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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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Trustees liable to pay liquidators for company’s losses

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

In the case of Rowmata Holdings Limited (in liq) v Hildred, the High Court has held that liquidators of a company were entitled to repayment of GST receipts from associated parties (two trusts) that had received them.

Background

The matter arose from a sale and purchase agreement for the purchase of land where two trusts (the purchasers) did not have the financial ability to settle. Before settlement date a company incorporated by the purchasers claimed a GST refund from the purchase some of which it paid out to the trusts in settlement of debts. When the purchasers subsequently defaulted at settlement date, the GST refund became repayable to Inland Revenue but there were no funds held by the company to meet this liability. The company went into liquidation and the High Court agreed with the liquidators that they were entitled to recover the entire amounts claimed from the trustees of the trusts.

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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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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...
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  • 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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