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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

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 www.makingtaxsimpler.ird.govt.nz
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Relying on Inland Revenue

Inland Revenue has released a draft statement for public consultation setting out the Commissioner’s view of the current law in relation to the status of different types of advice (other than binding rulings) that the Commissioner gives and the implications of reliance on it.

Situations where the Commissioner will take the view that advice he has previously given is incorrect include when:

  • a court decision clarifies the law and shows that the earlier advice is incorrect;
  • the Commissioner discovers an error in the earlier advice; or
  • the Commissioner reconsiders earlier advice and changes his view.

Read more

Imputation credits & resident withholding tax – reminder

As year-end is approaching quickly, it is important to remember that the maximum imputation ratio for dividends is 28:72 for the 2012 income year (previously 30-70 up to end of the 2011 income year). The Resident Withholding Tax (RWT) rate on dividends remains at 33 cents in the dollar meaning dividends are still taxed at 33% in the hands of the recipient (i.e. shareholder). RWT must be paid by the company for the imputed dividend shortfall. Read more

Tax efficiency in the spotlight

New Zealand tax system has been ranked the 27th most efficient out of the 183 countries surveyed in a report compiled by PricewaterhouseCoopers, the World Bank and the International Finance Corporation.

New Zealand’s average tax rate of 34.4 compares favourably with the average global rate of 44.8 per cent, and Australia’s rate of 47.7 per cent.

New Zealand also rates well on the 8 taxes business must pay when compared with Australia’s 11 and the world average of 28.5. Read more

Penny & Hooper – legitimate tax planning or avoidance?

The Supreme court has today released its long-awaited decision about a landmark tax case – Penny & Hooper. The case was decided in favour of Inland Revenue and this decision has widespread implications for the many small businesses using trust structures.

The case is a classic example of taxpayers complying with the ‘black-letter’ of the law, yet not acting within the ‘scheme and purpose’ of the Income Tax Act.

This case involved the restructuring of the business of two surgeons (Penny & Hooper) from sole practitioners earning an income of approximately $500,000 per year, into a company owned by a family trust for the benefit of the surgeons and their respective families. The surgeons became employees of their companies, on salaries of approximately $120,000 per year, while the remainder of the profit from their services was retained by the companies and allocated to the trusts.

Legitimate tax planning or avoidance – what is your view?

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?

David Tua v Inland Revenue – now this will be an interesting fight…

One of the great unknowns when you enter the boxing ring is how hard your opponent will be able to hit you. In recent times, the Inland Revenue has just delivered a couple of powerful punches to the face of David Tua, claiming he owes a whopping $2.2 million in unpaid taxes. Read more

In an increasingly complex tax world, how do you stay out of trouble?

Tax headlines recently have reflected lengthy tax disputes, many which have been lost by the taxpayer. Inland Revenue has increased its focus on tax audits and this can leave many companies feeling nervous about their practices. Are you next? Read more

Tax Avoidance – it all comes down to statutory interpretation

In recent times, we have seen several tax cases being lost by Taxpayers. Analysing the judgments, I believe we have seen a fundamental move when dealing with tax avoidance – a move back towards statutory interpretation. The Newton and Elmiger cases are the policy basis for our anti-avoidance rule as they focus on statutory interpretation and I believe the courts are showing a move back to this ordinary approach (as can be seen in the Banks cases).

Read more

Recent comments

  • 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...
  • Davo: Jo, quite likely is that the transition to an LTC was not done in time and the company became a normal company...

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