MEDIA RELEASE (NZ)

The Annual Tax Bill has a heavy focus on remedial fixes and contains something for almost every taxpayer, says CA ANZ Tax Leader John Cuthbertson FCA.

Parliament has passed the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Bill following its introduction in August 2024.

The Bill brings changes to areas including Kiwisaver, property tax, GST, partnerships, Resident Withholding Tax and international tax.

“Each year the Government proposes a remedial Bill, where they make a number of changes and fixes, and this one, like a box of chocolates, has something for everyone, but one in particular might leave a bad taste,” says CA ANZ Tax Leader John Cuthbertson.

“The Government has talked a big game about reducing taxpayer compliance, and this Bill gives a wide cross-section of kiwis a small treat.”

“New immigrants should note that there's an amendment that simplifies the process of transferring overseas pension and superannuation funds to a KiwiSaver scheme in New Zealand. Provided the Kiwisaver scheme offers a scheme paid option, the member can choose for their tax obligation, on transfer, to be met by the scheme, or they can continue to pay it themselves.

“Parents will be glad to hear that enrolling kids under 16 in KiwiSaver is now simpler – only one guardian is needed to sign up on behalf of a dependent.

“An oversight has also been corrected, where previously rollover relief from the bright-line test only applied to those in a marriage. Now, a retrospective change puts people in civil unions and de facto relationships on the same footing.”

Rollover relief enables residential property transfers within a family group without triggering bright-line taxes.

“But it’s not all strawberry kisses and mint treats. This Bill repeals income spreading rules where land is sold to the Crown.”

“Previously, compensation from the Crown, including for compulsory acquisitions under the Public Works Act, could be spread over four years on application by the taxpayer. This has been removed..”

“CA ANZ opposed repealing this spreading provision. Individual taxpayers who are subject to tax shouldn't have to pay more simply because they receive income from a substantial asset in a single year. While many property owners may not be subject to tax on the sale of their property this does not of itself justify removal of the provision. It’s not fair.”

“The one-off receipt will likely result in a larger group of people being taxed at a higher marginal tax rate when included on top of their existing income.

We would argue that this is not appropriate – either in relation to a compulsory acquisition or an agreed buy out where the property is no longer viable or habitable, following a disaster or managed retreat. There is no need for haste here. At a minimum it could be repurposed as an emergency response measure.”

An additional sweetener in the Bill is an amendment to make limited liability partnerships more attractive, by allowing them to apply for resident withholding tax (RWT) in the name of the partnership, and allowing non-resident partners to access the approved issuer levy regime, despite there being an NZ tax resident partner in the limited partnership.

“Limited partnerships could provide an ideal structure to manage large infrastructure projects. They are currently underutilised because of the tax administration burden, where there is a mash of requirements across the individual partners, and the limited partnership.”

Short term accommodation rentals made through an electronic marketplace, such as Airbnb, also receive a remedial.

“They may at their discretion choose to account for GST under the existing time of supply rules or return the GST in the taxable period when the guest checks out of the accommodation. That means they can potentially choose to account for GST in a later taxable period, which provides some flexibility,” said Cuthbertson.

“The change applies to the entity responsible for returning the GST.  So it can apply to the marketplace itself, a listing intermediary such as a property manager, or the accommodation owner, depending on who is responsible for returning the GST to Inland Revenue.”