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Snapshot of recent developments

Tax Alert - March 2019

Policy Developments:

Taxation (Annual Rates for 2018-19, Modernising Administration, and Remedial Matters) Bill passes second reading with supplementary order papers introduced.

The Taxation (Annual Rates for 2018-19, Modernising Administration, and Remedial Matters) Bill (“TARMTARM Bill”) passed its second reading but not before two supplementary order papers (“SOP”) were added to it.

SOP No 188. In addition to minor remedial amendments, this SOP also proposes income derived for the purposes of the purchase of disability support services is exempt income and group companies are included in the ASX-listed companies demerger dividend exemption.

SOP No 189 proposes the New Zealand Memorial Museum Trust — Le Quesnoy is treated as a donee organisation under schedule 32 for a period of approximately 4 years. Gifts of money to the New Zealand Memorial Museum Trust — Le Quesnoy may be eligible for donee organisation tax breaks.

The Bill has now moved to the Committee of the Whole House stage.

Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill Supplementary Order Paper introduced

Supplementary Order Paper No. 193 has been added to the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill. This reintroduces the proposal to extend the Commissioner of Inland Revenue’s care and management role, which was removed from the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill earlier this year.

The proposed amendments provide options to resolve legislative anomalies where there are issues with tax laws that produce outcomes which are inconsistent with clear and understood policy intent. The options allow for an Order in Council to be made on the recommendation of the Minister of Revenue, and provide the Commissioner of Inland Revenue with an exemption-making power. These can be used to modify the application of tax laws, at the optional application of taxpayers, for a limited period of time, and following a period of public consultation.

Research and Development tax incentive draft guidance now available

On 25 February 2019 Inland Revenue released draft guidance on how the R&D tax incentive regime will apply. They have made this available on a new forum where you can comment and view the draft guidance.

ATO releases synthesized text of the MLI and the convention between Australia and New Zealand

On 22 February 2019, the Australian Taxation Office published the synthesized text which shows the modifications made to the treaty by the MLI. The text was jointly prepared by the competent authorities of Australia and New Zealand and represents their shared understanding of the modifications made to the treaty by the MLI. The sole purpose of the document is to facilitate the understanding of the application of the MLI to the Convention and therefore does not constitute a source of law.

Unless stated otherwise in the synthesized text, the provisions of the MLI will have effect with respect to the Australia - New Zealand Income Tax Treaty (2009) as follows:

  • with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2019; and
  • with respect to all other taxes levied by Australia, for taxes levied with respect to taxable periods beginning on or after 1 July 2019; and
  • with respect to all other taxes levied by New Zealand, for taxes levied with respect to taxable periods beginning on or after 1 July 2019.

Finalised Inland Revenue Items:

Exemption from electronic filing – operational statement 19/01

On 8 February 2019, Inland Revenue released operational statement OS 19/01 Exemption from electronic filing. The statement applies from 7 February 2019 to persons applying for an exemption from electronic filing pursuant to section 23G, 25P and 36BD(3) of the Tax Administration Act 1994. An exemption from the requirement to file returns or supply information digitally is available for those who are unable to comply due to lack, or inadequacy, of digital services.

Tax payments – when received in time – SPS 19/01

On 20 February 2019 Inland Revenue released SPS 19/01 – Tax payments – when received in time.

The statement will apply from 1 March 2019 and will replace SPS 14/01 – Tax payments when received in time. The statement sets out Inland Revenue’s practice of accepting a payment has been received on time. The statement covers electronic payments, debit/credit cards, cash and eftpos, payments by cheque, tax pooling, tax transfers, overseas electronic payments, and weekends and public holidays.

Income tax – application of schedular payment rules to non-resident directors’ fees – IS 19/01

On 28 February 2019 Inland Revenue released the finalised interpretation statement IS 19/01: Income tax – application of schedular payment rules to non-resident directors’ fees.

The Interpretation Statement considers the situations in which tax must be withheld from directors’ fees paid to non-residents. This includes a discussion of when directors’ fees paid to non-residents are considered to have a New Zealand source. The Interpretation Statement then goes on to consider when and how much tax must be withheld and paid to the Commissioner, if withholding is required from directors’ fees paid to a non-resident.

Tax Cases:

Payments held to not be donations

Church of Jesus Christ of Latter-Day Saints Trust Board v CIR [2019] NZHC 52

The Court of Appeal ruled in favour of the Commissioner in a case concerning whether payments made to a church in order to support a missionary serving overseas are donations per section LD 1.

The case concerned payments made by missionaries and family members of missionaries, who are required to contribute funds towards the work of other missionaries in New Zealand. The Commissioner successfully argued that the payments were made to meet the costs of the mission and not gifts, as they were not made gratuitously to the trust.

The case considered considerable discussion over the meaning of gift. The court concluded that payments made by the missionary, parents and grandparents are not gifts, however payments made by siblings, other distant relatives and other unrelated members of the Church are gifts for this purpose.

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