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Strike two! Taxpayer wins in Court of Appeal tax residency case

Just before Christmas, the Court of Appeal released its decision in the Diamond case:  Commissioner of Inland Revenue v Diamond [2015] NZCA 613. The result – which was a win for the taxpayer – once again strikes down the Inland Revenue’s interpretation of what is meant by a “permanent place of abode”. (Refer to James Coleman’s blog for a quick précis of the background facts to Diamond).

The Court of Appeal explicitly rejected the Commissioner’s argument that having a rental property “available” to the taxpayer was sufficient to amount to having a permanent place of abode in New Zealand. The Commissioner’s argument in court aligns with the position taken by Inland Revenue in Interpretation Statement IS 14/01.

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Tax residency: Diamond case going to Court of Appeal

Most tax professionals will be aware of the Diamond case (Diamond v Commissioner of Inland Revenue (2014) 26 NZTC 21,093). It is the first High Court judgment on personal tax residency in New Zealand after the 1980 law change. It therefore affects all New Zealanders who move abroad.

The High Court had to rule on the question of whether a rental property owned and rented out by Mr Diamond (the taxpayer) could be considered his permanent place of abode in New Zealand. Clifford J stated that to have a permanent place of abode in New Zealand means to have a home in New Zealand with a sufficient degree of permanence. 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 www.makingtaxsimpler.ird.govt.nz
Also see:

February tax bill – what’s in store for you?

On 26th February, the Government introduced the long-awaited Taxation (Annual Rates for 2015-16, Research and Development and Remedial Matters) Bill. This post provides a brief overview of what tax changes are in the pipeline. Read more

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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…and so the JG Russell case has finally come to an end…or has it?

Inland Revenue has won a $367m judgement against 79 year old accountant, JG Russell for an unpaid tax debt. Even though the case has been won by Inland Revenue, it is unlikely that Inland Revenue will actually recover the money. One has to then ask, was this really a case about the money, or principle? Read more

GST and Body Corporates

Minister of Revenue Todd McClay has announced the Government’s intention to amend the GST Act to confirm that Body Corporates will not be required to register for GST and file returns.  The Government’s view is that this will align Body Corporates with the rules for other residential property owners.  For more information see http://taxpolicy.ird.govt.nz/news/2014-06-06-govt-seeks-feedback-proposals-clarify-gst-treatment-bodies-corporate#statement.

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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 http://taxpolicy.ird.govt.nz/publications/2014-sr-foreign-superannuation/overview.

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

Tax relief proposed for community housing

The Government has announced that it will introduce legislation to Parliament to provide that assisting low-income families into home ownership will be exempt from income tax.

The law change is considered necessary after the Charities Commission (the functions of which have been taken over by the Department of Internal Affairs – Charities) decided that assisting people into home ownership was not always charitable. These decisions, which have been confirmed by the High Court have resulted in a charitable trust being deregistered (Queenstown Lakes Community Housing Trust) another having its registration re-instated (Liberty Trust); and have left a number of trusts uncertain about their tax status or facing unexpected tax liabilities.

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