The Finance and Expenditure Committee (FEC) has reviewed the Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill and recommended changes based on public submissions, including those from CA ANZ. The Bill now awaits its final reading and is expected to be enacted by 31 March 2025. This is a positive step for taxpayers, as many proposed changes aim to simplify compliance and provide certainty. However, some provisions remain that will increase the compliance burden overall. Below are the key changes recommended by the FEC.

Generic response to emergency events

The FEC supported CA ANZ’s call for a permanent framework for emergency tax relief, making it easier for the government to provide tax support following disasters without requiring new legislation. Additionally, the FEC recommended allowing extensions beyond five years for recovery efforts, an important flexibility measure. This will provide businesses and property owners with certainty about tax relief options during emergency events. However, despite CA ANZ’s concerns, different procedures will apply depending on the type of property for which relief is requested, and an annual election notice will be required to maintain the tax deferral.

Trustee tax rate

The Bill clarifies that income subject to minor or corporate beneficiary (anti avoidance) rules are subject to the 39% trustee tax rate, regardless of whether the trust itself is eligible by way of exclusion to apply the lower 33% rate. The FEC endorsed these clarifications in its report.

Approved Issuer Levy (AIL) Retrospective Registration

The FEC supported allowing retrospective registration for AIL at the Commissioner's discretion and removal of the two-year limit, aligning with CA ANZ’s submission. CA ANZ argued that many taxpayers, particularly those with foreign mortgages, may not realise their New Zealand tax obligations within two years, making the restriction unfair. The FEC recommended removing the two-year limit but including “duration of the delay in applying for the registration” as a factor that the Commissioner may consider when determining whether the delay was caused by oversight. It also recommended extending the scope of the Commissioner's discretion to cover situations where the borrower made reasonable efforts to register the relevant security on time but failed to complete the registration process.

KiwiSaver changes

The FEC proposed amending the Bill to make “scheme pays” -a mechanism where KiwiSaver providers can pay certain tax obligations on behalf of members -optional for KiwiSaver providers. This aligns with CA ANZ’s recommendation to prevent unnecessary regulatory burden, giving providers greater flexibility, especially those without systems in place to facilitate this process.

Portfolio Investment Entity (PIE) Adjustments

While the Bill includes changes to specific eligibility criteria to be a Portfolio Investment Entity, the FEC did not support deferral pending a broader review of the PIE rules. CA ANZ has previously raised concerns about the need for a more comprehensive approach to PIE tax settings.

Income spreading for land disposals

The FEC recommended including a savings provision allowing taxpayers who previously relied on the provision to continue using the income spreading rule for the balance of income still to be spread. However, the core repeal of income spreading for compulsory land acquisitions remains, despite CA ANZ’s submission opposing this change. This means future land disposals to the Crown will be subject to full taxation in the year of sale, potentially creating cash flow challenges for affected landowners.

GST remedials

The FEC recommended amendments to clarify and extend certain GST remedial measures. This includes broadening the zero-rating rules to apply to a wider range of temporarily imported goods and commercial vessels. The FEC also recommended that the proposed GST treatment on disposal of land be amended to clarify that it only applies to typical property developers. The provision is not intended to capture retirement village operators when determining GST adjustments on land use.

Final thoughts

CA ANZ continues to advocate for a fair and efficient tax system, pushing for refinements that reduce compliance burdens and improve tax policy outcomes. With the Bill expected to be enacted this month, taxpayers should stay informed and consider how these changes (as finalised) may impact them.