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Ring-fencing residential rental property losses

The inability to offset residential rental losses against salary and wages (and other income) is one step closer to reality after the Government released an issues paper today. In a nutshell –

• Losses arising from rental properties will not be able to be offset against the taxpayer’s other income. These losses often arise due to interest payable on mortgages on the rental property.

• The ring-fencing will apply to residential properties only (including overseas residential rental properties)

• The person’s main home will be excluded from ring-fencing, as well as properties that are held on revenue account (i.e. subject to tax on sale because of a land dealing, development or subdivision business) and properties that are subject to the mixed-use asset rules

• The ring-fenced losses can be carried forward to future years and offset against future rental income or against future taxable income on the sale of the property

• Losses will be able to be offset on a portfolio basis i.e. ring-fenced losses from one property can be offset against income from another rental property

• The rules will apply to individuals as well as trusts, companies (including LTCs), and partnerships

• The rules are intended to kick in from the start of the 2019/20 income year.

The Issues Paper can be found on Inland Revenue’s tax policy website:

Submissions close on 11 May 2018.

Are you ready for RLWT?

Residential land withholding tax (RLWT) kicks in on 1 July 2016. “Offshore RLWT persons” who sell land subject to the bright-line test may have RLWT deducted from their sale proceeds. Primarily, the vendor’s conveyancer will be responsible for deducting the tax, however, accountants may need to assist with calculating the amount payable to Inland Revenue.

The tax was introduced as a means of ensuring that offshore taxpayers who are required to pay tax under the bright-line test meet their New Zealand tax obligations. Collection of income tax from these taxpayers is more challenging then from New Zealand based taxpayers, and so deducting at source can be seen as a way around the issue. Read more

Government acts to target property speculators

The Government announced tax measures yesterday which will target taxpayers who purchase and sell properties within a short period of time in the hopes of making a quick dollar. Although the law already taxes property acquired with the intention or purpose of disposal, the legislation is currently seen to be difficult to apply. Furthermore, even if it is clear that a person should be paying tax, it’s not always easy for the Revenue to track down foreign property speculators. To this end, the Government has also announced measures which will specifically target non-residents.

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Tax Simplification project

A new Government public consultation project on options for simplifying and modernising New Zealand’s tax administration has been launched.

The first two in a series of public consultation documents designed to modernise and simplify the tax system have been released.
The first paper, Making Tax Simpler — a Government green paper on tax administration aims to introduce New Zealand to the overall direction of the tax administration modernisation programme and seeks feedback on that direction.  Consultation on this paper closes on 29 May 2015.
The paper, Better Digital Services outlines proposals for greater use of electronic and online processes allowing faster, more accurate, more convenient interactions with Inland Revenue. Consultation on this paper closes on 15 May 2015.
To make a submission or to read the full details of proposals refer to the documents below and go to
Also see:

Employee allowances – how should these be treated?

Salary and wages are not the only payments that an employer might make to an employee. An employer might also pay an allowance or reimbursement to their employee. Examples include allowances/reimbursements for business use of a private motor vehicle and reimbursement for meals and accommodation. How should an employer treat these types of payments? Should PAYE be deducted?

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New rules for foreign superannuation

New tax rules to deal with interests in foreign superannuation schemes held by New Zealand tax residents were introduced by the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014, which was enacted on 27 February of this year. For information on these important changes see

Also see NZ Tax Solutions,Issue 1, 2014,  Foreign Superannuation Update (CCH)

Trust income from property transactions liable for income tax and GST

This item has been adapted from an article written by Marilyn Hay

A recent Taxation Review Authority (TRA) decision has held that amounts derived by a trust that bought and sold properties were income on the basis that the properties were acquired for the purpose of intention of sale. The TRA also held that the trust was in the business of erecting buildings and that the exemption for residential land did not apply in this case. In addition, the TRA found that the trust was deemed to be registered for GST. The trust was therefore liable for income tax and GST output tax on the sales of the properties. The TRA also found that the trust was grossly careless when taking its tax position and that shortfall penalties should be imposed for gross carelessness.

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Do you or your clients rent out a holiday home? If so, you need to know the new tax rules.

The hot topic in the tax world at the moment is mixed use assets. A mixed used asset is one that is used for both business and private purposes, but is also not actively used for a large part of the financial year. Common examples include holiday homes, boats, etc.

On 17th July 2013 the Tax bill relating to the latest Mixed Used Assets Expenditure rules was passed into law effective from 1st April 2013 onwards for holiday homes and from 1st April 2014 for other assets (ie. boats and aircrafts). Read more

Is a capital gains tax justified?

… and so the battle continues as to whether or not New Zealand should introduce a capital gains tax. Today labour released its tax policy – a capital gains tax was at its centrepiece. The proper income tax treatment of capital gains has raised much debate and controversy amongst New Zealanders for many years.

Any good tax system or tax policy requires equity (equality), certainty, convenience and efficiency. Given a capital gains tax has the convergence of these key tax policy criteria, I believe the case for the introduction of such a tax is justified. What is your view?

RAP on RAP: marching to a different beat?

Received anonymously:

The Rewrite Advisory Panel (RAP) was established to advise rewriters of the Income Tax Act 1994. The Income Tax Act 2004 saw the RAP becoming the arbiter on possible unintended legislative changes and the Income Tax Act 2007 saw it becoming the overseer of the clarity of that Act (see:

In 2009, a submitter raised with the RAP the definition of ‘revenue account property’ (the second RAP referred to in the title but, to avoid confusion, I do not use that acronym in this note). The submitter said:–

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Recent comments

  • Peter: When you have more than one job all your income is added up and you pay tax on the total income amount. For...
  • Joanne Martin: Hi Would you be able to email me to discuss a small company that is an LTC which I need some advice on...
  • Rizwana Saheed: You are on the right track that there is an exemption when employees work overtime but whether or not...
  • bryan: as a group of employees we get paid meal money if we exceed 11hrs on any day. Employer says he wants to tax...
  • linda: My mother is 94 and has dementia. With govt assisted carers she is still living in a home gifted within the...
  • Sharon: Hi Daniel, Can you please advise how owners of a profit-making LTC pay themselves? The owners used to pay...
  • Another Anne: My Dad is in care on full subsidy. I am EPOA. Are we able to gift some money to my brother in UK so...
  • Twagilayesu Isaya: I agree with the author of this article that Inland Revenue Department need to provide clear...
  • Quinn: Hi. I would like some clarification regarding the valuation of the investments component of the owners basis...
  • QROPS Pensions: Interesting piece of writing, you always write the most useful content & TalkTax is no exception...

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