Land and Income Tax Amendment Act 1970

This commentary item was published in Public Information Bulletin Volume 42, September/October 1967

More information about Public Information Bulletins.

Public Information Bulletin No. 60 - March 1971 (PIB No 60)

Land and Income Tax Amendment Act 1970

Application of the Act

Section 2. Except where otherwise stated the amendments apply to the income year that began on 1 April 1970.

Returns by Superannuation Funds

Section 3 requires trustees of superannuation funds to make annual returns. Each fund has already been told of our requirements (See also sections 12, 13, 14 and 35).

Farming Land Exempt From Land Tax

Section 4 exempts from land tax land used for farming or agricultural purposes. This is land used for:

• Animal husbandry (including land used for keeping poultry or bees or for horse breeding).
• Growing fruit, vegetables or other crops.
• Horticulture including plant nurseries.
• Grape growing.

The exemption does not extend to land used for:

• Forestry or silviculture.
• A racecourse or horse training establishment.
• Saleyards.
• Wineries.

Dividend Rebate

Section 5. For the income year that begins on 1 April 1971 the dividend rebate applies to a taxpayer whose taxable income is less than $4,000. Dividend income is taxed at the same rates as other income when the taxable income is $4,000 or more.

Backpay Rebate

Section 6 removes the optional rebate previously granted in Section 78G(3). The rebate is now 6c in the dollar on the portion of the backpay applicable to an earlier year, or the amount of the taxable income whichever is the less.

Visiting Experts

Section 7 authorises the payment of the fees, salary and allowances of the non-government member of the "Visiting Experts Advisory Committee".

Special Exemption for Wife/Husband

Sections 8 and 9. The exemption for a dependent wife/husband is increased from $240 to $275. This reduces $1 for $1 when the wife's/husband's income for the year exceeds $375. There is no exemption when the wife's/husband's income exceeds $650.

Housekeeper Exemption

Section 10 increases the exemption for a housekeeper from $240 to $275.

Life Insurance Exemption

Section 11. The maximum exemption for life insurance premiums and superannuation contributions is increased from:

• $500 to $700 for a taxpayer who is a contributor to an employer-subsidised superannuation fund, and
• $650 to $950 for any other individual taxpayer.

Liability of Superannuation Funds

Section 12 repeals the absolute exemption which existed for superannuation funds.

Investment Requirements By Superannuation Funds

Sections 13 and 14 set out the requirements for investment in Government/Local Body securities which must be met before certain private superannuation funds will be exempt from income tax. The Department has explanatory notes on these sections.

Share Option or Purchase Schemes

Section 15. The general rule for valuing benefits received is amended so that restrictions in dealing with shares are ignored unless they apply for at least eight years or earlier death. If however, there are certain restrictions on the sale of shares when an employee ceases employment before eight years these restrictions will be taken into account in valuing those shares.

Forestry Encouragement Grants

Section 16 deals with treatment for income tax purposes of Forestry Encouragement Grants.

• A grant made for the labour of a landowner and his family is assessable income.
• A grant for expenditure is not assessable income.
• No deduction is allowed for this expenditure unless and to the extent that it is more than twice the amount of the grant.

Income Tax and Payroll Tax Not Deductable

Section 17. Neither New Zealand nor foreign payroll or income taxes are allowable deductions from assessable income.

Special Depreciation Allowances Extended

Sections 18 and 19 extend the Special Depreciation allowance on:

Qualifying Assets	New Expiry Date Ending 31 March
Plant and machinery	1972
Employee accommodation	1972
New farm buildings	1972
Private bathrooms or showers installed in hotels	1972
Export meat cool-storage buildings	1974
Export slaughterhouses or meat-packing houses	1974

The allowance has also been extended to include from 1 April 1970 owner/lessors of all the above assets other than new farm buildings which already qualify.

Special Depreciation on Fish-Processing Buildings

Section 20 extends the special depreciation allowance to lessors of fish-processing buildings.

Special Depreciation on Buildings Providing Tourist Accomodation

Section 21 extends until 31 March 1974 the special depreciation allowance granted to new "approved" hotels or motels, or extensions of either, erected to provide tourist accommodation.

Investment Allowance West Coast South Island

Section 24 extends to 31 March 1972 the investment allowance of 20% on plant, machinery and buildings for use in redevelopment projects on the West Coast of the South Island.

Farm Development Expenditure

Section 26 relates to expenditure on land used for farming and agricultural purposes.

• The allowance is extended to 31 March 1972.
• As from 1 April 1970 supporting frames constructed on the land for growing crops have been added to the items deductible under the section.

Investment Allowance

Sections 22, 23, and 25 reintroduce the investment allowance of 10% on the cost of certain plant and machinery. The allowance is for new plant and machinery for:

• Manufacturing,
• Farming and agriculture,
• Fishing,for which a binding contract was entered into on or after 26 June 1970 and before 31 March 1972, or for which on or after 26 June 1970 certain preliminary steps have been taken towards a binding contract for the purchase or construction of plant or machinery.

Basically the investment allowance is the same as that which lapsed after the 1966 financial year.

Development Expenditure by Rock Oyster and Mussel Farmers

Section 27 extends the allowance for developmental expenditure to 31 March 1972.

Industrial Research and Development Grants

Section 28 inserts a new section 125A in the Tax Act. The section provides for an exemption from income tax of grants made to any company under the Industrial Research and Developments Grants Act 1970. When a grant is made for expenditure otherwise deductible under the Tax Act, the amount that may be deducted is reduced by the grant.

Export Market Development and Tourist Promotion Expenses

Section 29.

• Extends to 31 March 1974 the 50% additional deduction for qualifying export market and tourist promotion expenses.
• Amends the Tax Act to enable export agents who are rewarded by commissions to qualify for the incentive.

Export Market Development by Self-Employed Taxpayers

Section 30 inserts a new section 129AA in the Tax Act. Self-employed persons undertaking "export market development activities" to promote the supply of their services for reward can now get a deduction of 50% of "the value of the time" they were engaged in these activities.

Deduction For Exports

Section 31 extends to 31 March 1974 the 15% deduction for increased export sales.

Income Equalisation Reserve

Section 32 is a drafting amendment to the provisions introduced in 1969, which extended the income equalisation reserve scheme to income derived by individuals from forestry.

Proprietory Provisions

Section 33 reinstates section 138 of the Tax Act as it was before the amendments made by the Land and Income Tax Amendment Act (No. 2) 1968, so far as it concerns overseas subsidiaries

Joint Assessments of Companies

Section 34. If one company in a group is assessed with proprietary income from another company in the group this income is not used for rate purposes for the group. This applies from 1 April 1968.

Assessment of Superannuation Funds

Section 35 sets out the liability of certain superannuation funds to income tax.

Income Derived Outside New Zealand

Section 36 makes it clear that tax is not payable where both the contractor and the contracted work are outside New Zealand.

New Rates of Income Tax from 1 April 1971

Sections 37 and 38. The new schedules introduced by these sections incorporate the changes in the individual rates of income tax announced in the 1970 Budget.

Temporary Increase in Income Tax

Sections 39, 40 and 41. These sections incorporate the temporary rate increase of 3 1/3% for a full year and 10% for 4 months of each of the 1970/71 and 1971/72 years announced in October.