Tweaks and realignments in the latest tax bill
Tax Alert - August 2019
By Emma Marr
Last month we mentioned that the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill (the Bill) was tabled in Parliament on 27 June 2019. The Bill is available here, the Bill Commentary is here, and the Regulatory Impact Assessments are here. The Bill contains proposals in relation to:
- Modernising and improving the settings for the administration of social policy by Inland Revenue (particularly in relation to KiwiSaver and Student Loans).
- Proposals aimed at improving current tax settings within a broad-based, low-rate framework.
- Other remedial matters, including in relation to the R&D tax credit regime, thin capitalisation, employee share schemes, provisional tax and binding rulings regime.
Changes in relation to the R&D tax credit regime were covered in the July 2019 Tax Alert, and changes to KiwiSaver are discussed in a separate article in this month’s Tax Alert. We highlight below some changes that are generally aimed at making tax compliance easier.
The Bill had its first reading on 23 July and Parliament then referred it to the Finance & Expenditure Select Committee. Submissions are due by 4 September.
There are a number of relatively minor amendments to the provisional tax rules, in some cases to align the rules with the way the new Inland Revenue computer system works. The changes generally seem to be either of benefit to taxpayers or reasonably neutral.
Taxpayers who use the standard uplift method will not have to file an estimate for the final installment if they think their RIT will be less than the standard uplift amount. This is a practical and sensible change that reflects the practice of many taxpayers, but gives them the comfort of knowing it is also technically correct.
The bill makes a few tweaks to the student loan scheme rules, none of which are fundamental but all of which will probably make a meaningful difference to some people’s lives.
Changes that fall into the category of “you’d think they could already do this, but it’s good they will be able to soon”:
- Overseas borrowers who can’t meet their student loan responsibilities because of a serious illness or disability can be treated as being physically in New Zealand, which would mean they don’t have to pay interest and can make repayments based on their income, as New Zealand resident borrowers do.
- Inland Revenue will notify employers when an employee is about to pay off their student loan so that the final payment can be tailored to the exact amount owing, preventing an overpayment.
- Historic fraudulent loans can be written-off. Essentially this would apply if someone has been a victim of identity theft and the correct borrower cannot be identified.
Other ideas we cannot fault:
- Limiting circumstances in which a pre-2013 repayment obligation can be re-opened. Currently Inland Revenue has to maintain rules that applied from the start of the student loan scheme in 1992. This is incredibly complex and creates unnecessary administration. The change would allow Inland Revenue to apply one set of rules from 1992 to the current day.
- Renaming the repayment ‘holiday’ as a ‘temporary suspension’.
If you have any questions about these or any other changes proposed in the legislation, please consult your usual Deloitte advisor.