Date posted: 05/05/2022

Submission on Dividend integrity and personal services income attribution

CA ANZ’s feedback on ‘Dividend integrity and personal services income attribution’, a Government discussion document

In brief

  • CA ANZ does not believe the proposed measures are required
  • CA ANZ considers the proposals would result in significant overreach
  • CA ANZ recommends further work be undertaken to justify expansion of the current integrity measures

The Government discussion document proposes measures aimed at limiting the ability of individuals to avoid the 39% personal income tax rate by diverting their income through entities taxed at a lower rate.

They include:

  • Any sale of shares in a company by the controlling shareholder be treated as giving rise to a dividend to the shareholder to the extent that the company (and its subsidiaries) has undistributed earnings other than capital gains.
  • Companies be required, on a prospective basis, to maintain a record of their available subscribed capital and net capital gains, so that these amounts can be more easily and accurately calculated at the time of any share cancellation or liquidation.
  • The “80 percent one buyer” test for the personal services attribution rule be removed.

In CA ANZ’s view, the first and third proposals are inconsistent with the problem definition stated in the regulatory impact statement and discussion document. They would represent a significant change in the way taxation is implemented in New Zealand, rather than being an integrity measure. CA ANZ considers the proposals disproportionately targets small-medium enterprise companies. This is inappropriate.

CA ANZ does not support broadening the attribution rules.

CA ANZ is deeply concerned by the lack of appreciation of the impact/overreach that the proposed solutions would have on ordinary commercial arrangements. CA ANZ suggests that further work is necessary to justify expansion of the current integrity measures.

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