Overview

The main focus of this Bill is to continue the Government’s programme of simplifying and modernising tax administration. The provisions in this Bill are improvements aimed especially at KiwiSaver and Student Loans, whose administration is due to transition to Inland Revenue’s new technology platform in April 2020. The third main feature of the Bill is aimed at extending the refundability of research and development tax credits.

There were 13 submissions which were generally supportive of the KiwiSaver proposals. Some were concerned at potential compliance costs borne by employers with regard to the proposal to allow a person to change their KiwiSaver contribution rate through their employer or provider or Inland Revenue.

The Bill allows the Commissioner in all cases to notify a portfolio investment entity (such as a KiwiSaver scheme) if their customer was discovered to be on an incorrect prescribed investor rate. While largely supportive of the proposal, submitters discussed a range of concerns. These are addressed in this report.

In relation to this matter, officials have suggested a further measure for inclusion in the Bill, which would allow Inland Revenue to refund overpaid portfolio investment entity (PIE) tax. The measure included in the Bill will correct the rate, but current legislation does not allow Inland Revenue to refund overpaid PIE tax. Officials therefore recommend an amendment to allow an end of year square-up to allow a refund to be paid.

A further matter was introduced to this Bill by Supplementary Order Paper. The measure aims to allow a KiwiSaver member to be able to withdraw funds in the case of a life-shortening congenital disease. Submitters offered a range of adjustments to improve the proposal.

There were five submissions on the student loans proposals.

Submitters were largely positive of the proposal to alert an employer when an employee paying off a student loan is close to eliminating their debt. This would allow the employer to ensure that no over-deduction would occur. One submitter felt that the proposal would impose undue compliance costs on employers.

The Bill contains a proposal to reduce the number of cases that Inland Revenue will go back and reassess a borrower’s loan balance prior to 1 April 2013. This was not supported by a submitter who felt that it rewarded non-compliant borrowers.

Ten submissions were received on the R&D proposals in the Bill. Nearly all submitters supported broader refundability and the proposed remedials. Five submitters submitted that the exempt entity exclusion goes too far and would exclude businesses who only receive small amounts of exempt income from claiming the R&D tax credit.

A number of submissions were also received on the wider R&D funding landscape or commented on matters outside the scope of R&D provisions in the Bill.

Officials have suggested a range of further matters and these are discussed in this report. Some of these relate to Inland Revenue’s business transformation programme and aim to ensure that service provision is not adversely affected by the transition to the new technology. All matters suggested by officials aim to ensure that the legislation is consistent with the policy intent.