A Week in Review

Public Transport a more attractive option?
It was certainly a busy week for Parliament, the Government calling for sitting under urgency to ensure two items of legislation were passed, prior to their intended application dates of 1st July.
The first was the Regional Fuel Tax (RFT), and if in Auckland from July 1st, expect your price at the pump to have increased by 11.5c per litre. The RFT will be imposed for a 10 year period, and the funds are supposed to be used to support the programme of capital projects as described in schedule 2 of the Land Transport Management (Regional Fuel Tax) Regulations 2018 (LI 2018/102).
It will be interesting to see the impact the RFT has on those fuel outlets which exist just outside of the Auckland Region boundary, however it would not surprise me to see other Regional Councils quickly jumping on the bandwagon when legislation permits, and attempting to get an RFT in place in their area as soon as they can.

BEPS Amendments Law
The Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018/16) received the Royal assent on 27 June 2018, with the legislation mainly coming into force on 1st July 2018. The main components of the new legislation are provisions to prevent multinationals (MNE’s) from using:
 artificially high interest rates on loans from related parties to shift profits out of NZ (interest limitation rules);
 artificial arrangements to avoid having a taxable presence (a permanent establishment) in NZ;
 related party transactions (transfer pricing payments) to shift profits into their offshore group members in a manner that does not reflect the actual economic activities undertaken in NZ and offshore;
 hybrid and branch mismatches that exploit differences between countries’ tax rules to achieve an advantageous tax position; and,
 certain tactics to hinder an IR investigation, such as withholding relevant information that is held by an offshore group member.

Payments to State and State Integrated Schools
IR has released two Questions We’ve Been Asked (“QWBA”) and a Public Ruling, which considers payments made by parents to state and state integrated schools. The two QWBA’s provide commentary on donation tax credits, whereas the Public Ruling comments on the GST implications attached to the parents payments – whether GST is chargeable on the amounts payable.
Public Ruling BR Pub 18/06 provides IR’s view that GST is not chargeable on payments that are made to the board of trustees of either school to assist with the provision of education services that the student is statutorily entitlement to receive free of charge.
On the other hand, payments made for supplies of other goods and services, where there is no statutory entitlement and essentially the supply is conditional on the payment being made, are subject to GST.
QB 18/11 is devoted to payments made to state integrated schools, whereas QB 18/10 deals with similar payments to state schools. Both are fairly identical in their respective conclusions however, that the parent will be entitled to receive a donation tax receipt from the school where the payment is voluntary and is:
 to assist generally with funding its costs, including the cost of delivery of the school’s curriculum
 for a specific purpose or project to benefit the school as a whole where no material benefit or advantage is obtained in return for making the payment, or
 to assist with the school’s cost of delivering individual subjects or activities forming part of the school’s curriculum and in which the student may participate regardless of whether any payment is made.

Can it really be that simple?
IR suggests it can be as the latest tax bill was introduced to Parliament. The Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill (72-1) contains proposals to further modernise NZ’s tax system and to make it easier and simpler for individual taxpayers by simplifying rules and processes.
If the system works as intended, most people will pay what they need to and get what they are entitled to during the year without having to do anything. From April 2019, this would include refunds automatically being paid out (provided IR confident their info is correct), the use of better information by IR to help people pay and receive the right amounts during the year, and the automatic finalisation of end-of-year refunds or bills to pay, for as many people as possible without them having to do anything.

The Bill will also introduce changes to the Tax Administration Act 1994 to help shift the tax system to be more taxpayer focused, make some minor amendments to the PAYE error correction rules, permit entry to AIM and some of the other provisional tax options during the income year and it will set the annual rates for 2018–19.
Outside of income tax and some minor amendments to the GST legislation, there will be KiwiSaver changes (2 new contribution rates and open to age 65+) and 13 charities added to schedule 32 (those with overseas donee status).

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