EY Tax Update - August 2024: Tax Bill introduced

New Zealand Tax Update, August 2024

Taxation (Annual Rates 2024-25, Emergency Response, and Remedial Measures) Bill introduced

The Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill was introduced on 26 August 2024. It has undergone its first reading in Parliament and been referred to Select Committee for public submissions.

The Bill proposes several key tax reforms, including changes to:

• Adopt standardised emergency response provisions which can be switched on by Order in Council from 1 April 2025: these provisions are aimed at allowing Inland Revenue to provide timely relief for taxpayers in emergency times by removing the need to pass primary legislation under urgency. Key measures which could be “switched on” include turning off the bright-line and other land-based timing tests in certain circumstances, taxation rollover relief and various depreciation amendments. Given the increasing incidence of emergency events, this change should ease pressure on Parliamentary schedules while providing greater certainty for taxpayers in times of crisis.
  
• Allow retrospective AIL registration: the Bill proposes to allow retrospective registration of securities for the 2% approved issuer levy withholding rate (AIL), provided certain criteria are met. Retrospective registration will be available from 1 April 2025 (but not able to be backdated before that date). This amendment should reduce compliance costs and will be welcome news for impacted taxpayers.
  
• Further limit the Portfolio Investment Entity (PIE) eligibility criteria from 1 April 2025: the Bill makes it clear that deposit takers cannot be a PIE. In addition, interest income received from associated persons would generally be excluded from being eligible PIE income, making it harder for entities that receive substantial associated party interest income to maintain PIE status.
  
• Make several GST remedial amendments: a raft of GST remedial amendments are included in the Bill, many of which will ease compliance costs, ensure the law works as intended and improve certainty for taxpayers.
  
• Amend certain rules for limited partnerships: including allowing limited partnerships to apply for Resident Withholding Tax exemption status at the partnership level and allowing non-resident partners to access AIL in some cases. These proposals follow interpretive work undertaken by Inland Revenue’s Tax Counsel Office. Without amendment, those impacted may have been subject to overly onerous withholding obligations.
  
• Extend the due date for taxpayers claiming the R&D tax incentive under the General Approval method: for General Approval deadlines from 1 April 2025, taxpayers will now have additional time (around an extra month) to file necessary documents. The previous due date often did not allow sufficient time for necessary documentation to be prepared, increasing compliance costs. This extension will be welcome news for claimants.
  
• Adopt the crypto-asset reporting framework (CARF): CARF is an OECD-led initiative aimed at increasing transparency around crypto-asset ownership. The changes include new information collection and reporting obligations for crypto-asset service providers from 1 April 2026.
  
• Increase thresholds relating to exempt employee share schemes: including increases to the maximum value of shares that can be offered ($7,500, up from $5,000) and the maximum benefit that can be provided ($3,000, up from $2,000). These increases are intended to make it easier for companies in the start-up and tech sectors to attract and retain talent.