Date posted: 13/07/2021

Submission on design of the interest limitation rule and additional bright line rules

CA ANZ recently provided our feedback to Government of recent property tax proposals

Chartered Accountants Australia and New Zealand (CA ANZ) recently provided our views to Government on its Design of the interest limitation rule and additional bright-line rules discussion document. In the lead up to this submission we received a large volume of feedback and thoughts from members in response to our NZ Tax Roadshow and call for feedback. On behalf of the NZ Tax Team, thank you for taking the time to provide your views.

While CA ANZ acknowledges that Government has a legitimate right to set tax policy direction, in our view the ‘ad hoc’ measures that have been introduced and proposed to date do not accord with good public policy design. In our submission we outline how these narrow proposals could lead to unintended consequences. 

The focus of our submission is to ensure that the proposed measures are workable, as simple as possible and that compliance costs are kept to a minimum.  We are very aware that many taxpayers who will have to apply these rules will not be sophisticated taxpayers and if the rules are overly complex, there will be wide spread non-compliance.

Key issues arising from the discussion document which need to be addressed include: 

  • Residential property boundary issues,
  • Treatment of non-deductible interest on disposal and losses,
  • Appropriate period for new build interest concession,
  • Application of any change to the definition of closely held company; and
  • Treatment/limitations placed on interposed entities.

As part of our submission we also observe that a comprehensive and coherent review of the land taxing provisions is overdue and should be added as a priority to the tax policy work programme.