New Zealand’s Minister of Revenue, Hon Simon Watts, introduced the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Bill into the House on 26 August 2024.

The Bill passed its first reading on 29 August 2024.

The Bill includes extensive remedial provisions on OECD’s Crypto-Asset Reporting Framework and Amendments, goods and service tax (GST), trustee tax rates, land transactions, partnerships, R&D incentives, funding, covenant payments, employment, equity and debt funding, lump-sum payments, and tax administration.

Proposes changes to income tax:

• Confirming the annual rates of income tax for the 2024–25 tax year;
• A generic set of tax relief measures for future emergency events;
• Addressing two issues that affect the transfer of overseas pension and superannuation funds to New Zealand;
• Allowing borrowers who have not registered a security for Approved Issuer Levy on time to register it retrospectively in limited circumstances;
• Increasing the thresholds relating to exempt employee share schemes;
• Allowing persons aged under 16 to enrol in KiwiSaver with the signature of one guardian;
• Introduces a “one-off” information sharing provision with the Ministry of Business, Innovation and Employment to encourage the use of NZBN numbers among unincorporated entities.
• Extending the thin capitalisation rules related to the calculation of non-debt liabilities for interest-free loans and certain shares;
• An amendment to ensure that beneficiaries account for deductions at the trustee level in calculating their foreign tax credit cap;
• An amendment to allow a limited partnership to choose to be treated as making a payment of non-resident passive income when the partnership is a lender and receives interest from a source in New Zealand that is derived by a non-resident limited partner of the partnership;
• Clarifying that the transfer pricing and dividend rules apply concurrently and ensuring that any adjustments that flow from a transfer pricing adjustment are subject to the same seven-year time bar;
• A clarification to provide for the amendment of assessments beyond the four-year time bar for certain related transfer pricing adjustments.

Incorporation of CARF proposal into New Zealand law

The Bill proposes implementing the OECD’s Crypto-Asset Reporting Framework (CARF) and Amendments to Common Reporting Standard.

The CARF proposal involves the reporting of tax information on transactions in crypto-assets in a standardised form, with a view to automatically exchanging this information with other jurisdictions.

The CARF is a global minimum standard, which means that all OECD member countries are expected to implement it. The information obtained under the CARF would increase Inland Revenue’s visibility over income derived through crypto-assets and support compliance activity by ensuring taxpayers are paying the correct amount of tax.

The CARF applies to entities or individuals that facilitate exchange transactions for customers. Under the CARF, these crypto-asset service providers must collect transaction and customer information and provide this to the tax authority in the jurisdiction in which they operate. The information is then exchanged with other tax authorities that have implemented the CARF to the extent it relates to persons resident in that jurisdiction.

Changes to Goods and Services Tax (GST)

• General amendments to ensure the GST rules for apportionment and adjustments of input tax deductions work as intended;
• Extending the scope of the temporary GST registration rules;
• Clarifying that distributions from unit title bodies corporate to refund members are deductible for GST purposes;
• Ensuring GST-registered persons that have accounting cycles based on 13-week quarters can have approved taxable period end dates that are aligned with their accounting calendar;
• Allowing an optional timing rule for GST on accommodation supplied through electronic marketplaces;
• Clarifying how property developers are defined for the purposes of a GST rule for limiting input tax deductions for land sold by property developers;
• Allowing taxpayers the option to deduct the GST-inclusive amount of all their expenditure for income tax purposes in certain situations when they include the flat-rate credit as income in their income tax returns;
• Ensuring that services provided in relation to commercial vessels passing through New Zealand should be zero-rated for GST purposes;
• Ensuring that zero-rating applies to a deemed supply of emissions units upon deregistration;
• Clarifying that the taxable activity exclusion for certain goods applies when a person deregisters from GST.

Changes to approved issuer levy (AIL) retrospective registration

The Bill proposes allowing a New Zealand borrower paying interest to a foreign lender who did not register a security for approved issuer levy (AIL) on time to retrospectively register the security in certain circumstances.

A New Zealand borrower paying interest to a non-associated non-resident lender can generally opt to pay a 2% (or sometimes 0%) AIL instead of a non-resident withholding tax (NRWT) at 10% or 15%. To be eligible for AIL, the New Zealand borrower must be an approved issuer and register the relevant security before making an interest payment.

Changes to taxation of transfers from overseas pension schemes

The Bill proposes measures to address two issues that affect the transfer of pension funds to New Zealand. They primarily address issues concerning the transfer of funds from the UK.

These are:

• The inability of some migrants to pay New Zealand tax due on a transfer of their UK pension fund to a qualifying recognised overseas pension scheme (QROPS) in New Zealand without withdrawing funds from the scheme, resulting in UK tax charges; and
• The existence of “locked in” KiwiSaver funds.