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Tax Changes in New Zealand in 2011

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					                               TAX AND CORPORATE NEWS
                               Latest news and information about tax and corporate legislations in New Zealand




                                 Tax Changes in New Zealand 2011

                                 In 2011 the New Zealand government implemented several changes to the national tax legislation, easing
                                 the cost of compliance for New Zealand companies and modernizing several aspects of the country’s tax
                                 rules. The series of changes brought in throughout the year were specifically aimed at improving New
                                 Zealand economic performance while raising greater tax revenues and boosting business performance
                                 around the country.

                                 Investment Protocol with Australia
                                 On February 16th the Prime Minister of Australia Julia Gillard and the Prime Minister of New Zealand John Key
                                 signed a new Investment Protocol (IP) under the two countries’ Closer Economic Relationship (CER) trade
                                 agreement.

KIRILL KRUGER                    Following the passing of the IP the screening thresholds for Australians investing in New Zealand were raised
                                 from AUD 231 million to AUD 1.005 billion. New Zealanders making an investment into Australia saw a new
Development Manager at           threshold of NZD 477 million, compared to the previous threshold of NZD 100 million.
Abaconda Management
Group , Director of AMG          Corporate Rate Cut
Business Development.            The corporate income tax applied to the profits of a businesses in New Zealand is reduced to 28 percent from
                                 30 percent. The lowered rate also applies to unit trusts, life insurance policyholders, and other savings
                                 vehicles.

Kirill Kruger is a young but     Working for Families Eligibility
experienced financial            Eligibility for Working for Families tax credits and Community Services cards is tightened, as the definition of
consultant, with a               “income” in means tests is shifted to include sources such as family trusts and to exclude rental and
specialization in                investment losses.
international and New
Zealand taxation research,       LAQC and LTCs
management and planning.         The government abolishes Loss Attributing Qualifying Companies (LAQC), and replaces them with Look-
Being a successful               Through Companies (LTC). The new Look-Through Companies are “tax transparent entities” which allows the
entrepreneur he has also
                                 profits and expenses of the company to be “passed through” to the shareholders.
authored advanced studies
in the field of financial
                                 The new entity offer 0% tax benefits to foreign entrepreneurs who raise their profits outside of New Zealand.
academics, and regularly
writes reports on current
                                 Depreciation
affairs and developments in
international and New            Businesses and landlords are not longer able to claim depreciation on buildings with life spans exceeding 50
Zealand finance, taxation        years.
and management.
                                 Portfolio Investment Entities
                                 A Bill is released, containing new rules for the tax treatment of non-resident investors in Portfolio Investment
www.abaconda.info                Entities. The new legislation is aimed at boosting the country’s appeal as a destination for investment funds,
info@abaconda.info               by granting 0% tax benefits to non-resident investors in a PIE which only has foreign sourced incomes.
+64 7 8080 444



© Abaconda Management Group
Excise Tax Threshold
The thresholds on the national excise tax system are adjusted for the first time in 14 years, greatly easing
compliance costs for small wineries around the country. Prior to the new rules, wineries with excise tax
liabilities in excess of NZD 10 000 were required to pay their tax obligations on a monthly basis. Following the
changes, only wineries with tax liabilities exceeding NZD 100 000 are required to pay every month. Small
wineries with obligations below NZD 50 000 only have to pay their tax liabilities once a year. Producers with tax
liabilities between NZD 100 000 and NZD 50 000 will pay excise tax once every six months.

Deductions on Software Development
The Revenue Minster of New Zealand Peter Dunne confirms that the Inland Revenue Department will treat
failed software development projects as deductible. Prior to the new rules, expenditures on software
development projects which failed were not deemed to be deductible. The change was aimed at removing
any barriers to businesses choosing to pursue new and innovative development projects.

Tax Compliance Improvements
Following a series of public consultations a new Bill is passed, containing measures aimed at improving tax
compliance procedures and making it easier for New Zealand taxpayers to meet their obligations. As per the
suggestions given in the consultations, the IRD will implement greater use of online and electronic filing, and
reduce the number of paper forms that must be submitted. The new electronic filing systems and
infrastructures allow the government to implement greater information sharing between different
departments and agencies.

GST Fraud
The government clarifies Goods and Service Tax regulations, to eliminate the occurrence of “phoenix fraud
schemes”. The fraudulent practice involved two cooperating parties, which would claim that one party made a
large purchase from the other, and would receive a corresponding GST refund from the IRD. However, the one
of the parties would then wind down their company in order to avoid the GST obligation. New regulations were
introduced which made it impossible to exploit this loophole.

Gift Duties Abolished
Gift Duty is abolished for the disposition of any property in New Zealand after October 1 st 2011. The levy was
removed as it was deemed to be inapplicable to the modern taxation and business environment, and set back
New Zealand taxpayers more in compliance costs than it raised as tax revenues.

Use of Money Interest Deductibility
The Inland Revenue Department clarified the rules regarding Use-of-money interest, saying that UOMI is now
an expense and is deductible. Prior to the clarification, UOMI was only counted as an expense under a very
limited set of conditions. UOMI can be claimed as an expense in the year it was paid.




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Description: Over 2011 the New Zealand government implemented several changes to the New Zealand tax system in an effort to improve economic performance and efficiency.