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Summary of recommendations

Home > Publications > 2021 > Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill > Summary of recommendations

Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill

Officials' report to the Finance and Expenditure Committee on submissions received on the Bill

February 2001


Summary of recommendations

Summary of recommendations

Feasibility Expenditure

Rec # Recommendation description Submitter Page #
1. Provide guidance on deductibility of pre-commencement feasibility expenditure 4 submitters 28
2. Provide guidance on indirect expenditure 3 submitters 31
3. Enlarge the scope of the clawback provision Officials 33
4. Provide guidance on the clawback of deductions 5 submitters 33
5. Impose a seven-year time limit on the clawback provision 6 submitters 36
6. Improve the interaction between clawback and deductibility proposals Officials 36
7. Provide guidance on feasibility expenditure 2 submitters 41
8. Clarify example 3 in the commentary Corporate Taxpayers Group 41
9. Resolve the de minimis drafting issue Corporate Taxpayers Group 42
10. List expenditure that would not be deductible Officials 43


Rec # Recommendation description Submitter Page #
11. Amend the definition of a “group of persons” Officials 53
12. Provide guidance on the proposed amendments through a Tax Information Bulletin 2 submitters 54
13. Allow direct information sharing between LINZ and Stats NZ Officials 56
14. Amend the definition of “dwelling” and related terms Officials 58

Purchase Price Allocation

Rec # Recommendation description  Submitter Page #
15. Educate taxpayers about new PPA rules 3 submitters 73
16. Inform and educate relevant organisations on the amendments nsaTax Limited 74
17. Clarify the required level of allocation 3 submitters 75
18. Pro rate tax book value where total purchase price is less than total tax book value 4 submitters 81
19. Remove the rule for allocation to amortisable improvements 3 submitters 83
20. Extend the timeframe for vendor allocation to three months post-settlement 3 submitters 84
21. Clarify the timeframe for purchaser allocation 2 submitters 85
22.  Clarify the provisions only delay purchaser deductions  6 submitters  88
23.  Reframe the provisions only delay purchaser deductions to ensure the result will be symmetrical  nsaTax Limited  89
24.  Clarify the timing of deductions for purchasers making late allocations  2 submitters  90
25.  Amend the wording related to discounted asset values  Corporate Taxpayers Group  91
26.  Clarify the interaction of proposed rules with existing market value provisions  NZ Law Society  93
27.  Address the drafting error relating to the consistency of de minimis  3 submitters  96
28.  Correct the low-value depreciable property threshold  Officials  97
29.  The safe harbour for low-value depreciable property should apply to both vendor and purchaser  2 submissions  98
30.  Express unilateral allocation rules as optional  Deloitte  101
31.  Change the term “respective market value” to “relative market value”  Deloitte  102
32.  Clarify the phrase “to which other income or deduction provisions of this Act apply or don’t apply at all”  EY  103
33.  Clarify the heading to section GC 21  EY  103
34.  Clarify that the rules apply to disposals for consideration  nsaTax Limited  104

Unclaimed Monies

Rec # Recommendation description Submitter Page #
35. Extend the binding rulings regime to the Unclaimed Money Act 1971 Russell McVeagh 109
36. Include a transitional variation provision 2 submitters 110
37. Include an alternative use proviso to allow holders to submit any amount of money as unclaimed money to the Commissioner New Zealand Law Society 110
38. Retain an alternative use proviso to the de minimis threshold of $100 2 submitters 111
39. Take an institutional approach to “account activity” 3 submitters 112
40. Amend section 8(1) to avoid the circular reference KPMG 114
41. Provide guidance on what constitutes “reasonable efforts” when attempting to locate the owner of unclaimed money Financial Services Council of New Zealand Incorporated 115
42. Limit the data collection requirements in subsection 4(7) to those which are in “readily retrievable electronic format” BNZ 116
43. Clarify the definition of unclaimed money in relation to term deposits BNZ 116
44. Amend clause 83B so that the effective date that the Unclaimed Money Act 1971 becomes an Inland Revenue Act is 1 March 2021 Officials 118
45. Update the drafting of the Unclaimed Money Act 1971 to include gender-neutral language Officials 118
46. Repeal the secrecy provision of the Unclaimed Money Act 1971 Officials 119
47. Allow for the publication of unclaimed money data Officials 119
48. Allow the use of unclaimed money to offset a liability Officials 120
49. Align the deeming period in the Kiwisaver Act 2006 with proposed reforms Officials 120
50. Withdraw the minor data collection requirement proposal Officials 121
51. Allow for a more flexible filing and payment regime Officials 121
52. Redraft the definition of unclaimed money to focus on “money” rather than on “an amount” Officials 122
53. Consolidate the deeming period under the Kiwisaver Act 2006 Officials 122

Other Policy and Remedial Changes

Rec # Recommendation description Submitter  Page #
54. Make adjustments for low-value assets and short-term leases Jim Gordon Tax Ltd 138
55. Allow taxpayers to apply the new rules on a lease-by-lease basis Officials 142
56. Apply minor drafting improvements Officials 143
57. Broaden the scope of the provision relating to incorrect GST treatment 2 submitters 147
58. Amend similar provisions to align with the broadened scope of the provision relating to incorrect GST treatment PwC 147
59. Amend the wording of section EZ 4B(1(a)(i) to better reflect the criteria for spreading 2 submitters 154
60. Clarify the wording of section EZ 4B(4) in relation to business cessation 2 submitters 155
61. Allow the use of the spreading method in relation to shareholder salaries under the circumstances specified in the Standard Practice Statement CAANZ 156
62. Amend the spread formula term “number” CAANZ 157


Rec # Recommendation description Submitter Page #
63. Align the amendment with existing tax treatment Officials 170
64. Include contracted labour costs in the scope of the amendment 5 submitters 172
65. Allow Commissioner discretion on timeframes when taxpayers face balance date changes EY 178
66. Correct drafting errors EY 180
67. Clarify the meaning of “acquire” in R&D expenditure exclusions Officials 182
68. Narrow the scope of the grant-related expenditure exclusion Officials 183
69. Remove the requirement that companies eligible to group SAI must be resident in New Zealand PwC 184
70. Amend the SAI calculation formula to include payments made within a New Zealand consolidated group, where certain conditions are satisfied PwC 185
71. Amend the hybrid financial instrument rule PwC 186
72. Transfer pricing deemed arm’s length amount exception PwC 187
73. Clarify how the reverse hybrid rule applies to hybrid entities and branches PwC 188
74. Amend a transitional effect of section CE 6 Russell McVeagh 196
75. Correct a typo in section CW 26C(7)(a)(ii) Officials 197
76. Narrow section FE 2(1)(d)(i) Chapman Tripp 206
77. Retroactively apply section FE 2(4B) from 1 April 2015 2 submitters 207
78. Amend the formula for group world debt percentages when higher than 60% 5 submitters 209
79. Clarify meaning of negative total assets KPMG 209
80. Correct the terminology surrounding distributions from trusts Wallis Tax Advisory Ltd 215
81. Simplify the cross-border related borrowing feature in the restricted transfer pricing rule PwC 217
82. Address the inconsistency in the notching for group credit rating EY 218
83. Amend clause 84 to include clause (1)(b) of Part B of Schedule 8 of the Income Tax Act 2007 Officials 219

Items Raised by Officials

Rec # Recommendation description Submitter Page #
84. Amend section EE 40 relating to restrictions on depreciation rates Officials 231
85. Repeal the building fit-out transitional rule from the 2020-21 income year Officials 231
86. Simplify the PIE schedular income year-end adjustment calculation Officials 233
87. Clarify that PIE losses and loss tax credits are incorporated when calculating a person’s income tax adjustment  Officials 233
88. Clarify that a natural person investor is a New Zealand resident Officials 234
89. Clarify that the adjustment does not apply to a trustee of a trust Officials 234
90. Limit the removal of excluded income status for multi-rate PIE income Officials 235
91. Include tax adjustments for under- and over-payments of tax on PIE income when calculating residual income tax Officials 235
92. Allow transfer tax refunds to an amount borrowed under the Small Business Cashflow (Loan) Scheme Officials 237
93. Add a transitional provision to the definition of “initial provisional tax liability” Officials 238
94. Retrospectively carve foreign trust registration and annual return fees out of the definition of “tax” Officials 238
95. Allow the use of passport numbers in the student loan customs information match Officials 239
96. Treat all distributions by an approved unit trust as trustee income Officials 240
97. Include the Problem Gambling Levy within the meaning of “tax” Officials 240
98. Allow temporary loss carry-back to enable loss grouping for groups that are not wholly owned Officials 241

Maintenance items

Rec # Recommendation description Submitter Page #
99. Correct a drafting error in the maintenance item in clause 83 CAANZ 245