Taxation Bill reported back from Select Committee -

Changes clarify that buildings developed for sale can be temporarily leased and remain ‘trading stock’, meaning Investment Boost can still apply for the purchaser. Other changes ensure that improvements to existing assets will be eligible for Investment Boost even if the expenditure does not result in a separate, distinctive, asset. Both changes will help provide greater certainty. 

Changes correct an earlier oversight suggesting that gift cards could not be treated as unclassified benefits, subject to the Fringe Benefit Tax (‘FBT’) de minimis rules. This has now been corrected and will be welcome news to many employers. 

Changes mean that benefits provided by reimbursement, which would have been exempt under the unclassified benefit de minimis had they been provided directly, do not immediately become subject to PAYE. This sensible change better aligns the FBT and PAYE treatment and will ensure that the employers’ choice to reimburse rather than directly provide the benefit, does not necessarily alter the tax outcomes.

Changes would exclude clothing provided as personal protective equipment (‘PPE’) from FBT, with retrospective application from 1 April 2008. To qualify the clothing must be “used or worn by a person to minimise risks to the person’s health and safety” and meet the definition of PPE in the Health and Safety at Work Act 2015. The change addresses a draft interpretation released by Inland Revenue which suggested the current law could result in FBT applying to hard hats and safety gloves for example. This swift realignment of drafting to policy intent will be welcome news to many employers concerned with Inland Revenue’s earlier draft conclusions.

Changes now clarify that if a non-resident visitor (‘digital nomad’) overstays or otherwise breaches the eligibility requirements, this does not give rise to retrospective tax obligations for their employer, other businesses or third parties, (although obligations can still arise retrospectively for the individual). This change is sensible, helping to further de-risk an employer’s decision to allow remote working from New Zealand.

Changes mean that for shares subject to the deferral, receiving a dividend no longer triggers a taxing point, which provides additional flexibility for employers and should make the deferral option more attractive. In addition, technical ‘liquidity events’ where an employee “has not received, or become entitled to, a liquid asset” would not trigger a taxing point, meaning the deferral can continue to apply. Examples include the receipt of shares subject to a restriction that prevents their on sale by the employee, or circumstances where there is a technical sale, but economic ownership remains unchanged due to a corporate restructure. This will be welcome news for employers looking to apply the new deferral option.

Changes mean that losses from disposals of RAM interests can now be used to offset income tax on dividends received, and not only against future RAM gains. Additional tweaks to the eligibility for RAM and extended RAM rules should reduce some complexity and broaden the application of the proposal. However, disappointingly, the election to use RAM for a particular share will limit the availability of other FIF methods, such as the Fair Dividend Rate, to any other shares for which the RAM is also available.  We had also hoped that RAM would be made available to New Zealand investors, but the FEC did not recommend that change. We understand policy consideration of that broader option continues – here’s hoping we get some traction soon.

Changes repeal the requirement to test deferral impacts when applying the cash basis person tests (referred to as the deferral threshold) for the financial arrangements rules, and allow for earlier application of the increased cash basis person thresholds from the 2025-26 income year, rather than 2026-27 year as originally proposed. Both changes should help ease compliance costs and are welcome. We continue to push for a broader review of the financial arrangements regime which in our view suffers from excessive complexity. Officials have suggested this remains a question of tax policy resource prioritisation – hopefully we see the project get the go-ahead soon.

Changes would ensure that joint ventures do not have to elect to continue their current GST treatment, reducing compliance costs. Additional changes would provide flexibility for the Commissioner to accept late elections to support transition into the new rules. Both changes are sensible and should help reduce compliance costs.

Changes ensure that it will be the responsibility of the recipient to notify the supplier of their GST registration status and to provide the necessary recipient details for the taxable supply information. This approach is more practical and eliminates the need for retailers for example, to be obliged to ask for personal information from customers if they spend over $1,000 on a purchase.