February 2021 Tax Alert


Snapshot of recent developments

Tax Alert - February 2021

Tax legislation and policy announcements

Taxation (Income Tax Rate and Other Amendments) Act 2020 

The Taxation (Income Tax Rate and Other Amendments) Act 2020 (“the Act”) was introduced on 1 December 2020 and received Royal Assent on 7 December 2020. Deloitte has also published an article on the Act.

The Act includes the following tax amendments, mostly with effect from 1 April 2021 income year, unless otherwise stated below:

  • A new personal income tax rate of 39 per cent on annual income over $180,000;
  • All fringe benefit tax rates are increased consequentially;
  • A new employee superannuation contribution tax (ESCT) rate of 39 per cent, with the ESCT threshold being $216,001 upwards;
  • A new 39 per cent resident withholding tax rate on interest with effect from 1 October 2021;
  • Additional disclosure requirements on trustees (compulsory from 2021-22 income year; the Commissioner may also require trustees to provide information back to 2013-14 income year);
  • A new information gathering power (section 17GB) for the Commissioner to gather information she considers relevant for tax policy reasons, with effect from the enactment date. The Commissioner must not use the information collected under this section as evidence in proceedings against a person, but this does not apply to any information the Commissioner subsequently obtains under another section of the Tax Administration Act 1994; and
  • An increase in the minimum family tax credit threshold for the 2020-21 and later tax years.
June tax bill report back date pushed out

The Finance and Expenditure Committee report back date to the House on the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill (June Tax Bill) has been deferred by 4 months to 4 March 2021. The due date was previously set for early December 2020.

Small Business Cashflow Loan eligibility criteria expanded

On 18 December 2020, the Government announced that Cabinet will amend the Small Business Cashflow Loan scheme by introducing revised eligibility criteria with effect from 28 January 2021 (originally February 2021). The Small Business Cashflow Loan scheme is administered by Inland Revenue. Deloitte has published an article regarding this.

Public consultation on the Pillar One and Pillar Two Blueprints

On 16 December 2020, the OECD published the public comments they received on Pillar One and Pillar Two Blueprints. On 14 and 15 January 2021, the OECD held a public consultation meeting focused on the key questions identified in the consultation document and raised in the written submissions received.

Protocol to NZ -Switzerland Treaty comes into force

On 10 December 2020, the amending protocol, signed on 8 August 2019, to the New Zealand - Switzerland Income Tax Treaty (1980), came into force.

Inland Revenue statements and guidance

Guidance on setting up a business asset sale

Inland Revenue has already started to publish guidance on sale price allocation rules for both the buyer and seller. It states both parties need to agree on how the sale price is allocated between taxable and non-taxable assets and allocate the sale price for all assets in line with market value. Inland Revenue will investigate the sale and correct the sale price allocation if they find that the buyer and seller did not allocate the sale price reasonably in the same way in their income tax returns or did not allocate it in line with market values. This supports legislation introduced in 2020 to govern purchase price allocations in asset sales, which we wrote about in July 2020.

Finalised kilometre rates

Inland Revenue has set the rates for the 2019/20 income year. Compared to the prior year, the Tier One rates are slightly higher to reflect the small increase in the cost of owning a vehicle. However, Tier Two rates are slightly lower to reflect the decrease in the overall costs of operating a vehicle. If the 2020 tax return has been flied using the 2018/19 rates, Inland Revenue can reassess the return upon being notified of this.

Vehicle type

Tier One Rate per km

Tier Two Rate per km

Petrol or Diesel

82 cents

28 cents

Petrol Hybrid

82 cents

17 cents


82 cents

9 cents

Salary, wages and bonuses paid in cryptoassets

On 11 January, Inland Revenue issued two revised rulings: BR Pub 21/01 Income tax – salary and wages paid in crypto-assets and BR Pub 21/02 Income tax – bonuses paid in crypto-assets. While these rulings replace BR Pub 19/01 and BR Pub 19/02 respectively, the tax treatment in the rulings remain the same. The rulings have been replaced as some aspects of the arrangement originally ruled on and the commentary may be inconsistent with the Wages Protection Act 1983. BR 19/01 and BR 19/02 will be withdrawn on 28 February 2021 but the Commissioner will continue to be bound by those rulings for arrangements entered into on or before 28 February 2021 until 1 September 2022.

First step legally necessary to achieve liquidation when a liquidator is appointed

On 11 December 2020, Inland Revenue issued Questions We’ve Been Asked QB 20/03 – First step legally necessary to achieve liquidation when a liquidator is appointed. The statement concludes that the first step legally necessary to achieve a short-form liquidation is a resolution by the shareholders or board of directors or, where applicable, another overt decision-making act provided for in a company’s constitution to adopt a course of action that will end in removal from the register. In comparison, the first step legally necessary to achieve a long-form liquidation is a shareholders’ resolution appointing a named liquidator as required by the Companies Act 1993.

Prohibiting Fair Dividend Rate method for Foreign Investment Funds income from specific investments

On 7 December 2020, Inland Revenue issued five determinations (FDR 2020/02, FDR 2020/03, FDR 2020/04, FDR 2020/05 and FDR 2020/06) which prohibit the use of the Fair Dividend Rate method to calculate foreign investment fund income from interest in certain investments.

Special financial arrangement determinations for public-private partnerships

Inland Revenue has published three special financial arrangement determinations which were issued on 17 December 2020:

  • Special Determination 27B – Convertible Notes in Respect of a Limited Partnership Interest. This determination replaces Special Determination 27A to take into account amendments to the convertible notes under the 2020 amendments.
  • Special Determination 28B – Arrangements Rules to the Design and Construction Phase in a Public-Private Partnership. This determination replaces Special Determination 28A to take into account 2020 amendments to the project.
  • Special Determination 29B – Application of the Financial Arrangements Rules to a Public-Private Partnership. This determination replaces Special Determination 29A and take into account 2020 amendments to the arrangement.

Consultation documents

The following documents are out for public consultation


Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.


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