Estate and Gift Duties Amendment Act 1964

This commentary item was published in Public Information Bulletin Volume 16, December 1964.

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This Act came into force on 18 November 1964. It provides reduced rates of duty and makes some important amendments to the estate duty laws.

Estate and Gift Duties Amendment Act 1964

This Act came into force on 18 November 1964. It provides reduced rates of duty and makes some important amendments to the estate duty laws.

Reduced rates of estate duty

Section 2 of the Act gives effect to the statement in the Budget that Government would reduce the rates of estate duty.

Four important features

The important features of the new scale of rates are -

• It applies to the estates of all persons who died, on or after 25 June 1964.
• It increases the exemption limit for small estates from £2,000 to £4,000.
• It reduces the previous rates on estates between the values of £4,000 and £48,000.
• It is the same as the previous scale on estates which exceed a value of £48,000.

Pamphlet revised

A revised edition of the Department's pamphlet "Estate Duty in New Zealand" is being printed and copies will soon be available at all district offices. The pamphlet will include a table of the new rates and examples of how they apply.

Definition of "General power of appointment"

Section 3 of the Act repeals the definition of "General power of appointment" in the principal Act and defines those words in wider terms.

Wider definition

Although the previous definition enabled property over which the deceased had a power to appoint or dispose for his own benefit to be included in the dutiable estate it was not wide enough to include property which the deceased had power to obtain for his own benefit. As now defined a general power of appointment will enable property to be included in the dutiable estate if the deceased had power to obtain or appoint or dispose of it or to charge any sum of money upon it for his own benefit. It also makes clear that such property can be included whether the power can be exercised in writing or in any other manner.

Joint property

Section 4 of the Act simplifies the law under which jointly held property can be brought into a dutiable estate.

Two ways

Under the previous law jointly held property could be included in either of two ways. It could be included to the extent that the deceased caused it to be vested in joint ownership and in such case it was valued as at the date it was vested. In the alternative it could be brought in to the extent that the deceased could have disposed of his beneficial interest in it prior to his death. In such case the value would be that at the date of death.

A simple example will illustrate how the previous law applied -

Example

• In 1940 'A' caused property worth £5,000 to be vested in himself and 'B' as joint tenants.
• When 'A' died the property was worth £7,000.
• The property was brought into 'A's' estate at its value when it was vested, that is £5,000.
• Had the property been valued at, say, £12,000 when 'A' died one half of that amount could have been brought into his estate instead of the £5,000.

Law simplified

The two sections in the principal Act which deal with joint tenancies have been repealed. In their place one section has been substituted and this provides that jointly held property shall be included in a dutiable estate to the extent of the value of the deceased's share or interest immediately before his death. As it applies to the example given above this means that -

• When 'A' dies and the property is worth £7,000, only one half of that amount (£3,500) can be included in his estate.

Joint family homes included

The new section also applies to Joint Family Homes. Under the previous law the value of a Joint Family Home could be included as a joint tenancy only when the settlor of the home was the first to die and it was then brought in at its value when settled less an exemption of £3,000.

For example -

• In 1957 'A' settled a property worth £5,000 on himself and his wife as a Joint Family Home.
• When 'A' died the property was brought into his estate at £5,000 less the special exemption of £3,000.
• Had 'A's' wife predeceased him nothing would have been included in her estate in respect of the Joint Family Home.

How the new section will work

Under the Joint Family Homes Act 1964 each joint tenant is deemed to have a half interest in the home. It also increases the special estate duty concession from £3,000 to £4,000. Read with the new provisions in the Estate and Gift Duties Amendment Act 1964 this means that interests in Joint Family Homes will be treated for estate duty purposes as illustrated by this example -

Example

• In 1957 'A' settled a property on himself and his wife 'B' as a Joint Family Home.
• On the death of either 'A' or 'B' whoever is the first to die if the property is then worth £9,000 one half of that sum will come into his or her estate. From that figure of £4,500 will be deducted the special concession of £4,000 which leaves the net sum of £500 in the estate in respect of the Joint Family Home.
• Nothing will come into the estate of the first 'A' or 'B' to die unless one half of the value of the Joint Family Home exceeds £4,000 at the date of death.

In force on 1 April 1965

The new provisions in respect of ALL joint tenancies come into force on 1 April 1965. This is the date that the Joint Family Homes Act 1964 also comes into force.

Group superannuation funds

Section 5 of the Act simplifies the law under which benefits from superannuation funds can be included in a dutiable estate. Liability under the section which now deals specifically with such property will depend simply on whether benefits out of or under a group superannuation scheme as defined are payable or granted on or in consequence of the death.

The concession of up to £500 a year for a widow's life or widowhood pension and the concessions for allowances made for children during minority are to continue. They will, in fact, be more widely applied because the term "group superannuation scheme" has been more widely defined. Moreover the concession for a widow's life or widowhood pension is also extended because it will now apply to a pension which arises if a husband has elected to surrender the whole or a part of his retirement allowance to provide such a pension. It is no longer necessary to have funds specially approved for the purposes of the Estate and Gift Duties Act 1955.

Disclaimers not to be treated as gift

Section 6 provides that a person who disclaims a gift or testamentary benefit does not thereby make a gift for the purposes of the Act. This accords with the present practice of the Department.

Gift statements

Section 7 provides that a gift statement shall be filed in respect of all gifts which exceeds £1,000 in value or which would exceed that value when aggregated with other gifts by the donor within 12 months. The previous figure was £500.