Seven New Tax Rules you need to know
By Spencer Smith and Sybrand van Schalkwyk
Before 22 February 2011, our tax rules for insurance payouts were pretty basic.
The tax rules never envisaged the complex situations that many businesses are finding themselves in with their insurers. The experience in the aftermath of Canterbury’s earthquakes quickly revealed the inadequacy of our overly simple rules.
To give the Government credit where it is due, the IRD’s Policy Unit has moved to address the problems and to enact sensible and pragmatic rules in response to issues such as red zones and the demolition of buildings because they are uneconomic to repair.
This blog summarises 7 tax changes for Insurance Payouts that we think you should know about, including the most recent changes announced earlier this month (now included in an amendment Bill before Parliament). Read more
The much heralded new associated person rules were introduced for land transactions from 6 October 2009. There has been a plethora of commentary and articles on the new rules and it is not the intention of this article to add further to that body of work. Needless to say however it is generally well accepted that the new rules are extremely wide, and difficult to break as far as establishing non-tainted entities for land developers, land dealers and builders (although not impossible in some circumstances, in the author’s opinion). The purpose of this article is to instead explore the parameters of the exemptions available to land developers, dealers and builders. In view of the fact that many clients who are in business as land developers, dealers or builders will be “tainted” under the new rules, perhaps now is the time to focus on other ways under the Act to avoid taxation on non-business land.
Taxation of sale of rental properties and personal residences
In early 2009 a rental property investor was referred to Owens Tax Advisors Ltd, having bought and sold a number of residential rental properties and then been audited by IRD. At one point IRD proposed that if the sale of rental properties amounted to a business then the sale of one or two private homes were also potentially subject to GST and income tax.