A Week in Review

Latest Work Programme Update

IR has published their latest update to the 2017-18 Public Rulings Work Programme.
With all the recent publicity, I am eagerly awaiting the release of IR’s views on the income tax and GST treatment of crypto-currencies – will those significant gains on Bitcoin be taxable? A number of jurisdictions have already issued a view that Bitcoin is not a currency (effectively removing it from taxation under the financial arrangement rules), instead concluding it is an asset, which then usually reverts to the general taxing principle of determining what was the taxpayer’s intention when they acquired it – for resale versus long-term hold?

However the distinction for those foreign tax authorities is not as important as it is in the NZ context, since most have capital gains tax regimes to capture any profits made on disposal regardless. Will we see IR go down the same track as their recently released policy with respect to gains on disposal of gold bullion (taxable unless you can prove otherwise)?

Other interesting agenda items in my view include:

• GST – Supplies of dwellings & other real property – to provide further guidance on the application of s.5(15) which in essence deems there to be two separate supplies of land when a dwelling is sold with other real property.
• GST & Income Tax – short term accommodation – to provide guidance and clarity with respect to the taxation issues associated with taxpayers offering property for rent on a short term basis via websites like Airbnb.com.
• Income Tax – income attribution – to provide guidance on the application of the personal services income attribution rules with a particularly focus around the meaning of “significant business assets”.
• Income Tax – application of Bright-line rules to land disposals, with a couple of items to focus on aspects of the “main home exemption”.

The full update can be located here http://www.ird.govt.nz/resources/9/7/975eb8fc-3a00-4b90-af8f-5be17b2cc061/2017-12-07+Public+Rulings+Work+Programme.pdf.

Cornerstone 100-day plan promise gains traction

Well it is about to become a reality, as the Families Package (Income Tax and Benefits) Bill (4-1) has been introduced into the House (under urgency, supposedly to have its third and final reading by 15th December!), implementing the removal of National’s 2018 tax cuts package.

Additionally the Bill looks to:

• reinstate the independent earner tax credit and repeal Working for Families tax credit changes legislated as part of the Budget 2017 Family Incomes Package;
• increase payments of family tax credits and raises the Working for Families tax credit abatement threshold;
• increase financial assistance provided to caregivers receiving Orphan’s Benefit and Unsupported Child’s Benefit;
• introduce a Best Start tax credit to help families with costs in a child’s early years;
• introduce a Winter Energy Payment to help older New Zealanders and those in receipt of a main benefit to heat their homes over winter ($450p.a single, $700p.a. couples), and;
• implement changes to the Accommodation Supplement.

The cost of all of the proposed changes are covered by the savings generated from cancelling the tax cuts package – apparently….

Budget Policy Statement (“BPS”) Released

Released with a view to setting the groundwork for the 2018 Budget (broad fiscal parameters & Government priorities), the BPS discusses the significant progress already made towards completing the Government’s 100-day plan, which includes:

• first year of post-secondary education or training will be fees-free from 1 January 2018;
• student allowances and living cost loans will increase by $50 a week from 1 January 2018;
• the Healthy Homes Guarantee Act 2017 has passed, requiring all rentals to be warm and dry;
• contributions to the New Zealand Superannuation Fund will resume on 15 December 2017, and;
• the minimum wage will increase to $16.50 an hour from 1 April 2018.

Included in Budget 2018 priorities are:

• building & improving access to quality public services for all New Zealanders;
• taking action on child poverty and homelessness;
• supporting families to get ahead and sharing the wealth generated by our economy with a wide range of New Zealanders;
• sustainable economic development and supporting the regions, and;
• managing New Zealand’s natural resources and taking action against environmental challenges, such as climate change.

And finally, a fiscal strategy that will ensure:

1. 1. Delivery of a sustainable operating surplus across an economic cycle;
2. 2. Reduction in the level of net core Crown debt to 20% of GDP within five years of taking office;
3. 3. Prioritising investments to address the long-term financial and sustainability challenges facing New Zealand;
4. 4. A prudent approach is taken to ensure expenditure is phased, controlled and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio, and;
5. 5. The existence of a progressive taxation system that is fair, balanced and promotes the long-term sustainability and productivity of the economy.

The full BPS can be found at http://www.treasury.govt.nz/budget/forecasts/hyefu2017.

EU releases tax haven Blacklist….
Seen as “non-cooperative jurisdictions for tax purposes” (failed to respond in the light of the repeated requests in terms of transparency), the first EU Blacklist contains 17 territories – American Samoa, Bahrain, Barbados, Grenada, Guam, South Korea, Macau, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and the United Arab Emirates.

Not to go un-noticed, another 47 (that’s right – 47!) countries have been “grey listed” as not compliant with EU tax standards, but who are committed to change their rules by the end of 2018, or 2019 for developing countries, to avoid a colour upgrade (or downgrade depending on one’s view of the world).

It is with little surprise that the list has already been criticised about the absence of certain countries.

Richard Ashby BBus, CA, CPA PARTNER
Em: [email protected] Ph: +64 9 365 5532 Fx: +64 9 309 5260 Mb: +64 21 823 464