Snapshot of recent developments

Tax legislation and policy announcements

Filing fee increases from 1 July 2024

On 27 May 2024, regulations were amended increasing certain filing fees from 1 July 2024:

• The Taxation Review Authorities Amendment Regulations 2024 increase the fee for filing a notice of claim with a Taxation Review Authority from $410 to $533.

• The Customs and Excise Amendment Regulations 2024 increase the fee for an application for appeal to a Customs Appeal Authority from $410 to $533.

Special report: Deemed rate of return for the 2023-24 income year

On 6 June 2024, Inland Revenue published a special report that sets the deemed rate of return for attributing interest on foreign investment funds at 8.63% for the 2023-24 year, an increase of 0.48% from the previous income year. The rate came into effect on 6 June 2024.

Regulatory impact statement: Crypto-Asset Reporting Framework

On 6 June 2024, Inland Revenue released a Regulatory Impact Statement on the Crypto-Asset Reporting Framework.

Customs fees and charges

On 11 June 2024, the Customs and Excise (Fees) Amendment Regulations 2024 amended the Customs and Excise Regulations 1996 to adjust certain fees effective 1 July 2024.

The inward cargo fee for goods carried on a ship or boat is reduced while the following fees are increased: inward cargo transaction fee for goods carried on an aircraft; outward cargo transaction fee; import entry transaction fee; and export entry transaction fee.

New excise duty rates for alcohol

On 12 June 2024, the Excise and Excise-Equivalent Duties Table (Alcoholic Beverages Indexation) Amendment Order 2024 adjusted the duty rates on alcoholic beverages from 1 July 2024.

Inland Revenue statements and guidance

Closed accounts for deceased customers

On 29 May 2024, Inland Revenue changed how accounts are managed for deceased taxpayers. Inland Revenue advise that when the account is ceased, credits will remain visible on the account for 12 months.

Non-individual IRD number registrations

On 29 May 2024, Inland Revenue detailed the reasons for delays in processing non-individual IRD number registrations. The most common information missing when applying are:

• Supporting documentation

• IRD numbers for all related parties

• For estates - a cover letter explaining why a related party has an overseas address or country on supporting documents
  

CPI adjustments

On 30 May 2024, Inland Revenue updated three standard-cost amount CPI adjustments:

1. DET 19/01 Household boarding service providers: Weekly standard cost (per boarder): $231
2. DET 19/02 Short-stay accommodation: Daily standard cost (for each guest): Owned dwelling $61; and Rented dwelling: $55
3. OS 19/03 Square metre rate for the dual use of premises: $53.10
   

QWBA’s on the main home exclusion to the bright-line test

On 31 May 2024, IR issued two finalised pieces of guidance about the main home exclusion to the bright line test:

• QB 24/01 addresses which home is a person’s main home (where they have two or more homes they use as a residence) for the purpose of the main home exclusion. In summary, a person’s main home is the one they have the greatest connection with. This is an objective test and requires an overall assessment of the person’s circumstances.

• QB 24/02 details how renting a room to a flatmate for property sold within the bright-line period affects the main home exclusion. In summary, a person can still qualify for the main home exclusion if they rent a room. For land sold on or after 1 July 2024, the main home exclusion applies if more than 50% of the land is used, for most of the bright-line period, for a dwelling that is the person’s main home.

Tax Information Bulletin Vol 36 No 5 June 2024

On 31 May 2024, IR issued TIB Vol 36 No 5 June 2024 which included the following.

Case summaries

• CSUM 24/03: Taxation Review Authority (TRA) 007/22 [2024] NZTRA 003

• CSUM 24/04: Commissioner of Inland Revenue v McGuire [2024] NZHC 883

Technical decision summaries

• TDS 24/06: Sale of property and the bright-line test

• TDS 24/07: Suppressed cash sales, GST and evasion shortfall penalties

• TDS 24/08: Employee Share Scheme – right to receive shares

Processing of early individual income tax returns

On 4 June 2024, Inland Revenue announced they will be pausing the processing of early IR3, IR3NR, and automatic assessments of the 2025 tax year as they are updating their system following changes to personal income tax rates from 31 July 2024.

Trust disclosure compliance costs survey

On 5 June 2024, Inland Revenue advised that they are reviewing changes to the trust disclosure requirements and are running a one-off survey to help understand the compliance costs for agents and trustees. The voluntary survey was emailed to 17,000 randomly selected trusts.

Operational statement: Exemption from electronic filing

On 6 June 2024, Inland Revenue issued OS 24/01 which replaces OS 19/01 and sets out the criteria for a person to be granted an exemption from the electronic filing requirement. The position is unchanged but the legislative references and format have been updated.

Draft QWBA: Do supplies of standing timber and other unsevered crops wholly or partly consist of land for the compulsory zero-rating rules?

On 6 June 2024, Inland Revenue issued a draft QWBA which provides further guidance on the meaning of “land” in the context of the GST compulsory zero-rating rules. The draft guidance concludes that supplies of standing timber and other unsevered crops do not wholly or partly consist of land if the agreement is for the sale and purchase of:

• an annual crop produced by the labour of the cultivator; or

• a crop that is produced by the land each year after an initial productive act and the purchaser does not derive a benefit from the further growth of the crop sold.

The deadline for comment is 19 July 2024.

GST – Supplies of properties used for transitional housing

On 7 June 2024, Inland Revenue issued three public rulings considering the GST treatment of supplies of properties by landlords to organisations for use in the Ministry of Housing and Urban Development’s Transitional Housing Programme. The items specify when landlords will be subject to GST and when they have exempt supplies.

The Commissioner also issued Operational Position 24/01 which sets out how the technical views in these public rulings will be applied where landlords have taken incorrect tax positions in previous GST periods.

Public guidance work programme updated

On 10 June 2024, Inland Revenue updated the public guidance work programme.

ED0256: Extension of time applications from customers without tax agents

On 11 June 2024, Inland Revenue issued a draft standard practice statement which will replace SPS 09/03. The statement affects customers who are not represented by a tax agent, or whose tax agent no longer qualifies as a tax agent, or tax agents without a current extension of time.

The deadline for comment is 22 July 2024.

Depreciation rate for metal (scrap) recovery plant

On 12 June 2024, Inland Revenue issued DEP112 which sets the depreciation rate for metal (scrap) recovery plant and changes the asset class description. The asset class is now “Scrap metal shredder including sorting plant” under the “Cleaning, Refuse and Recycling industry category”. The rates are EUL of 1.5 years, DV of 13%, and a SL of 8.5%.

Interpretation statement: Trustee of employee share scheme trust treated as nominee

On 12 June 2024, Inland Revenue issued IS 24/04 which details the tax treatment where an employee share scheme trustee holds shares in a company on the terms of the scheme and is treated as nominee of the company.

The effect (for tax purposes) is to treat the company as holding shares, and issuing and buying back shares, in itself; and to treat the trustee as not holding, and not acquiring or transferring, shares in the company.

This means that, for tax purposes, the company is treated as holding the shares in itself held by the trustee in accordance with the treasury stock rules. This has flow-on effects for the Available Subscribed Capital and how dividends on those shares are treated for tax purposes.

QWBA: Fringe benefit tax – employee share loans and associates

On 12 June 2024, Inland Revenue issued QB 24/03 which answers whether a fringe benefit arises where a trustee of a family trust that is associated with an employee is provided a loan to acquire shares under an employee share scheme.

The answer is no, provided a fringe benefit would not arise if the employee were provided the loan to acquire the shares under the employee share scheme in the same circumstances.

Applications for extension of time

On 17 June 2024, Inland Revenue announced they have simplified requesting an extension of time with a new ‘Apply for extension of time’ feature in myIR. To access the request, go to ‘More’ in the Income tax account, then select ‘Apply for extension of time’.

After submitting, Inland Revenue will send a notice with the outcome within 15 working days.

More information request letters

On 17 June 2024, Inland Revenue provided an update on 2024 individual income tax ‘More information request’ letters, which are being issued until the end of July.

Taxpayers must review this letter, add any other income and expenses, and complete the assessment. If the taxpayer does not have an extension of time, taxpayers need to do this within 45 days from the date the letter is issued. Any tax to pay will be due on 7 February 2025.

If the taxpayer has an extension of time, agents have until 31 March 2025, and any tax to pay will be due on 7 April 2025.

Focus on smaller liquor stores

On 18 June 2024, Inland Revenue released insights into its first round of a hidden economy campaign focusing on small liquor stores (there are around 3,000 off-licence liquor stores). During the first stage of the campaign, 220 unannounced visits were made nationwide.

Customers with overdue debt

On 19 June 2024, Inland Revenue announced a move to increase engagement with taxpayers with outstanding compliance obligations by visiting businesses with significant outstanding tax debt that have not engaged with Inland Revenue despite reminders and warning notices.

If taxpayers do not engage and continue to ignore their obligations stronger action may be taken. This includes debt enforcement and/or insolvency proceedings.

Performance Improvement Review of Inland Revenue

On 24 June 2024, the Public Service Commission published Inland Revenue’s Performance Improvement Review. The Review found that Inland Revenue is a high-performing organisation that is well-placed to meet growing expectations of the tax system.

Tailored tax code applications paused

On 24 June 2024, Inland Revenue announced they are pausing processing Tailored tax code applications from Monday 24 June 2024 to prevent the need to recalculate and issue a new tailored tax code with upcoming changes to personal tax thresholds. Inland Revenue will restart processing in the week leading up to 31 July 2024.

Technical decision summary: GST registration date (adjudication)

On 28 May 2024, Inland Revenue issued TDS 23/10 which concerned a taxpayer attempting to register for GST with a backdated date of registration. The issue was whether the registration was voluntary or whether the taxpayer was liable to register, and if voluntary, whether Inland Revenue’s decision not to backdate the registration was a valid exercise of the Commissioner’s discretion under s 51(4)(a) of the Goods and Services Tax Act 1985.

The Tax Counsel Office decided that the application was voluntary because the taxpayer was not liable to be registered and that Inland Revenue had discretion to determine the effective date of registration.

Technical decision summary: Permanent establishment (private ruling)

On 29 May 2024, Inland Revenue issued TDS 24/11 which considered permanent establishment and residency issues for an overseas resident company that established a wholly-owned New Zealand resident company to undertake work in New Zealand. Some of the overseas company’s employees would take a leave of absence and temporarily move to New Zealand, and the overseas company would pay the New Zealand company a fee on a costs-plus basis for the services provided on an arm’s length basis.

The Tax Counsel Office decided the arrangement did not cause the overseas company and its main customers to be comes “resident in New Zealand” under s YA 1 of the Income Tax Act 2007 as none of the four required elements were satisfied. The company also did not create a “permanent establishment” in New Zealand, nor did the arrangement give rise to assessable income.

Technical decision summary: Compensation – capital or revenue nature (private ruling)

On 7 June 2024, Inland Revenue issued TDS 24/12 which determined whether a settlement payment was assessable income. The Tax Counsel Office decided that the settlement payment was not income but an amount of capital nature as it was not for an interruption or impairment to business activities but to compensate for damage to intellectual property.

Technical decision summary: GST – supply of accommodation (private ruling)

On 11 June 2024, Inland Revenue issued TDS 24/13 which concerned an arrangement where a company purchased land with an existing structure, demolished it, and constructed a building.

The building was intended to be used as a hostel but was redesigned to provide residential accommodation targeting long-term stays. The issues were whether the building was a “commercial dwelling” and therefore not treated as an exempt supply, whether the 9% concessionary rate applied to the supply and communal facilities, whether input tax was deductible, and implications when the land was sold.

The Tax Counsel Office decided the building is a “commercial dwelling” and therefore not an exempt supply, that the 9% rate applies in certain circumstances, input tax incurred is deductible, and the supply must be zero-rated when sold (provided the legislative requirements are met).

OECD updates

Fiji and Moldova join Inclusive Framework

On 27 May 2024, Fiji joined the Inclusive Framework on BEPS. On 28 May 2024, Moldova also joined.

OECD releases further guidance on Two Pillar Solution

On 17 June 2024, the OECD released supplementary elements relating to the report on Amount B of Pillar One and guidance to ensure consistent implementation and application of the global minimum tax under Pillar Two.

Additional guidance for the implementation of CbC reporting released

Additional guidance has been released clarifying how to report in Table 1 of a CbC report payment received from other constituent entities to ensure consistent treatment of payments in the payer and recipient jurisdictions in a CbC report.

Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.