New tax year, new tax legislation

By Robyn Walker, Amy Sexton & Viola Trnski

The Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Act (the Act) finally received Royal Assent on 31 March 2023. In our September 2022 issue of Tax Alert, we took a look at a number of the proposed changes in what was then the Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill (No 2) (the Bill). In this article, we highlight some of the most widely applicable changes in the Act, noting some are changes are or will be featured in separate articles. We note that the Act contains many amendments (it has approximately 200 new clauses with 42 different application dates), and we can’t cover them all.

Employee benefits for North Island flooding events

Three new sections were inserted by Supplementary Order Paper (SOP) No 319 to provide income exemptions for flood-related costs, this includes:

• Employer’s welfare contributions of up to $5,000 and accommodation provided to employees will be exempt from tax, provided certain provisions are met.
• Certain fringe benefits of up to $5,000 (when combined with the value of any cash payments) provided to employees will not be treated as a fringe benefit, provided certain provisions are met.
• Accommodation expenditure for employees working on limited-duration rebuild or recovery projects will be exempt from tax, provided certain provisions are met.

Note there is a total cap of $5,000 of combined cash and fringe benefits per employee.

Cross-border workers

• Controversial proposals to simplify the application of non-resident contracts tax (NRCT) in return for extensive information reporting requirements have been removed from the Bill, we expect new proposals to be consulted on later in 2023. Other proposals to improve the flexibility of the NRCT regime are proceeding.
• Amendments are made to make the PAYE, FBT and ESCT rules more flexible.
• Where employees are working in New Zealand and the employer has no presence here, the employee will be required to pay tax in relation to certain fringe benefits and superannuation contributions. This will be incorporated within the IR56 process.

More details in relation to these rules will be included in our May Tax Alert.

Platform economy

Information Reporting

• The Act implements the OECD information reporting and exchange framework for platforms facilitating accommodation, personal services, the sale of goods and the rental of vehicles. The rules are proceeding largely as originally proposed, with the exception that the implementation of the rules for the sale of goods and rental of vehicles is deferred for up to three years. Other platforms will need to commence collating data to report from 1 April 2024. 

GST marketplace rules

• Ride-sharing and accommodation platforms will need to charge GST on supplies made by underlying suppliers. The proposals are proceeding largely as originally proposed, but with some modifications to simplify the rules.

Non-active trusts

• The Act increases the number of circumstances in which a trust can declare itself to be ‘non-active’; the benefit of this is being excused from complying with the trust disclosure rules.

Built to rent exemption from interest limitation rules

• There will be an in-perpetuity exemption from the interest limitation rules for build-to-rent dwellings. To qualify there will need to be 20 or more connected dwellings and the landlord must offer fixed-term tenancies of no less than 10 years.

Dual resident companies

Amendments will allow dual resident companies to offset tax losses, be a member of a consolidated group and retain imputation credit accounts.

Some integrity measures are introduced for which will apply to companies which become resident in another country under a double tax agreement (DTA). There have been some changes to the original proposals including:

• The proposed changes removing the exemption which applied to dividends paid within wholly-owned New Zealand groups for certain dividends paid to DTA non-resident companies have been modified. To the extent to which a dividend has been fully imputed, there will be no liability to withhold NRWT from the dividend.
• Imputation credits will be able to be attached retrospectively to dividends paid to companies that are later determined to be DTA non-resident.
• Australia-New Zealand dual resident companies' dividends paid are to be excluded.
• Corporate migration rules will not be triggered if a company inadvertently becomes DTA non-resident and the company has not taken a tax position that they are a DTA non-resident.

This article only provides a short summary of some of the changes in the new Act. If you would like further information on how the Act may impact you or your business, please contact your usual Deloitte advisor.

April 2023 - Tax Alerts