Commentary on parts of the act - schedules

Income Tax Act 2007 – commentary on the schedules.


The schedules have been renumbered and grouped by function. The appendix to Schedule 19 of the 2004 Act is of little practical use. Instead, it is now clear that the Commissioner's practice of issuing PAYE tables replaces this appendix, and is authorised under section RD 11(4). The comparative numbering for the schedules is set out in Table 3.

Table 3 - Comparative schedule numbering

2004 Act Schedule 2007 Act Schedule
Schedule 1 Schedule 1
Schedule 2 part a Schedule 5
Schedule 2 part b Schedule 1
Schedule 3 Schedule 24
Schedule 4 Schedule 25
Schedule 5 Schedule 26
Schedule 6 Schedule 27
Schedule 6b Schedule 19
Schedule 7 Schedule 20
Schedule 8 Schedule 17
Schedule 9 Schedule 18
Schedule 10 Schedule 10
Schedule 11 Schedule 12
Schedule 11b Schedule 11
Schedule 12 Schedule 31
Schedule 13 Schedule 3
Schedule 14 Schedule 1
Schedule 15 Schedule 37
Schedule 16 Schedule 13
Schedule 17 Schedule 14
Schedule 18 Schedule 36
Schedule 19 Schedule 2
Schedule 19, appendix omitted
Schedule 20 Schedule 48
Schedule 21 Schedule 49
Schedule 22 Schedule 50
Schedule 22a Schedule 51
Schedule 23 Schedule 52

Schedule 51

Schedule 51 contains the list of policy changes that have been approved by the government for inclusion in the 2007 Act. The policy changes are minor in nature. They were listed for consultation in exposure drafts of legislation and in submissions made to the Finance and Expenditure Committee. An explanation for each of the intended changes appears earlier in this article.

Importance of drafting approach for future legislation

The key aim of the rewrite has been to produce tax legislation that is clear, uses plain language and is structurally consistent. It is intended that this plain drafting approach be adopted for all future income tax legislation. It is therefore useful to review the key principles on which the 2007 Act is based.

Plain drafting has focused on refining structure, using plain language techniques, and clarifying the structural relationships between the core provisions and Parts of theAct.

Rewriting the income tax legislation has been integral to increasing voluntary compliance with the tax laws. The reason is that legislation that is clear, uses plain language and which is structurally consistent should make it easier for taxpayers to identify and comply with their income tax obligations.

The rewrite cannot, however, eliminate all the complexity and inconsistency of tax law because the subject matter is inherently complex. The challenge has been to ensure that the complexity results from the concepts rather than from the way the information is presented. The 2007 Act addresses this challenge through structure, drafting style and integrating the interpretive principles of the Interpretation Act 1999 with the drafting.


The overall scheme of the Act is determined by the structure and general application of the core provisions. This is complemented by links to the various parts which provide the detail for the workings of the core provisions.

The structure is based on the principle of working from the provisions that are the most generally applicable to those least generally applicable. This applies on an Act-wide basis as well as within each Part and subpart.

The subparts represent a grouping of provisions that address similar or related rules. For example, subpart CE addresses transactions relating to the income of employees and contractors. Each section in Parts C to E has been rewritten to address a single concept. In some cases this has led to sections in the 2004 Act being broken up into a number of parts.

In the 2007 Act, the main operative rule of a section is located at the start of the section. Other subsections within that section are then drafted to supplement the main operative rule. The 2007 Act also makes extensive use of signposts and cross-references to guide the reader to other relevant or related provisions. Each section is followed by cross-references to the corresponding provision in the 2004 Act and a list of the defined terms inthe section.

Drafting style

The drafting approach used throughout the rewrite of the Income Tax Act is based on the style set out in the government discussion document, Rewriting the Income Tax Act - objectives, process, guidelines (December 2004) in conjunction with the Parliamentary Counsel Office Drafting Manual.

Examples of these guidelines include:

  • replacing archaic expressions with more modern ones, while taking care not to change the law inadvertently, by rewriting words or expressions that have a well-understood meaning;
  • using new defined terms when a term has a meaning that varies from its ordinary non-tax meaning, although some terms have been retained because there is a depth of case history behind them, and simpler words of equivalent meaning cannot be found;
  • harmonising definitions when possible, making it easier to find defined terms;
  • relocating the detail of definitions that are used for specific provisions from section OB 1 in the 2004 Act and placing them within the relevant provisions while retaining a reference to the definition has been retained in section YA 1; and
  • placing reliance on aspects of the Interpretation Act 1999.

Rules of interpretation under the Interpretation Act 1999

The main rule for the interpretation of statutes in New Zealand is contained in section 5(1) of the Interpretation Act 1999 which states, "The meaning of an enactment must be ascertained from its text and in the light of its purpose".

To reflect the purpose of the legislation, the drafting approach adopted in the rewritten Act:

  • takes into account the scheme of the Act as a whole, that is to impose tax;
  • takes into account the subject matter of the Part or subpart in which the section is situated;
  • takes into account the context of the section itself as well as the words in the section;
  • attempts to make the underlying policy more easily identifiable from the most natural reading of the provision; and
  • relies more on the general rules of interpretation set out in the Act.

Readers' aid

Readers' aids are contemplated by subsections 5(2) and (3) of the Interpretation Act 1999, which state:

"(2) The matters that may be considered in ascertaining the meaning of an enactment include the indications provided in the enactment.

"(3) Examples of those indications are preambles, the analysis, a table of contents, headings to Parts and sections, marginal notes, diagrams, graphics, examples and explanatory material, and the organisation and format of the enactment."

In addition to diagrams, flowcharts, notes and lists of defined terms, the drafting of the Act uses Part, subpart, section headings and subsection headings. Tables are used extensively in Part O (Memorandum accounts) and also in Parts R and Y. Lists of defined terms follow each section.

Defined term

All defined terms in the Act are listed in section YA 1. The drafting approach adopted for definitions that are not widely used through the Act locates those terms close to their relevant operative provisions if that is likely to assist readers. Section YA 1 then lists that definition by pointing to the substantive definition. This location may be either within the section or within the relevant subpart.

The drafting style adopted for definitions led to some defined terms being introduced by the word "means" and of others by "includes". In the 2007 Act, the term "means" is used to introduce an exhaustive definition. The use of "includes" with a definition generally introduces an incomplete definition.

Parts of speech and other grammatical forms of word

Section 32 of the Interpretation Act 1999 states "Parts of speech and grammatical forms of a word that is defined in an enactment have corresponding meanings in the same enactment".

Definitions in the 2007 Act rely on section 32 of the Interpretation Act for different parts of speech or other grammatical forms of a word that have a corresponding meaning. For example, it is not necessary to add to a definition of "sell" a statement that "sale" has a corresponding meaning.

The defined term "pay" is an example of this drafting approach as the defined term "payment" in the 2004 Act is no longer necessary.

Parts of speech, number and gender

Sections 31, 33, 35 and 36 of the Interpretation Act 1999 establish rules in relation to parts of speech, number and gender. The effects of these rules are that:

  • in all Acts of Parliament, the singular includes the plural, and vice versa; and
  • unless an income tax provision adopts a unique approach to the determination of time and distance, any references to time and distance used in the rewritten Act are to use the rules set out in the Interpretation Act 1999.

Ambulatory nature of law

Section 6 of the Interpretation Act 1999 specifies that "An enactment applies to circumstances as they arise".

The provision recognises the fact that an Act of Parliament may last for many years and operate within a changed society where the courts must consider circumstances that are often very different from those in which it was originally enacted.

For example, the purpose of the foreign investment fund rules is to make sure that New Zealand residents who have overseas investments are taxed on their share of the overseas entity's income on a current basis. As the nature of investments evolves, the courts will be called on to consider to what extent a new form of investment may fall within one of the classes of foreign investment fund referred to in section EX 29.

The drafters of the Income Tax Act 2007 have tried to achieve an enduring piece of legislation through the use of plain language and clear structure.