The Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Bill was introduced to parliament in late November. This is in effect the annual repairs and maintenance type bill that we have come to expect at this time of year.
There are however a number of things in here that readers will need to be aware of that can affect them. These are as follows:
1. Employee allowances, particularly with regard to accommodation.
A summary of the new features is as follows:
- Payments will be tax exempt provided that the new location is not within reasonable daily travelling distance of an employee’s home; and
- there is either a reasonable expectation that the employee’s secondment to that work location will be for a period of 2 years or less, in which case the payment will be exempt for up to 2 years; or
- the move is to work on a project of limited duration whose principal purpose is the creation, enhancement or demolition of a capital asset and the employee’s involvement in that project and is expected to be for no more than 3 years, in which case the maximum exemption period is 3 years; or
- the move is to work on Canterbury earthquake recovery projects, where the maximum period is extended to 5 years if the employee starts work in the period starting on 14 September 2010 and ending on 31 March 2015, and to 4 years if the employee starts work in the period 1 April 2013 and ending 31 March 2016. The maximum period reverts to 3 years where the employee starts work after 1 April 2016.
2. Black Hole Expenditure
As announced in the 2013 government budget, certain types of black hole expenditure will be made tax deductible. This is because these expenditures do not give rise to a depreciable asset, and at present cannot be deducted for taxation purposes. Typically these will relate to applications for resource consents and patents.
3. Fatca Disclosures
The Bill proposes new law whereby New Zealand financial institutions will be required to collect information in respect of their customers that are, or are likely to be, United States taxpayers. This information will then be required to be sent to the Inland Revenue who will in turn transmit it to the IRS under the New Zealand/United States Double Tax Agreement. In effect, it creates extra compliance on New Zealand financial institutions to collect information on behalf of the US IRS.
4. De-registration of Charities
After some recent discussion papers regarding this, the law in relation to charities, particularly where they become de-registered, will be amended. At present a charity is either registered or unregistered and as such this determines whether it receives tax exemptions or not. The proposals will deal with situations where a charity becomes unregistered for failure to meet the requirements.
5. Taxation of Land Related Lease Payments
This is the introduction of the law following the recent issues paper “The Taxation of Land-Related Lease Payments” released in April 2013. Feedback has been received and basically the proposal is to go ahead largely with the original proposals without significant amendments.
In effect, the rules are trying to ensure that all lease payments are effectively receiving symmetrical tax treatment. Lease inducements will be taxable and deductible, usually over the term of the lease.