Snapshot of recent developments

Tax legislation and policy announcements

Regulatory Impact Statement: FamilyBoost

On 3 April 2024, the Treasury released the Regulatory Impact Statement on the FamilyBoost tax credit.

Information release: Reportable jurisdictions for application of CRS Standard

On 5 April 2024, Inland Revenue published an information release on the Tax Administration (Reportable Jurisdictions for Application of CRS Standard) Amendment Regulations 2024.

Inland Revenue statements and guidance

Special reports on new measures

Inland Revenue has released special reports on three of the new measures in the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Act 2024:

• 39% trustee tax rate
• GST on accommodation and transportation services supplied through online marketplaces
• Offshore gambling duty

ITR 35: 2024 International tax disclosure exemption

On 31 March 2024, Inland Revenue issued ITR35 which sets out when a resident is exempt from the requirement to disclose interests in foreign entities.

The scope is the same as the 2023 exemption, however, certain resident disclosure requirements have been removed. The requirement for a non resident or transitional resident to disclose interests held in foreign companies and foreign investment funds has also been removed.

ITR35 applies for the income year corresponding to the tax year ending 31 March 2024.

Tax Toolbox campaign

Between April and June 2024, Inland Revenue will run a campaign targeting construction customers. The key objectives of the campaign are to: remind customers of the Tax Toolbox; educate customers about their core tax obligations; encourage and empower customers to take action and address their outstanding returns and debt; and motivate them to seek help from Inland Revenue or tax agents.

FDR 2024/01: A type of attributing interest in a foreign investment fund
for which a person may not use the fair dividend rate

On 2 April 2024, Inland Revenue issued FDR 2024/01 which applies for the 2024-2025 income year and subsequent income years.

Any investment by a New Zealand resident investor in shares in the Wellington Global Impact Bond Fund — NZD Share Class to which no exemptions apply is a type of attributing interest for which the investor may not use the fair dividend rate method to calculate foreign investment fund income for the interest.

Determination 24/01: Amortisation rates for listed horticultural plants

On 3 April 2024, Inland Revenue issued Determination 24/01 (replacing Determination 05/01) which sets out the amortisation rates (based on diminishing values) for listed horticultural plants.

The Determination applies from 1 April 2023 and subsequent income years.

Droughts declared across parts of New Zealand (extension)

On 3 April 2024, Inland Revenue announced they will allow farmers and growers affected by current drought conditions to make late deposits for the income equalisation scheme (2023 year) until 30 June 2024. This applies to the Greater Wellington (including Horowhenua and the Wairarapa), Manawatu Wanganui (including Tararua), Taranaki and Northland regions. This is an extension of the previous classifications for Marlborough, Tasman, Nelson, Canterbury and Otago.

Law change for disposal of or a donation of trading stock to approved donee organisations

On 5 April 2024, Inland Revenue updated its website to include the law change for disposed or donated trading stock to an approved donee organisation at less than market value. From 1 April 2024, these disposals can be treated at the stock’s discounted value, or at zero value.

Law change for charity deregistration

On 8 April 2024, Inland Revenue updated its website to note the new law change to the charity deregistration tax rules. When a charity is deregistered and not re-registered within one year, income tax may be payable on net assets not transferred to another registered charity or New Zealand tax-exempt entity. Assets transferred to an overseas charity do not qualify. This rule applies to charities that deregister on or after 1 April 2024.

Technical decision summary (private ruling): Sale of property and the
bright-line test

On 11 April 2024, Inland Revenue published private ruling TDS 24/06 which concerned three sections of residential land owned by the applicant. The three sections were acquired by different groups of people, including the applicant, the applicant’s spouse and another co-owner, as tenants in common and joint tenants. On the death of the applicant’s spouse, the applicant inherited the shares in the properties that had been owned by their spouse.

The issues were whether the bright-line tests potentially apply to future sales (sections CB 6A and CZ 30), whether a change affecting land/rezoning land provision would apply to future disposals (section CB 14), and if it applies, whether a deduction is available under section DB 28.

The Tax Counsel Office held that sections CB 6A and CZ 30 and section CB 14 will not apply to the future disposal of the land. It was not necessary to consider section DB 28 deductions. Conditions included that the applicant sell the freehold estates in fee simple and that none of the land was “tax base property” as defined in section FC 1(2).

Technical decision summary (Adjudication): Suppressed cash sales, GST and evasion shortfall penalties

On 12 April 2024, Inland Revenue published TDS 24/07. The taxpayer traded as a restaurant. An investigation determined the taxpayer suppressed cash sales, under-returned GST and income tax and ceased carrying on a taxable activity in later GST periods, as another company took over the restaurant business. The Inland Revenue reassessed the taxpayer’s GST and income tax returns for the relevant periods, accounting for suppressed cash sales based on an analysis of the point of sale data, the taxpayer’s bank statements and an industry benchmark. A default assessment was also issued for one income year. Evasion shortfall penalties were applied. The taxpayer filed a Notice of Proposed Adjustment rejecting the reassessments and disputing the default assessment.   

The Tax Counsel Office found that the taxpayer under-reported cash sales, was not entitled to offset the cost of fresh produce purchased with cash as no supporting evidence was provided, the reassessment of GST and income tax was correct, and evasion penalties were correctly imposed.

Fringe Benefit Tax overview

On 12 April 2024, Inland Revenue added to its tax technical Overviews page an FBT page. This provides all items published by the Commissioner on FBT, organised by subject.

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