method (AIM) with tax paid on behalf of AIM shareholders
  • Issue: Inclusion of a tolerance for provisional tax instalments
  • Issue: Amend the definition of “START tax type” in the Tax Administration Act 1994 to include Release 4 tax types
  • Issue: Adding START tax types to section 184A(5) of the Tax Administration Act
  • Issue: Income tax treatment of Nga Whenua Rahui kawenata
  • Issue: The monetary system
  • Issue: Tax rates

Maintenance items

• Maintenance items
  • Issue: Proposed amendments are supported
  • Issue: Maintenance item unnecessary
  • Issue: Additional maintenance items

Appendix

• Summary of recommendations
  • KiwiSaver
  • Student loans
  • Research and development
  • Other policy and remedial changes
  • New matters raised at Select Committee
  • Maintenance items