New Zealand: Draft legislation proposes changes to GST and income tax

GST and income tax policy, remedial amendments

GST and income tax policy, remedial amendments

The government on 8 September 2021 tabled a draft bill (Taxation (Annual Rates for 2021-22, GST and Remedial Matters) Bill) containing policy and remedial amendments addressing goods and services tax (GST) and income tax policy. 

Below is a summary of some of the key proposed changes. 

GST policy and remedial amendments

Among other changes to the GST, the bill proposes to:

  • Confirm that “cryptocurrency assets” (a new tax definition is proposed) will largely be removed from being subject to GST
  • Confirm the New Zealand domestic leg of international transportation services can be zero-rated
  • Allow all taxpayers to agree a GST apportionment methodology with Inland Revenue (currently, this is only available for larger taxpayers with annual sales over $24 million). The method must fairly reflect the taxpayer’s taxable activity.

Income tax policy and remedial amendments

The bill contains many proposed changes to the income tax changes, including:

  • Confirming that cryptocurrency assets are (generally) not financial arrangements for tax purposes
  • Allowing tax pooling to be used for tax liabilities arising from a voluntary disclosure for a greater range of tax types (including PAYE, FBT, GST, and NRWT in addition to income tax and RWT currently), if certain other conditions are met. This will allow reductions in use of money interest.
  • Fixes to the “Fair Dividend Rate foreign exchange hedging rules” for PIE managed funds. These technical changes are intended to make these rules more workable.

More housing tax bill changes expected

In June, the government consulted on two aspects of its March housing tax changes—the design of interest limitation rules for residential property and the “new build” exemption—read  TaxNewsFlash.  Draft legislation on these design features is expected to be added to the bill later this month. The interest limitation rules apply from 1 October 2021. 
 

Read a September 2021 report prepared by the KPMG member firm in New Zealand

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.