According to the Minister, over the last 12 months the government, and the entire country, has faced a series of unfortunate events and disasters, such as the Christchurch earthquakes and the Rena oil spill. He claimed that the government had done everything possible to address these issues and take New Zealand through the downturns in the best possible way.

In regards to tax system improvements, the Minister said that in response to the quake the government has extended redundancy tax credits, and removed tax and gift duty on trading stock that businesses donated for earthquake relief. He added that as a result of the government’s actions following the disaster, the Inland Revenue Department now has an extended range of powers to handle times of disaster.

On an economic scale, the government has been actively pursuing means of increasing the commercial competitiveness of New Zealand firms. The Minister explained that the government has expanded its network of Double Taxation Agreements, and improving compliance procedures for taxpayers.

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In a media statement jointly released by the Minister of Revenue Peter Dunne and the Minister of Finance Bill English, it was conceded that New Zealand’s tax system was not forseen to handle the repercussions of disasters to the scale of the Christchurch earthquake, and several proportional changes will be added in the face of new realities. Bill English explained, saying, “…with the end of the tax year rapidly approaching, businesses and employers in Christchurch and around New Zealand need some certainty about the tax issues arising from the Canterbury earthquakes.”

The New Zealand Inland Revenue Department (IRD) had already previously announced that it would be providing selective concessions for tax payments and filing requirements. The government has now added that the Commissioner of IRD will be bestowed with a greater range of powers to extend statutory tax dates on a case or class-of-cases basis, in the occurrence of future unforeseen events or disasters.

According to Peter Dunne, it is important to ensure that businesses and individuals should receive relief from both income tax and gift duty on donations of trading stock to Christchurch relief charities. The Ministers announced that the Cabinet has agreed to several measures which address tax issues arsing in the wake of the diasaster, including: ensuring that welfare contributions made by employers to their employees should be tax free; extending the redundancy tax credit to September 30th 2011; and, exempting some payments from income calculations for families receiving Working for Families tax credits as a direct result of employment loss due to the earthquake.

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The New Zealand Finance and Expenditure Committee has evaluated the income sharing tax-bill brought forward by the Revenue Minister Peter Dunne, saying that the idea has merit but would be too costly to implement and contains several oversights.

If enacted, the Taxation (Income-sharing Tax Credit) Bill would allow families with dependent children to split the parent’s incomes evenly for tax assessment purposes. Any tax benefits arising after application of the new rules would be given to the taxpayers in the form of an end of year tax credit. The Committee estimates that implementing the new bill would cost approximately NZD 502 million.

The committee’s report suggested that income splitting rules were still worth pursuing, saying, “…while we are recommending that the bill proceed, we acknowledge that the fiscal cost of the bill… is significant.”

The committee suggested several cost-saving changes to the bill, such as exploring different distribution methods for the tax benefits, in an effort to reduce administration costs. Evaluation of the proposal also indicated that nearly 78 percent of the credits would be enjoyed by families with combined incomes exceeding NZD 70 000. The committee recomended that the children should only be considered as dependent up to a maximum age of six, compared to the original proposal of 18. The report warned that the income splitting scheme could be considered as discriminatory based on marital status, and could raise significant controversy in the future.

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On October 7th the Software Developers’ Working Group met in Wellington for its inaugural meeting. The group was formed by the New Zealand Government after the nationwide Making Tax Easier consultation process, which aimed to asses individuals’ and businesses’ needs in taxation administration. The Working Group will be tasked with working alongside Government bodies to design systems which would ease national businesses’ tax compliance burdens.

During the consultations it was proposed that new software standards be created which would allow commonly used accounting and taxation software packages to communicate directly with the Inland Revenue Department (IRD). Theoretically, this would greatly increase businesses’ ease of tax compliance, and reduce costs. In his address to the Working Group Peter Dunne, Revenue Minister of New Zealand, explained that since the majority of businesses already implement software packages for their financial affairs, it makes perfect sense to use online communication to directly pass on routine pieces of business and tax information, like PAYE and GST data.

According to Peter Dunne introducing routine electronic filing would provide great gains for the economy, however “…this is not something that the Government can do by itself.” He added that the IRD routinely works with private sector software developers and consultants, and the Working Group is comprised of key and talented individuals from the industry.

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While the Christchurch office of the Inland Revenue Department (IRD) is already operational, the Government has conceded that those struck by the earthquake in Christchurch have more important concerns than their current tax matters. Consequently, on September 14th Peter Dunne, Revenue Minister of New Zealand, announced that the “use of money” interest that is levied on late tax payments could be waived for people affected by the emergency.

According to Peter Dunne, the exemption is the IRD’s way of recognizing that some tax payers are facing circumstances that are completely beyond their control. He elaborated, saying “For instance they may have been unable to get into their buildings or records have been destroyed, or it might be that personal circumstances prevented them from paying on time.”

The IRD has also created a telephone helpline for individuals affected by the earthquake, which can be reached on 0800 473 566.

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The New Zealand Inland Revenue Department (IRD) has announced that it has launched a new initiative to determine the ideal national structure of the child support system, including the formulas used to determine payments, penalties and debt rules. The proposed changes are outlined in a Government paper Support Children, released on September 2nd.

Announcing the need for a change in the child support system, Peter Dunne, Revenue Minister of New Zealand, said “The reality is that family life in New Zealand has changed considerably in the 18 years since the current scheme was introduced.” He added that families’ financial situations are now more complicated then when the child support laws were introduced, requiring an update. He added that it is more common to see separated parents to take greater involvement in children’s upbringing, further adding to the antiquity of the present laws.

Peter Dunne said that ultimately it would be better that systems were instated for separating parents that would place child support as a last resort and not a first option. However, when the child support scheme is required, Peter Dunne said that he wants to see “a situation where paying parents are more likely to comply with their obligations voluntarily.”

The discussion documents can be found on the IRD’s website.

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In a statement made on August 30th Peter Dunne, Revenue Minister of New Zealand, said that there are currently several inconsistencies and issues within the national social assistance system. According to the Minister, some individuals are able to restructure their financial affairs, in order to unfairly receive monetary assistance from the Government, like Working for Families, student allowances and community services cards.

Peter Dunne announced that the Government has released Social Assistance Integrity: Defining Family Income, a public issues paper which seeks feedback on the potential solution to the perceived unfairness. The man suggestion consists of a revamp to the definition of income, when evaluating welfare applications. Specifically, income from trusts, some fringe benefits, passive income of children such as interest or dividends over NZD 1 000 a year, and income of non-resident spouses are being suggested as potential changes.

It has been proposed within the paper that some of the changes be instated as early as April 1st 2011. Any suggestions brought forward from the consultations will be instated through the Supplementary Order Paper to the Taxation (GST and Remedial Matters) Bill, which is currently in front of parliament.

The paper can be found on the Inland Revenue Department website, and all submissions are required to be submitted before September 24th 2010.

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After a round of public consultations, the New Zealand Government intends to instate several changes to the national student loan system. On August 27th Peter Dunne, Revenue Minister of New Zealand, announced that a bill had been tabled in Parliament with the alterations, saying “Student Loan Scheme Bill paves the way for borrowers to communicate with Inland Revenue online and vice versa, and is part of a package of reforms to simplify the way Inland Revenue administers student loans.”

The bill aims to reduce the number of physical letters and correspondences sent to loan-holders and migrate Studylink to an up-to-date electronic filing system. According to Peter Dunne, the change will be of great benefit to overseas-based borrowers. The bill also removes the currently enforced end-of-year assessments for salary earners whose incomes are over the pay-period repayment thresholds. If the changes are passed, the Inland Revenue Department (IRD) will assume that loan repayment deductions correct and final, and minor end-of-period discrepancies will be ignored.

The penalty payment rules applicable to student loans will also be changed, “so an individual’s debt does not quickly become insurmountable.” Currently, the compounding monthly late payment penalty is set at 1.5 percent, an equivalent to 19.56 percent as an annual interest. Under the bill, the late payment interest will be charged only on overdue amounts, and be levied at the Government’s base interest rate with a 4 percent penalty margin. Borrowers who enter into installment payment plans will be subject to a rate of 2 percent.

If passed, the bill will come into effect in April 2012.

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Couples with children could be given the option of working fewer or more flexible hours, if a new legislation passes through Parliament. On the 16th of August the Taxation (Income-sharing Tax Credit) Bill was tabled in Parliament. The bill proposes that a couple with dependent children be able to choose to be taxed on an equal share of their combined incomes, and receive an end of year tax credit on any tax benefits calculated. Explaining the benefits, Peter Dunne, Revenue Minister of New Zealand, said, “Because income tax rates rise according to the amount earned, many families could ultimately end up paying less tax if, for example, one parent works fulltime and the other chooses to remain home to care for their children.”

Peter Dunne has proposed the income sharing system before, in his role as the leader of UnitedFuture party. He claims that the scheme would empower families and parents who choose to stay at home to provide fulltime care to children.

Some doubt has already thrown on the proposal, as it could potentially breach the New Zealand Bill of Rights Act. Those opposing income sharing have claimed that it discriminates against solo parents. Petr Dunne has accepted the view, but maintains that solo parents have access to a selection of fiscal support mechanisms like childcare subsidies, the minimum family tax credit, the childcare rebate and the domestic purposes benefit.

If the Bill passes through all stages of Parliament approval and legal ratification the credit will apply from the tax year beginning 1 April 2012.

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The New Zealand Rewrite Advisory Panel (RAP) requires public comment legislations surrounding the taxation of beneficiary income of trusts and the issue of Available Subscribed Capital on corporate reorganizations. The request was raised by Peter Dunne, Revenue Minister of New Zealand, late last week.

The two issues are the initial cases that will be investigated by the RAP its new role as a consulting independent body to the Government on remedial tax issues. The RAP was originally created to investigate unintended changes arising during the rewrite of the Income Tax Act 1994. The role was eventually expanded to encompass recommending actions to deal with remedial tax law issues arising from rule changes of other Acts. In March 2010, the RAP was instructed to investigate and recommend clarifying actions on any issue raised by the Revenue Minister. Summarizing the new role of the RAP, the Minister said that the Panel’s work will be “…invaluable in providing quick responses to particular remedial questions that do not involve policy change and are not being dealt with by the tax policy work programme.”

Public comment on the capital of companies being reorganized and beneficiary income of trusts must be submitted to the RAP before September 3rd. All submitted issues will be examined by the Panel, who will forward the problem’s details along with recommended-action report to the IRD.

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