Snapshot of Recent Developments: August Tax Alert

Policy Developments:

Taxation (Use of Money Interest Rates) Amendment Regulations 2019

On 4 July 2019, the Taxation (Use of Money Interest Rates) Amendment Regulations 2019 were notified in the New Zealand Gazette. These regulations amend the Taxation (Use of Money Interest Rates) Regulations 1998 to:

• Increase the taxpayer’s paying rate of interest on unpaid tax from 8.22% to 8.35% per annum; and
• Decrease the Commissioner’s paying rate of interest on overpaid tax from 1.02% to 0.81% per annum.

These Regulations come into force on 29 August 2019.

Consultation document on clean car “feebate”

On 9 July 2019, the Ministry of Transport released a consultation document that proposes to make electric, hybrid and  fuel efficient vehicles more affordable for Kiwis to buy, potentially by a discount of up to $8,000 for new and used light vehicles entering the New Zealand fleet from 2021 onwards. Meanwhile, a fee up  to $3,000 will be charged on highly polluting imported vehicles. 

Vehicles with a retail price of $80,000 or more would not be eligible for discounts. 

One of the trade-offs proposed in the discussion document is that the current exemption from Road User Charges (RUC) that exists for electric vehicles will end in December 2021.The exemption from RUCs has previously been held out as a reason not to consider amending how the fringe benefit tax rules apply to electric vehicles.

Consultation on a foreign trust distributions

Inland Revenue released a draft interpretation statement on the tax treatment of foreign trust distributions on 31 July 2019. This will be covered in the September edition of Tax Alert. Submissions are due on 10 September 2019.

Finalised Inland Revenue Items:

Income tax – salary and wages paid in crypto-assets – BR Pub 19/01

On 28 June 2019, Inland Revenue released the finalised public ruling, BR Pub 19/01: Income tax – salary and wages paid in crypto-assets. This ruling considers whether regular remuneration received by employees in crypto-assets for services performed by the employee under an employment agreement are subject to PAYE. The Commissioner considers that the concepts of “salary” and “wages” are wide enough to encompass some regular payments in crypto-assets. Therefore they are “PAYE income payments” and PAYE rules apply. 

Income tax – bonuses paid in crypto-assets – BR Pub 19/02

On 28 June 2019, Inland Revenue released the finalised public ruling, BR Pub 19/02: Income tax – bonuses paid in crypto-assets. This ruling considers that payment of an amount of crypto-assets to an employee in connection with their employment as an incentive or bonus is a “PAYE income payment” under s RD 3 and is subject to the PAYE rules.

Tax Cases:

Mercury NZ Limited v Commissioner of Inland Revenue [2019] NZHC 1524

The High Court held that turbine halls were “buildings” for the purposes of the depreciation provisions and therefore subject to a depreciation rate of 0%. The case considered whether turbine halls fell within the definition of “building” or are part of plant, i.e. the gantry cranes situated within the halls.

The High Court has determined that the turbine halls have walls (incorporating the gantry crane support systems), base and the cladding. These elements are one structural system. The Court also found that the turbine halls were buildings in the ordinary sense of the word and therefore should be treated as buildings for the depreciation provisions. 

August 2019 Tax Alert contents

• Updating a PIR and (further) KiwiSaver changes
• Does travel to work come with a tax bill? 
• A new way to calculate your home office costs
• Have your say on vacant land tax
• Tweaks and realignments in the latest tax bill