Public Rulings Work Programme

Tax Alert - October 2015

The Public Rulings Work Programme for 2015-16 has been released.  The programme, as at 3 September 2015, includes several new items.  New issues of note that are currently being worked on include:

  • Deductibility of a software developer’s costs. This item will update a 1993 statement regarding the tax treatment of a software developer’s costs for development, acquisition and depreciation of software.
  • Depreciation of computer software.  This item focuses on issues around development, acquisition and depreciation of software which is acquired or developed for use in a taxpayer’s own business.  It is expected to be released this month.
  • Taxation of income derived from online activities.  This statement will cover the tax treatment of sales through online auction sites such as Trade Me as well as income earnt from online advertising on sites such as YouTube.  This item will aim to educate taxpayers around their obligations and is intended to increase voluntary compliance.
  • Tax treatment of lump sum settlement payments.  This statement is intended to resolve the current uncertainty of tax treatment for payments made to settle claims that are part capital and part revenue

The following new items are included on the program, although no date has been set for public consultation as yet so it may be some months before anything is released.

  • A review of IS 2215 “Income tax treatment of New Zealand patents”.  Recent legislative changes regarding the treatment of black hole expenditure may impact on the correctness of this statement and so it is scheduled for review.
  • A new statement on the GST grouping rules in light of how they interact with other provisions in the GST Act.  There is some uncertainty around how the GST grouping rules apply in practice.
  • The statement on the taxation of trusts in the appendix to TIB Vol 1, No 5 November 1989 will be reviewed.  This item still refers to the Income Tax Act 1976 and so needs to be updated to reflect the current legislation.
  • Share reclassifications.  This item will seek to clarify the Commissioner’s view on whether shares that have been issued will be treated as cancelled and reissued when there is an alteration of shareholders’ rights in accordance with the terms of the shares.
  • The interpretation guideline IG 007 “Non-resident software suppliers’ payments derived from New Zealand – Income tax treatment” will be reviewed and updated to reflect the changes in the way software is transacted in current times.

We also note that a couple of items are on hold pending the outcome of litigation.  This includes:

  • The deductibility of costs associated with obtaining resource consents which is on hold pending the outcome of the TrustPower case which is on appeal to the Supreme Court.
  • Consideration of how the associated persons’ rules apply to corporate trustees following the decisions in Concepts 124 Ltd v CIR and TRA 02/10.  The outcome of these cases has created some uncertainty about the previously published guidance in this area. This ruling is on hold pending the outcome of an appeal regarding TRA 02/10.

The programme also aims to assist with a number of broader Inland Revenue compliance initiatives around property taxation in line with extra funding allocations announced as part of Budget 2015.

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