Miscellaneous Remedial Amendments

Miscellaneous remedial amendments to various acts - the Income Tax Act 1994, Income Tax Act 2004, Tax Administration Act 1994, Goods and Services Tax Act 1985 and the Taxation Review Authorities Act 1994.

Disclosure provision for premiums paid to non-resident insurers

Section FC 17 of the Income Tax Act 1994

As a result, a special disclosure provision in section FC 17 of the Income Tax Act 2004 requiring the disclosure to the Commissioner of premiums paid to residents of The Netherlands became unnecessary.  This provision has therefore been repealed with effect from 1 April 2005, the same application date as the related amendment to the double tax agreement.

Redundant foreign tax credit provision

Section LC 15 of the Income Tax Act 2004

The dividends Article in the double tax agreement between New Zealand and the United Kingdom was recently replaced, with application from the 2005-06 income year.  Section LC 15 of the Income Tax Act 2004, which related to the claiming of foreign tax credits from the United Kingdom, was relevant only for the purposes of the previous dividends Article, which allowed New Zealand-resident individuals a tax credit in the United Kingdom.  (The new dividends Article follows the standard New Zealand model and does not allow such a credit.)  The redundant section LC 15 has therefore been repealed, with application from the date the Income Tax Act 2004 came into effect, the same application date as the new dividends Article.

Redundant provisional tax provisions

Section MB 2 of the Income Tax Act 2004

Section MB 2(1)(aa) and (ab) of the Income Tax Act 2004, which related to provisional tax payments, were redundant and have been repealed with application from the commencement of the Income Tax Act 2004.   These provisions were first enacted in 1998, with application to provisional tax payments for the 1998-99 income year only, and should not have been re-enacted as part of the Income Tax Act 2004. 

Dividend withholding payment credit cross-references

Sections ME 5 and MG 5 of the Income Tax Act 2004

Sections ME 5(1)(h) and MG 5(1)(e) of the Income Tax Act 2004, which relate to debiting imputation credit and dividend withholding payment accounts, contained an incorrect cross-reference.  The reference to "section LD 8(1)(a)" has been replaced with "section LD 8(1)(c)", with application from the date the Income Tax Act 2004 came into effect.

Resident withholding tax exemption for community trusts

Section NF 9 of the Income Tax Act 1994 and the Income Tax Act 2004

An income tax exemption for trustees of community trusts - section CB 4(1)(m) of the Income Tax Act 1994 - was enacted by the Taxation (GST, Trans-Tasman Imputation and Miscellaneous Provisions) Act 2003 with application from the 2004-05 income year.  An amendment allowing a resident withholding tax exemption certificate to be issued to a trustee of a community trust has been made to section NF 9 of the Income Tax Act 1994 to match this income tax exemption, to apply from the 2004-05 income year.   An equivalent amendment has also been made to the Income Tax Act 2004. 

Late payment penalty cross-reference

Section NH 3 of the Income Tax Act 2004

Section NH 3(4) of the Income Tax Act 2004, relating to the disallowance by the Commissioner of an election by a company to satisfy a dividend withholding payment liability by reducing a net loss, contained a reference to an additional tax penalty imposed under former section 150 of the Tax Administration Act 1994.  The reference was redundant and has been replaced by a reference to late payment penalty imposed under section 139B of the Tax Administration Act 1994, with application from the date the Income Tax Act 2004 came into effect.

Definition of "finance lease"

Section OB 1 of the Income Tax Act 1994 and sections FC 8B and OB 1 of the Income Tax Act 2004

The Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 amended the finance lease rules in the Income Tax Act 1994 and Income Tax Act 2004.

Some of the amendments made to the Income Tax Act 2004 were not consistent with leasing terminology used in other provisions in that Actt. Several minor changes have therefore been made to ensure consistency of terminology.

  • The various references to "lease term" in the definition of "finance lease" in section OB 1 and in section FC 8B(2) and (3) have been replaced with "term of the lease".
  • The use of the term "personal property lease asset" in the definition of "finance lease" in section OB 1 of the Income Tax Act 2004 has been standardised.
  • The reference to the term "lease payments" in the definition of "finance lease" in section OB 1 of the Income Tax Act 2004 has been replaced with "personal property lease payments".

Several features of the definitions of "finance lease" in the Income Tax Act 1994 and Income Tax Act 2004 have also been amended for consistency purposes.

  • The requirement that the definition in the Income Tax Act 1994 applies to leases entered into on or after 20 May 1999 has been reinstated.
  • The requirement that it be ascertained whether a leasing arrangement is a finance lease at the time the lease is entered into has been amended to apply to all limbs of the definition, except an arrangement involving a lease term that is more than 75% of the lease asset's estimated useful life.  This exception is necessary because consecutive or successive leases may satisfy the 75% requirement only some time after the beginning of the lease.

The amendments to the Income Tax Act 2004 apply from the date the Act came into effect while the amendments to the Income Tax Act 1994 apply for arrangements entered into on or after 29 March 2004.

Definition of "net loss"

Section OB 1 of the Income Tax Act 1994 and the Income Tax Act 2004

The definition of "net loss" in section OB 1 of the Income Tax Act 2004 contained two drafting errors.  First, the cross-reference to "section 177C(4)" of the Tax Administration Act was incorrect and has been replaced with "section 177C(5)".  Secondly, the reference to the amount "written off" by the Commissioner has been replaced by a reference to the amount "extinguished" by the Commissioner, in order to align the definition with the correct terminology used in section 177C.  These amendments apply from the date the Income Tax Act 2004 came into effect.  An equivalent amendment to the second amendment has been made to the definition of "net loss" in section OB 1 of the Income Tax Act 1994, with application from 1 July 2002. 

Superannuation fund expense transfers

Section DI 3 of the Income Tax Act 1994

A master superannuation fund is now allowed to elect in which year (2000-01 or 2001-02) it will deduct certain expenses of a member fund.  The amendment deals with a timing anomaly that arose from an amendment to section DI 3 in 2001.  Master funds previously deducted the expenses on the day they were incurred but, after the change, deducted the expenses in the income year in which they were incurred.  Master funds could not deduct 2000-01 member fund expenditure incurred after their 2000-01 balance date.

Small claims jurisdiction of Taxation Review Authority

Section 89E of the Tax Administration Act 1994

Section 89E allows taxpayers to elect in their notice of proposed adjustment (NOPA) to have their dispute heard in the small claims jurisdiction of the Taxation Review Authority in certain circumstances.  Section 89E refers to a NOPA issued under section 89D (a taxpayer NOPA to an Inland Revenue assessment) but not section 89DA (a taxpayer NOPA to a self-assessment).  Section 89E has therefore been amended to include a cross-reference to section 89DA to ensure that taxpayers can elect to use the small claims jurisdiction of the Taxation Review Authority in self-assessment situations.  The amendment applies for disputes that are begun under Part 4A of the Tax Administration Act on or after 1 April 2005. 

Redundant binding rulings provision

Section 91E of the Tax Administration Act 1994

Section 91E(6) contained a definition of "assessment" for the purposes of the Commissioner making a private ruling.  This definition was redundant, because of the general definition of "assessment" in section 3 of the Tax Administration Act, and has therefore been repealed, with application from the date of enactment.

Non-filing taxpayers

Sections 92 and 108 of the Tax Administration Act 1994

Sections 92(4) and 108(1B) were enacted as part of the self-assessment amendments in 2001 and were intended to ensure that the tax position of a non-filing taxpayer for an income year becomes certain and final in the same way as for filing taxpayers.  These provisions became unnecessary under section BC 1(1) of the Income Tax Act 2004, which provides that the income tax liability of a non-filing taxpayer is the total tax withheld in respect of the taxpayer; this ensures that the tax position of a
non-filing taxpayer becomes certain and final.  Accordingly, sections 92(4) and 108(1B) have been repealed, with application from the 2005-06 income year.

Use-of-money interest for income statement recipients

Section 120C of the Tax Administration Act 1994

The provisions concerning the calculation of use-of-money interest in relation to income statement recipients could previously produce incorrect results.  In particular, paragraph (b)(iii) of the definition of "interest period" in section 120C(1) of the Tax Administration Act 1994 did not work properly in some cases and could result in an interest end-date that was before the interest start-date.  The provision was also unnecessary as the general provisions cater adequately for income statement recipients.  Accordingly, the provision has been repealed, with application from the 2004-05 income year.

Updating unacceptable tax position provisions

Section 141B of the Tax Administration Act 1994

Section 141B is concerned with the imposition of shortfall penalties in relation to unacceptable tax positions.  Before 1 April 2003 the provision was concerned with unacceptable interpretations of tax laws.  Section 141B(5) and (6) has been updated to take into account this change of approach in section 141B from unacceptable interpretation to unacceptable tax position.  The amendments apply from the date of enactment,
21 December 2004.

Reduction of penalties for previous behaviour

Section 141FB of the Tax Administration Act 1994

Section 141FB(5) allows tax shortfalls to be grouped and effectively treated as a single penalty.  This provision has been amended to allow all grouped tax shortfalls to qualify for the reduction for previous behaviour.  The amendment has the same application date as the new section 141FB - 21 December 2004.

GST on imports

Section 12 of the Goods and Services Tax Act 1985

Section 12, which relates to the imposition of GST on imports, has had a minor clarifying amendment made to it.  The change involved making the input tax terminology in section 12(4)(d)(ii) consistent with the approach used in section 12(4)(c) by referring to an "input tax deduction" under section 20(3).  The amendment applies from the date of enactment, 21 June 2005. 

Adjustment provision

Section 25 of the Goods and Services Tax Act 1985

Section 25(2)(a) previously referred to "tax charged by the supplier", which was incorrect because it is the GST Act itself that charges tax on supplies.  A clarifying amendment has been made to correct the error by adopting the approach used in section 25(4), with application from the date of enactment, 21 June 2005.

Factored debts provision

Section 26A of the Goods and Services Tax Act 1985

Section 26A requires registered persons who account for GST on a payments basis to pay GST on the remaining book value of a debt when it is factored.  This provision has been restructured to integrate it with the calculation of tax payable in section 20 of the GST Act, with application from the date of enactment, 21 June 2005.

Refund of excess tax

Section 45 of the Goods and Services Tax Act 1985

The Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 amended the timeframes within which tax refunds are allowed under the Income Tax Act 1994, Income Tax Act 2004 and section 45 of the Goods and Services Tax Act 1985.

The terminology used in the new refund provision in section 45 of the Goods and Services Tax Act 1985 has been amended where appropriate to align with the terminology used in the new refund provisions in the Income Tax Act 2004. 

The amendments have the same application date as the new section 45 of the GST Act and apply to taxable periods beginning on or after 1 April 2005. 

Meaning of "precedent"

Section 13B of the Taxation Review Authorities Act 1994

A definition of "precedent" has been recently included in the Taxation Review Authorities Regulations 1998 to clarify that a "precedent" case is one that has wider implications for other taxpayers.  For consistency, a similar amendment has been included in the Taxation Review Authorities Act 1994, where "precedent" is referred to in section 13B(1)(b).  The amendment applies for disputes that are begun on or after 1 April 2005.