Snapshot of recent developments
Tax Alert - March 2021
Tax legislation and policy announcements
Taxation (Income Tax Rate and Other Amendments) Act 2020
COVID-19 resurgence support for businesses
The Taxation (COVID-19 Resurgence Support Payments and Other Matters) Act 2021 received Royal Assent on 18 February 2021. It contains the details of the COVID-19 resurgence support payments scheme and sets the minimum family tax credit threshold for the 2021–22 and later tax years. The minimum family tax credit threshold for the 2021–22 and later tax years is increased from $29,432 to $30,576 per annum.
Budget Policy Statement 2021
On 9 February 2021, Finance Minister Grant Robertson delivered the Budget Policy Statement for 2021 which sets out the high-level priorities in line with the Government’s objectives for this term. Included in the priorities, is a focus on housing. While acknowledging the supply side is “critical”, they will address the demand side particularly of those who are speculating with such measures coming in shortly.
OECD International Compliance Assurance Programme
On 19 February 2021, the OECD published a new handbook for tax administrators and Multinational Enterprises as part of the International Compliance Assurance Programme (ICAP). It contains information on the process for ICAP reflecting the experience and feedback of tax administrations and Multinational Enterprises that participated in the pilot programmes in 2018 and 2019.
Inland Revenue statements and guidance
Employees’ working from home
On 16 February 2021, Inland Revenue released determination EE002B – Variation to Determination EE002A – Payments to employees for working from home costs. This determination is to vary and extend the timeframe of Determination EE002A. It applies to reimbursement payments made by employers from 18 March 2021 to 30 September 2021. This variation will ensure that, for this extended period, the determination will continue to apply to any employee that works from home and that qualifying payments continue to be treated as exempt income under section CW 17 of the Income Tax Act 2007. The new determination does not change the outcomes under Determination EE002A (explained here).
Small Business Cashflow Loan updates
A reminder the new eligibility criteria for the Small Business Cashflow Loan scheme (SBLS) came into effect on 28 January 2021. IR has updated its website to reflect this. In addition, the terms and conditions of the loan have been refreshed to include the changes, including extending the interest free period from one year to two years and broadening the use of the loan to cover capital expenditure. IR unilaterally changed the terms and conditions of existing loan contracts at the end of last year.
Facilitation payments to farmers and forgiveness of debts
On 18 February 2021, Inland Revenue issued Commissioner’s Statement CS 21/01 – Income tax treatment of facilitation payments to farmers and debt remission on settlement of a loan. The Commissioner’s view is that facilitation payments will be taxable income to the recipient under the financial arrangement rules in the Income Tax Act 2007. Any debt forgiveness or remission under the settlement with the lender will also be income to the borrower under the financial arrangement rules.
2021 national standard costs for specified livestock
On 28 January 2021, Inland Revenue published national standard costs for specified livestock determination 2021. This determination is made in terms of section EC 23 of the Income Tax Act 2007. It shall apply to any specified livestock on hand at the end of the 2020-2021 income year where the taxpayer has elected to value that livestock under the national standard cost scheme for that income year.
Fair dividend rate determination
On 12 February 2021, Inland Revenue issued determination FDR 2020/01 – A type of attributing interest in a foreign investment fund for which a person may not use the fair dividend rate method (HSBC Global Liquidity Funds plc: HSBC US Dollar Liquidity Fund – Class H (Distributing) Shares). This determination states that such investment, is a type of attributing interest for which the investor may not use the fair dividend rate method to calculate foreign investment fund income from the interest. This determination applies for the 2021 and subsequent income years. However, under section 91AAO(3B) of the Tax Administration Act 1994, this determination does not apply for a person and an income year beginning before the date of the determination unless the person chooses that the determination applies for the income year.
Monthly retirement payments from the United Nations Joint Staff
On 29 January 2021, Inland Revenue published finalised Questions We’ve Been Asked QB 21/01 – Income tax – monthly retirement payments from the United Nations Joint Staff Pension Fund (UNJSPF). The conclusion has remained the same as the consultation document, whereby the tax exemption in section CW 64 of the Income Tax Act 2007, the Diplomatic Privileges and Immunities Act 1968, and Orders in Council for the United Nations and its agencies do not apply to monthly retirement benefits from the UNJSPF. In general, monthly retirement payments received by retired United Nations staff members are taxed as pensions under section CF 1(g).
The following documents have recently been published for public consultation:
Shifting GST liability to the purchase of land
On 16 February 2021, Inland Revenue released draft Questions We’ve Been Asked PUB00256 – When does section 5(23) of the Goods and Services Tax Act 1985 apply to shift GST liability to the purchaser of land? This consultation item explains how section 5(23) may apply to shift GST liability to the purchase of land if the supply has been incorrectly zero-rated. Submissions close on 31 March 2021.
GST – registration of non-residents
On 29 January 2021, Inland Revenue released consultation document PUB00354 – GST – Registration of non-residents under section 54B. This draft interpretation statement provides guidance on whether a non-resident is eligible to register for GST under section 54B of the GST Act 1985. Section 54B allows non-resident businesses that do not make supplies to end consumers in New Zealand to recover GST input tax on goods and services acquired in New Zealand. Since section 54B was introduced, there have been legislative changes that treat certain supplies by non-residents as being made in New Zealand. These changes include the supply of remote services and low value goods. This means a greater number of non-residents must register under the standard registration provision and fewer non-residents are eligible to register under section 54B. There are a number of requirements that must be met and commentators have indicated that these have not been well understood. The item steps through the requirements and provides examples of their application. Submissions close on 12 March 2021.
Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.
Deloitte Tax Calendar – Order yours now
We’re currently working on the Deloitte tri-fold tax calendar containing key tax payment dates, rates and quick tax facts for 2021-22. If you would like a free copy for your desk or for members of your accounting team, please click here to order. The calendar will be sent out in early April. Please order your copy by 19 March 2021.
March 2021 Tax Alert contents
- What are the tax obligations which come with claiming COVID-19 Government support?
- The tax cost of your fringe benefits is about to increase
- The new 39% tax rate puts tax structuring back into the spotlight – why it may be time to talk about tax avoidance
- Snapshot of recent developments