THIS Bill proposes amendments of a miscellaneous character to the following Acts:

Transcription

1 TAXATION REFORM BILL (NO. 4) EXPLANATORY NOTE THIS Bill proposes amendments of a miscellaneous character to the following Acts: (a) The Income Tax Act 1976: (b) The Goods and Services Tax Act 1985: (c) The Estate and Gift Duties Act 1968: (d) The Stamp and Cheque Duties Act 1971: (e) The Inland Revenue Department Act 1974: (f) The Accident Compensation Act A number of the amendments give effect to recommendations of the Consultative Committee on Tax Simplification. The Bill also provides the annual confirmation of rates of income tax and excess retention tax for the income year. Clawe 3 amends section 2 of the Act. PART I INCOME TAX Subdause (1) repeals the definition of the term "friendly society", which currently refers to any society registered or incorporated in New Zealand under any Act relating to friendly societies, credit unions, industrial unions, industrial associations or trade unions, and replaces it with a definition that refers simply to societies, credit unions, and associations of credit unions registered or deemed to be registered under the Friendly Societies and Credit Unions Act The amendment applies from 1 April 1992, and has as a major effect the exclusion of trade unions and employer associations from the defmition (to the extent they are not already excluded by the effects of section 185 of the Employment Contracts Act 1991) and thus from the tax exemption for friendly societies set out in section 61 (23) of the Act (but see also clause 1162)). Subdawe (2) inserts a definition of the term "source deduction payment" that is a simple cross-reference to the existing definition in section 6 of the Act. Subdawe (3) inserts in the main interpretation section the definition of the term "tax file number" that currently appears in section 327A of the Act. Clause 4 inserts a new section 2, into the Act that has general interpretative effect in relation to terms used to describe income years, non standard accounting years, and related references. Subsections (1) and (2) of the new section price ind. GST $6.80 No

2 11 are similar, but not identical, to the section 2A proposed to be inserted by dame 3 of the Income Tax Amendment Bill (No. 6), and subsection (3) is new. Clause 5 inserts a new section 14A into the Act in relation to the furnishing of returns by electronic means. Under subsection (1) the Commissioner may give approval to any taxpayer or agent to transmit by electronic means in the prescribed electronic format the information contained in any return. Subsection (2) provides that an approval under the section may relate to any individual taxpayer or agent or to any class of taxpayers or agents, and may relate to any one or more classes of return. An approval will be subject to such conditions as may be specified by the Commissioner, whether generally or in any particular case. Subsection (3) requires the taxpayer to retain a hard-copy transcript of the information electronically transmitted to the Commissioner, which transcript is deemed to be the return of the taxpayer and is to be held by the taxpayer on behalf of the Commissioner. The information electronically transmitted will be treated for the purposes of the Act as if it were a return furnished pursuant to the relevant provision of the Act. Clause 6 amends section 17 of the Act to- (a) Define "IRS taxpayers", who, unless they have non-standard balance dates, are to furnish their annual returns by 7 June in each year; and (b) Provide that all other tapayers are to furnish their returns by the 7th day of the 4th month aiter the end of their income year or accounting year, rather than within the 2 months currently prescribed in section 17 (2). "IRS taxpayers" are defined as persons whose only income is New Zealand sourced income that consists solely of salary or wages, extra emoluments, or resident withholding income and does not include any withholding payments or beneficiary income within the meaning of section 226 (1) of the Act. The new provisions will apply from the income year, except in the case of non-standard balance date taxpayers whose accounting years end on any day between 1 October 1991 and 7 May 1992 (both dates inclusive). Clause 7 amends section 25 of the Act to the effect that the 4-year time hmit on the upwards amendment of assessments is to run from the end of the year in which the notice of an assessment is actually issued. Under the present section the 4-year time limit runs from the end of the year in which the assessment was Inade. Clause 8 amends section 28 of the Act, which relates to evidence of returns and assessments. Subdaute (1) allows recognition of the signature of Regional Controllers on documents produced in proceedings. Subdawe (2) provides an equivalent provision to that in the existing section as to the admissibility of hard-copy transcripts of return information transmitted by electronic means. Clause 9 amends section 30 of the Act to allow taxpayers to apply for an extension of time for filing a notice of objection. Any such application must be made before the expiry of the time originally set for filing the objection, or before the expiry of any extended time previously allowed by the Commissioner under the section. Clause 10 inserts a new subsection (6,0 into section 33 of the Act to provide a 6- month time limit on the period allowed to the Commissioner for nling in the High Court a case stated in respect of any objection.

3 111 The 6-month period runs from the various dates specified in new paragraphs (a) to (c) depending on the nature of the objection and the procedure by which it is referred directly to the High Court, and may be extended by the Court on the application of the Commissioner. The time limit will apply only where the relevant notice of the objector or the Commissioner as to the stating of the case is received or given on or after 1 July 1992, or where the parties consent to or the High Court grants leave for the direct referral of the objection to the High Court on or after 1 July Clause 11 amends section 61 of the Act, which relates to incomes wholly exernpt frorn tax. Subdataes (1) and (4) amend section 61 of the Act in relation to the exemption from tax of income derived by New Zealand companies whose income is derived exclusively or principally from Niue, and of dividends derived from such companies. The current exemption contained in paragraph (48) of the section applies only to dividends paid to Niue residents, with the result that dividends paid to shareholders who are neither resident in Niue nor resident in New Zealand are subject to New Zealand non-resident withholding tax. The proposed new paragraphs (9) and (48) remove this consequence, and are updated to refer to the new controlled foreign company and trust regimes of the Act. Subclawe (2) inserts a new paragraph (23,0 exempting from tax, for the period 15 May 1991 to 31 March 1992, the income of unions, employers organisations, and associations deemed by section 185 of the Employment Contracts Act 1991 to have become incorporated societies incorporated under the Incorporated Societies Act Subdawe (3) omits from section 61 (39) words that are no longer necessary in light of the new definition of "friendly society" substituted by clause 3 (1) of the Bill. Clause 12 amends section 64FB (2) of the Act, which relates to new start grants for farmers, to extend to 30 September 1991 the latest qualifying date for debt forgiveness arrangements giving rise to the tax relief afforded under the section in relation to the 1988 and 1989 East Coast droughts. The existing deadline of 30 September 1990 was set in relation to the earlier recognised South Island drought conditions. Clause 13 amends the existing transitional provisions in section 8 (4) of the Income Tax Amendment Act (No. 3) 1991 in relation to shareholder-employees who, by reason of the amendments to sections 75 and 104A of the principal Act enacted by that Act, were treated as derivin up to 2 years' worth of monetary remuneration in the income year. Tne provisions now apply to persons estimating provisional tax in the income year as well as to persons applying the 105 percent uplift from their residual income tax. Clause 14 amends section 104A of the Act in relation to accrual expenditure and timing mismatches between the assessability and deductibility of monetary remuneration paid by an employer to employees and shareholder-employees. Subdause (1) inserts a definition of "holiday pay" as meaning payment for the 11 days of statutory public holidays and 3 weeks annual leave required by the Holidays Act 1981, and any additional holiday pay of a similar nature required by any other statute or by an employment contract. Specifically excluded are entitlements in the nature of sick leave, retirement leave, and long service leave. Subdause (2) adds a new subsection (6) to make it clear that directors' fees are included within the ambit of the section. Clause 15 inserts a new section 197I into the Act in relation to trade unions and employer organisations that cease to be exempt from tax from 1 April 1992 (see

4 1V clawes 3 (1) and 11 (24. In determining the amount of any depreciation allowable under section 108 of the Act for assets acquired before 1 April 1992, the Commissioner is to have regard to the cost of the asset and to ali amounts that the Commissioner would have allowed as a deduction if the asset had been used in the production of assessable income before that date. Where assets are buildings, the Commissioner is also to have regard to expenditure incurred in acquiring the asset. Clawe 16 amends section 245y of the principal Act, and also the application provision in the Part of the Income Tax Amendment Act (No. 5) 1988 that introduced the international tax regime, to- (a) Extend by a further year the transitional measures for the controlled foreign company regime; and (b) Postpone for a further year the application of the foreign investment fund regime. The transitional measures for the controlled foreign company regime will thus apply until 31 March The application of the foreign investment fund regime is deferred until 1 April 1992, but with special provision to render taxable any foreign investment fund income arising from investments made on or after 19 December 1991 (the date of introduction of this Bill). Clause 17 amends section 327A of the Act to remove the definition of the term "tax file number", which now appears in section 2 of the Act. Clause 18 amends section 327p (6) of the Act to reduce from 10 years to 7 years the period for which records relating to resident withholding tax deductions must be kept by persons required to make such deductions. The Commissioner can extend the retention period by up to 3 years in respect of any specified records where there is, Or is likely to be, an audit or investigation of the person making the deductions or of a person to whom the records relate. Clause 19 amends section 336p of the Act to ensure that, where a fringe benefit is taxable by virtue of being provided to a person associated with an employee, the taxable value of the benefit will be reduced by any amount paid by the associated person in respect of the benefit in the same way as it would be reduced by any amount paid by the employee. Clause 20 amends section 361 of the Act, with effect from the income year, to set the normal terminal tax date for employees as 7 February. The existing section 361 (2) sets the terminal tax date as the 20th day of the 8th month following the taxpayer's balance date. Clause 21 amends section 374 of the Act to remove 2 outdated references to persons entitled to receive a family benefit, and substitutes references to principal caregivers. Clause 22 amends section 374E (1) of the Act, which relates to the guaranteed minimum family income credit of tax, to remove from the defulition of the term "qualifying person" an outdated reference to a specifed war pension and substitute a reference to veteran's pension. Clause 23 amends section 388 of the Act, with effect from the income year, to set the terminal tax date for all provisional taxpayers as the 7th day of the appropriate month specified in the Eighth Schedule to the Act. The current section, while it makes the same provision in respect of most provisional taxpayers, provides a different terminal tax date in the case of natural persons whose residual income tax did not exceed $2,500 in the preceding income year. Clause 24 amends section 395 of the Act, with effect from the income year, to set the terminal tax date in cases not otherwise provided for in the Act

5 V as the 7th day of the appropriate month specified in the Eighth Schedule to the Act. The previous section 395 (2) provided, in the case of natural persons, for terminal tax date to be the 20th day of the 8th month following the person's balance date. Clause 25 amends section 414 of the Act to afford relief from the payment of unpaid tax deductions in cases where a new start grant has been paid to a farmer. The present subsection (2A) provides relief from the payment of unpaid income tax. The new subsection (28) extends this relief to cover unpaid PAYE deductions or other amounts owing under Part XI of the Act that relate to source deduction payments made in relation to any farming business in respect of which a new start grant has been paid. The provision is limited to new start grants paid in relation to the adverse events currently listed in section 64FB (1) of the Act. Clause 26 amends section 428 of the Act, which relates to the keeping of records, with effect from 1 April Subdause (1) reduces the standard record retention period from 10 years to 7 years. Subdause (2) provides that a pay-period taxpayer who receives income from which tax has been deducted at source need retain records of that income only for 12 months after the end of the income year in which the income was received. Subdause 63) repeals section 428 (6), which is now spent. Subdause (4) inserts 2 new subsections into the section. The new subsection (7) allows the Commissioner to extend the standard retention period by up to 3 years in the case of any particular taxpayer whose affairs are or have been under audit or investigation by the Commissioner, or where the Commissioner intends to conduct or is actively considering conducting such an audit or investigation. The new subsection (83 empowers the Commissioner, by notice in the Gazette, to reduce the records retention period to 12 months in relation to classes of taxpayers who are not provisional taxpayers where the records relate to payments from which tax has been deducted at source. Clause 27 inserts a new section 42BA into the Act specif)ing the period for which returns must be retained where the return information is transmitted to the Commissioner by electronic means and the return itself is retained by the taxpayer. The basic retention period is 7 years after the end of the income year to which the return relates. This period can be extended where the new section 428 (7) is invoked by the Commissioner in relation to other records of the taxpayer. A return need not be retained where the Commissioner has given written notice that retention is not required. Clause 28 amends section 432 of the Act to require employers who deliver tax deduction remittance certificates under section 353 of the Act in respect of any period commencing on or after 1 April 1992 to also deliver to the Commissioner employment commencement and cessation certificates in relation to persons who commence or cease to be employees of the employer in that period. Such certificates are to be supplied within the same time as is allowed for delivery of the remittance certificates under section 353. The new subsection (5) allows the Commissioner to vary any of the requirements of the new subsections (2) to (4), subject to the proviso that any such variation cannot impose requirements that are more onerous than those contained in the subsections.

6 V1 The new subsection (6) specifies that it is not necessary to supply a certificate in relation to any period in which no person commences or ceases to be an employee of the employer. Also excluaed from the ambit of the new provisions are any classes or aescriptions of employment specified by the Commissioner, whether by reference to the nature ot the employment or to any class or description of employee or employer, and also the commencement or cessation of any entitlement to national superannuation, veteran's pension, income-tested benents, and earnings related compensation. The new subsection (7) provides that the term "employee" includes any person who receives or is entitled to receive a payment that would, but for section 6 (3) of the Act, be a source deduction payment. Clause 29 repeals the Eleventh Schedule of the Act, which classifies the estimated annual income of families into income bands for calculating their entitlement to interim instalments of family support credit of tax, and substitutes a new Eleventh Schedule that reflects the increase in family support abatement rates since the regime was introduced in The effect of the new schedule is to reduce the maximum amount of family support entitlement that can be foregone from $17 per week to the $10 per week that applied on introduction of the regime. Clause 30 amends the Seventeenth Schedule to the Act, which sets out the "blacklist" of low tax jurisdictions for the purposes of the transitional provisions of the controlled foreign company regime, to add to Part B companies of certain types that are resident in Ireland, Malaysia, and Malta. PART II INCOME TAX (ANNUAL) This Part provides the annual confirmation of rates of income tax and excess retention tax for the income year. This is the last year for which excess retention tax is payable. PART III GOODS AND SERVICES TAX Clause 35 inserts a definition of the term "name" in section 2 of the Goods and Services Tax Act 1985 that specifically includes any trading name of a registered person that has been notihed to the Commissioner in either the person's application for registration under the Act or in a trading name notification under the new section 53 (2) of the Act. The aim of the new definition is to allow use of a registered person's trading name on tax invoices and credit and debit notes. Clause 36 amends section 11 of the Act to zero-rate sales of duty free goods to inbound air travellers and to outbound air travellers who uplift the goods on returning to New Zealand. The zero rating is retrospective to 1 October Clause 37 amends section 11 (2) of the Act, which relates to the zero-rating of services, by repealing the existing paragraph (c) and substituting new paragraphs 09 and (ca). The new paragraph (c) simply repeats the existins paragraph insofar as it relates to services in connection with movable personal property situated outside New Zealand. The new paragraph (ca) imposes a new restriction in relation to services supplied directly in relation to temporary imports. Under the present paragraph (c) (11) the identity of the recipient of the service is immaterial, but under the new paragraph (ca) zero-rating will occur only where such services are supplied to persons who are not resident in New Zealand.

7 Vll Clause 38 corrects an obvious drafting error in section 16 of the Act, to the effect that the January return date for returns otherwise due on the last working day in December is to be the January date in the following year and not in the sanne year. Clause 39 amends section 19c of the Act in relation to the calculation of the tax payable or refund due where there is a change in a registered person's accounting basis. The formulae set out in new subsections (2) to (7) are simplified to the extent that they now require input tax and output tax to be taken into account only in relation to amounts due to or by persons included in the lists of creditors and debtors required to be prepared under section 198 (3) of the Act. Clause 40 inserts a new section 25x into the Act to allow, subject to the Commissioner's approval, the use of symbols, abbreviations, or other notations where tax invoices or credit or debit notes are electronically transferred. Any approval by the Commissioner may be expressed to apply generally or only in particular cases, may be subject to conditions, and may be withdrawn or varied at any time on reasonable notice. Clause 41 amends section 33 of the Act to allow for extensions of time for the filing of objections to assessments, along similar lines to the amendments to section 30 of the Income Tax Act 1976 proposed in dawe 9 of the Bill. Clause 42 amends section 53 of the Act to provide for formal notification to the Commissioner of any trading name that a registered person wishes to use for the purposes of issuing or creating tax invoices and credit and debit notes under the Act. Clause 43 amends section 75 of the Act to reduce from 10 years to 7 years the standard records retention period, and to give the Commissioner power to extend that 7-year period by up to 3 years where the registered person is, has been, or is likely to be subject to audit or investigation by the Commissioner. PART IV ESTATE AND GIFT DUTIES Clause 45 extends the gift duty exemption contained in section 74 of the Estate and Gift Duties Act 1968, which currently exempts from duty elections by members of group superannuation schemes to receive a reduced pension in return for payment, after the member's death, of a pension to the surviving spouse or to any dependant. The new section 74 includes an exemption for elections to receive a reduced pension in return for the payment, commencing before death, of a pension to the member's spouse. Clause 46 amends section 90 of the Act to allow for extensions of time for the filing of objections to assessments, along similar lines to the amendments to section 30 of the Income Tax Act 1976 proposed in dame 9 of the Bill. PART V STAMP AND CHEQUE DUTIES Clause 48 amends section 72 of the Stamp and Cheque Duties Act 1971 to allow for extensions of time for the filing of objections to assessments, along similar lines to the amendments to section 30 of the Income Tax Act 1976 proposed in dawe 9 of the Bill. PART VI INLAND REVENUE DEPARTMENT Clause 50 amends section 17A of the Inland Revenue Department Act 1974 to provide that a return will be treated as having been duly furnished when the

8 V111 information contained in the return has been transmitted in the prescribed electronic format in accordance with the new section 14,4 of the Income Tax Act Clause 51 repeats and replaces section 22A of the Act to allow the Commissioner to prescribe electronic formats, and to certify formats in which information from returns and other information is transrnitted as matching such prescribed formats. Clause 52 repeals section 38 of the Act, which sets out the powers of a Taxation Review Authority to either adjourn or determine an objection where either party fails to appear or be represented, and substitutes a new section that also gives the Authority power to dismiss an objection (without having to hear the Commissioner) where it is the objector who fails to appear or be represented. The Authority may set down a dismissed objection for a new hearin on the application of the objector, and where it does so the dismissal of the objection will cease to have effect. PART VII ACCIDENT COMPENSATION Clause 54 amends section 114 of the Accident Compensation Act 1982 to provide relief from the payment of unpaid accident compensation levies on earnings derived from a rarming business in respect of which a new start grant has been paid. The provision is limited to new start grants paid in relation to the adverse events currently listed in sectin 64FB (1) of the Income Tax Act 1976.

9 Hon. Wyatt Creech TAXATION REFORM (NO. 4) ANALYSIS Title 1. Short Title PART I INCOME TAX 2. This Part and Part II to be read with Income Tax Act Interpretation 4. References to income years, and to nonstandard accounting years, etc. 5. Commissioner may approve furnishing of return information by electronic means 6. Dates by which annual returns to be filed 7. Limitation of time for amendment of assessment 8. Evidence of returns and assessments 9. How objections to assessments originated 10. When objection may be referred in first instance to High Court 1 1. Incomes wholly exempt from tax 12. New start grants for farmers 13. Income credited in account or otherwise dealt with-provisional tax of shareholder employees 14. Accrual expenditure 15. Trade associations 16. Transitional provisions-attributed foreign income and losses and foreign investment fund income and losses 17. Interpretation-resident withholding tax deductions 18. Records to be kept 19. Taxable value of fringe benefit 20. Assessment and payment of tax 21. Family support credit of tax 22. Guaranteed minimum family income credit of tax 23. Assessment and payment of terminal tax 24. Payment of tax 25. Relief in cases of serious hardship 26. Keeping of business records 27. Keeping of returns where return information transmitted electronically 28. Employers to make returns as to employees 29. Eleventh Schedule substituted 30. Seventeenth Schedule amended PART II INCOME TAX (ANNUAL) Income Tax 31. Rates of income tax for year commencing on 1 April 1991 Excess Retention Tax 32. Rates of excess retention tax for year commencing on 1 April Repeal Repeal PART III GOODS AND SERVICES TAX 34. This Part to be read with Goods and Services Tax Act Interpretation 36. Zero-rating 37. Zero-rating 38. Taxable return periods 39. Calculation of tax payable or refund where change in accounting basis 40. Commissioner may approve use of symbols, etc., on electronically transmitted invoices and credit and debit notes 41. Objections to assessments 42. Registered person to notify of change of status 43. Keeping of records PART IV ESTATE AND GIFT DUTIES 44. This Part to be read with Estate and Gift Duties Act Exemption for certain elections by members of group superannuation schernes No

10 2 Taxation Reform (No. 4) 46. Objections to assessments PART V STAMP AND CHEQUE DUTIES 47. Part to be read with Stamp and Cheque Duties Act Objections to assessments PART VI INLAND REVENUE DEPARTMENT 49. This Part to be read with Inland Reve nue Department Act Annual returns by taxpayers 51. Power of Commissioner to prescribe forms 52. Power to proceed if either party fails to attend PART VII ACCIDENT COMPENSATION 53. This Part to be read with Accident Compensation Act Power to recover or write off compensation overpaid and unpaid levies Schedule A BILL INTITULED An Act to amend the Taxation Acts BE IT ENACTED by the Parliament of New Zealand as follows: 1. Short Title-This Act may be cited as the Taxation Reform Act (No. 4) PART I INCOME TAX 2. This Part and Part II to be read with Income Tax Act 1976-(1) This Part of this Act, Part 11 of this Act, and the Schedule to this Act shall be read together with and deemed part 10 of the Income Tax Act 1976* (hereafter in this Part and Part 11 referred to as the principal Act). (2) Except as otherwise provided m this Part, this Part and Part 11 of this Act, and the Schedule, shall come into force on the day on which this Act receives the Royal assent. 15 *R.S. Vol. 12, p. 1 Amendments: 1983, No. 4, 1983, No. 139; 1984, No. 10; 1985, No. 59; 1985, No. 125; 1986, No. 3; 1986, No. 7; 1986, No. 41; 1986, No. 117; 1987, No. 66; 1987, No. 104; 1987, No. 190; 1988, No. 6; 1988, No. 14; 1988, No. 133; 1988, No. 225; 1989, No. 7; 1989, No. 13, Part II; 1989, No. 49; 1989, No. 150; 1990, No. 24; 1990, No. 63; 1990, No. 91; 1991, No. 10; 1991, No. 14; 1991, No. 47; 1991, No. 75; 1991, No Interpretation-(1) Section 2 of the princjpal Act is hereby amended by repealing the definition ot the term "friendly society" (as amended by section 161 (1) of the Friendly Societies and Credit Unions Act 1982), and substituting the following definition: 20 " 'Friendly society' means any society or credit union or association of credit unions registered or deemed to be registered under the Friendly Societies and Credit Unions Act 1982:". (2) Section 2 of the principal Act is hereby further amended 25 by inserting, after the definition of the term "shearing shed hand", the following definition:

11 Taxation Reform (No. 4) 3 Source deduction payment' has the meaning ascribed to that term by section 6 of this Act:". (3) Section 2 of the principal Act is hereby further amended by mserting, after the definition of the term "tax deduction 5 certificate", the following definition: Tax flle number' means any identification number that has been allocated to a person by the Comrnissioner either generally for the purposes of this Act or specifically for the purpose of issue to that person of a 10 certificate of exemption in accordance with section 327M of this Act:". (4) The Friendly Societies and Credit Unions Act 1982 is hereby consequentially amended by repealing so much of the Sixth Schedule as relates to the Income Tax Act (5) Subsections (1) and (4) of this section shall apply to income derived on or after the 1st day of April References to income years, and to non-standard accounting years, etc.-the principal Act is hereby amended by inserting, after section 2, the following section: 20 "21 (1) In this Act, references to any income year that is identified by means of a reference to 2 calendar years jwhether or not the years are mentioned in full or in shortened iorm) are references to the income year that- "(a) Commences on the 1 st day of April in the earlier of 25 those 2 calendar years; and "(b) Ends on the 31st day of March in the later of those 2 calendar years. "(2) In this Act, unless the context otherwise requires,- "(a) References to persons with- 30 "(i) A standard balance date; or "(ii) A standard accounting year; or "(iii) A standard income yearare references to persons who furnish a return of income under section 9 of this Act for an income 35 year ending with the 31st day of March, being the income year that is the income year in respect of which the reference is made: "(b) References to persons with- "(i) A non-standard balance date; or 40 "(ii) A non-standard accounting year; or "(iii) A non-standard income yearare references to persons who furnish a return of income under section 15 of this Act for an accounting year ending with an annual balance date

12 4 Taxation Rdorm (No. 4) other than the 31 st day of March, being, unless the context otherwise requires, the accounting year that corresponds to the income year in respect of which the reference is made: "(c) References to persons with- 5 "(i) An early balance date; or "(ii) An early accounting year; or "(iii) An early income yearare references to persons who furnish a return of income under section 15 of this Act for an 10 accountin year ending with an annual balance date that falls between the 1 st day of October and the following 30th day of March (both days inclusive), being, unless the context otherwise requires, the accounting year that corresponds to the income year 15 in respect of which the reterence is made: "(d) References to persons with- "(i) A late balance date; or "(ii) A late accounting year; or "(iii) A late income year- 20 are references to persons who furnish a return of income under section 15 of this Act for an accounting year ending with an annual balance date that falls between the 1st day of April and the following 30th day of September (both days 25 inclusive), being, unless the context otherwise requires, the accounting year that corresponds to the income year in respect of which the reierence is made. "(3) In this Act, unless the context otherwise requires, where 30 any statement is made, in relation to any provision or provisions, that references to income years include references to non-standard accounting years,- "(a) References in the provision or provisions to income years shall be read as including, in the case ofpersons with 35 non-standard accounting years, references to the corresponding non-standard accounting years of such persons; and "(b) The provision or provisions shall, in relation to such nonstandard accounting years, apply accordingly with 40 any necessary modifications. 5. Commissioner may approve furnishing of return information by electronic means-the principal Act is

13 Taxation Rdorm (No. 4) 5 hereby amended by inserting, after section 14, the following section: "141 (l) For the purposes of this Act, the Commissioner may give approval to any taxpayer, or to any person who acts as 5 agent to any taxpayer, to transmit by electronic means in the prescribed electronic format the information contained in any return of the taxpayer. "(2) Any approval given under subsection (1) of this section- "(a) May relate to any individual taxpayer or agent or to any 10 class or classes of taxpayers: "(b) May relate to any one or more classes of return: "(c) Shall be subject to such conditions (if any) as may be specified by the Commissioner, whether generally or in any particular case. 15 "(3) Where any taxpayer or agent of a taxpayer transmits to the Commissioner in the prescribed electronic format the information contained in any return of the taxpayer in accordance with an approval given under subsection (1) of this section,- 20 "(a) The taxpayer shall retain or cause to be retained a hardcopy transcript of the information so transmitted; and "(b) The hard-copy transcript shall be deemed to be the return of the taxpayer, and shall be held by the 25 tapayer on behalf of the Commissioner; and "(c) The intormation transmitted to the Commissioner shall be treated for the purposes of this Act as if it were a return furnished pursuant to section 9 of this Act or to such other provision or provisions of this Act as 30 relate to the kind of return in question." 6. Dates by which annual returns to be filed-(1) Section 17 of the principal Act is hereby amended by repealing subsections (1) and (2) (as amended by sections 2 and 12 (2) of the Income Tax Amendment Act (No. 3) 1987), and 35 substitutins the following subsections: "(1) In this section, 'IRS taxpaver' means, in relation to an income year, a natural person were- "(a) The only income of the person in that year is New Zealand sourced income that consists only of any 40 one of more of the following: "(i) Salary or wages; or "(ii) Extra emoluments; or "(iii) Resident withholding income; and

14 6 Taxation R*rm (No. 4) "(b) The person does not derive in that income year any income consisting of- "(i) Withholding payments; or lii) Benefu:iary income as deftned in section 226 (1) of this Act. 5 "(2) The annual returns of income required under this Act shall be furnished to the Commissioner as follows: "(a) In the case of an IRS taxpayer with a standard balance date, not later than the 7 th day ofjune in each year: "(b) In all other cases, not later than the 7 th day of the 10 month which is the 4th month after the end of the income year or non-standard accounting year of the taxpayer to which the return relates." (2) Section 17 (5) of the principal Act (as inserted by section 5 (1) of the Income Tax Amendment Act (No. 2) 1985) is hereby 15 consequentially amended by omitting from subparagraph (b) (i) the expression "subsections (1) and (2)" and substituting the expression "subsection (2)". (3) Sections 2 and 12 (2) of the Income Tax Amendment Act (No. 3) 1987 are hereby consequentially repealed. 20 (4) Subject to subsection (5) ot this section, this section shall apply with respect to annual returns of income required to be furnished in relation to income derived in the income year and subsequent years. (5) In the case of a non-standard accounting year taxpayer 25 whose balance date falls on any date between the 1st day of October 1991 and the 7th day of May 1992 (both dates inclusive), this section shall apply with respect to annual returns of income required to be iurnished in relation to income derived in the income year and subsequent years Limitation of time for amendment of assessment- Section 25 (1) of the principal Act is hereby amended by ornitting the words "assessment was made", and substituting the words "notice of assessment was issued". 8. Evidence of returns and assessments-(1) Section of the principal Act is hereby amended- (a) By inserting, after the words "the Commissioner" where they first occur, the words "or a Regional Controller": (b) By inserting, after the words "the Commissioner" where they secondly occur, the words "or Regional 40 Controller". (2) Section 28 of the principal Act is hereby further amended by adding the following subsection:

15 Taxation Re/orm (No. 4) 7 "(2) The production of any document under the hand of the Commissioner or a Regional Controller or a District Comrnissioner purporting to be a hard-copy transcript of all or any information transmitted by electronic means in accordance 5 with section 14A or any other provision of this Act shall in all Courts and in all proceedings (including proceedings before a Taxation Review Authority) be sufficient evidence of the information electronically transmitted, and all Courts and Taxation Review Authorities shall in all proceedings take 10 judicial notice of the signature of the Commissioner or Reional Controller or District Commissioner to any such hara-copy transcript." 9. How objections to assessments originated- (1) Section 30 (1) of the principal Act is hereby amended by 15 inserting, after the words "notice of assessment is given", the following words and paragrahs: ", or within such extended time as the Commissioner may allow on the application of the person made before the expiry of- 20 "(a) The time for objection specified in the notice of assessnnent; or "(b) Any extended time for objection previously allowed by the Commissioner in respect of the assessment:". (2) Section 30 (2) of the principal Act is herebr amended by 25 inserting, after the words 'notice of assessment', the words, or after such extended time as the Commissioner may allow under subsection (1) of this section,". 10. When objection may be referred in first instance to High Court-Section 33 of the principal Act is hereby 30 amended by inserting, after subsection (6), the following subsection: "(6A) The case so stated and signed shall be filed by the Commissioner not later than 6 months after- "(a) The date on which the Commissioner receives written 35 notice from the objector under section 31 (2) of this Act or subsection (2) (a) of this section, where- "(i) That written notice is received by the Commissioner on or after the 1st day ofjuly 1992; and 40 "(ii) The objection in respect of which the case is stated relates to a question of law only and is referred to the High Court in accordance with subsection (2) of this section:

16 8 Taxation Reform (No. 4) "(b) The date on which both the Commissioner and the objector consent under subsection (4) of this section to the referral of the objection to the High Court, where-- "(i) The objection relates to a question of fact 5 (whether or not it also relates to a question of law) and is referred to the High Court by consent in accordance with subsections (3) and (4) of this section; and "(ii) The written notice of the objector under 10 subsection (3) (a) of this section, or the notification of the Commissioner under subsection (3) (b) of this section, is 6iven on or after the 1st day ofjuly 1992: "(c) The date on which the High Court grants leave for the objection to be referred directly to the High Court, 15 where- "(i) The objection relates to a question of fact (whether or not it also relates to a question of law), and leave of the Court is sought in accordance with subsections (3) and (4) of this section; and 20 "(ii) The Court grants the leave sought on or after the 1st day ofjuly 1992: "Provided that the High Court may on the application of the Commissioner extend any time limit specified in this subsection for the flling of a case, whether the application is made before 25 or after the expiry of the time limit. 11. Incomes wholly exempt from tax-(1) Section 61 of the principal Act is hereby amended by repealing paragraph (9) (as amended by section 22 (1) of the Income Tax Amendment Act (No. 4) 1986), and substituting the following paragraph: 30 "(9) The income of a New Zealand company, being a company-- "(a) Tnat the Commissioner is satisfied derives its income exclusively or principally from Niue; and "(b) That, if it were a foreign company as defined in section A of this Act, would not at any time during the income year in which the income was derived be a controlled foreign company within the meaning of section 245c of this Act: "Provided that the exemption under this paragraph shall not 40 apply to any income derived by the company from sources in New Zealand:". (2) Section 61 of the principal Act is hereby further amended by inserting, after paragraph (23), the following paragraph:

17 Taxation Reform (No. 4) 9 "(23A) Income derived on or after the 15th day of May 1991 and before the 1st day of April 1992 by any umon, employers organisation, or association that, having been registered or deemed to be registered under the Labour Relations Act immediately before the commencement of section 185 of the Employment Contracts Act 1991, is deemed by the said section 185 to have become an incorporated society mcorporated under the Incorporated Societies Act 1908, except so far as any such income is derived from business carried on beyond the 10 circle of the union's, organisation's, or association's membership:". (3) Section 61 (39) of the principal Act is hereby amended by omitting the words "registered or deemed to be registered under the Friendly Societies and Credit Unions Act 1982". 15 (4) Section 61 of the principal Act is hereby further amended by repealing paragraph (48) (as amended by section 22 (2) of the Income Tax Amendment Act (No. 4) 1986), and substituting the following paragraph: "(48) Dividends from a New Zealand company, being a 20 company that the Comrnissioner is satisfied derives its income exclusively or principally from Niue, derived by any person other than-- "(a) A person who is resident in New Zealand; or "(b) A company that, at any time during the income year in 25 which the dividends were derived, is a controlled foreign company within the meaning of section 245c of this Act; or "(c) A trustee of a trust where at any time during the income year in which the dividends were derived any settlor 30 (as defmed in section 226 of this Act) or any beneficiary of the trust is resident in New Zealand: "Provided that the exemption under this paragraph shall not apply to any dividends to the extent that those dividends constitute distribution of income or pins derived by the 35 company from sources in New Zealand: '. (5) Section 22 of the Income Tax Amendment Act (No. 4) 1986 is hereby consequentially amended by repealing subsections (1), (2), and (4). (6) Subsections (1), (3), and (5) of this section shall apply to 40 income derived on or after the 1st day of April (7) Subsection (4) of this section shall apply to dividends derived on or after the 1 st day of April 1992.

18 10 Taxation Rdorm (No. 4) 12. New start grants for farmers-section 64FB (2) of the principal Act (as inserted by section 37 (1) of the Income Tax Amendment Act 1989) is hereby amended- (a) By inserting in paragraph (a), after the expression "30th day of September 1990", the expression "(or the 30th 5 day of September 1991, in the case of the drought conditions referred to in paragraph (c) of the definition of the term 'adverse event )": (b) By on*tting from paragraph (b) the expression "the 30th day of September 1990", and substituting the 10 expression ' that 30th day of September". 13. Income credited in account or otherwise dealt with-provisional tax of shareholderemployees-section 8 (4) of the Income Tax Amendment Act (No. 3) 1991 is hereby amended by adding to paragraph (b) the expression "; or", and 15 inserting, after that paragraph, the following paragraph: "(c) Under section 384 (2) (a) (ii) of the principal Act the amount of additional tax payable by such a person in respect of income derived in the income year, Accrual expenditure-(1) Section 104A (1) of the principal Act (as inserted by section 11 of the Income Tax Amendment Act 1978) is hereby amended by inserting, after the definition of the term "goods", the following definition: 25 " 'Holiday pay' means- "(a) Payment for holiday leave that an employer is obliged to make pursuant to- "(i) Section 7A of the Holidays Act 1981 in respect of, or in substitution for, public 30 holidays; and "(ii) Section 11 of that Act, in respect of annual leave; and "(iii) Any other statute requiring payment for additional holiday leave of a similar nature 35 to that specified in subparagraph (i) or subparagraph (ii) of this paragraph: "(b) Payment for any additional holiday leave that an employer is obliged to make pursuant to an employment contract, being leave of the same nature 40 as the annual leave provided for in section 11 of the Holidays Act 1981;- but does not include payment for any further entitlements, such as sick leave, retirement leave, or

19 Taxation R form (No. 4) 11 long service leave, that may be required by statute or by any employment contract:". (2) Section 104A ot the principal Act (as so inserted) is hereby amended by adding the following subsection: 5 "(6) For the avoidance of doubt, it is hereby declared that, for the purposes of this section and section 75 of this Act, and also for the purposes of section 6 (2) of this Act insofar as it relates to this section and the said section 75,- "(a) The term 'employee' includes a director; and 10 "(b) The term 'monetary remuneration' includes directors' fees." 15. Trade associations-(1) The principal Act is hereby amended by inserting, after section 197H, the following section: "197I. (1) In this section, the term 'trade association' means 15 any-- "(a) Union, employers organisation, or association deemed to be registered under the Incorporated Societies Act 1908 pursuant to section 185 of the Employment Contracts Act 1991; or 20 "(b) Any other body or association whose income, having been exempt from tax pursuant to section 61 (23) of this Act as income of a friendly society, ceases to be so exempt on or after the 1st day of April "(2) For the purpose of determining the amount of any 25 depreciation allowable under section 108 of this Act to any trade association in respect of the depreciation of any asset that- 66. (a) Was acquired by the trade association before the 1st day of April 1992; and 30 "(b) Was used m tax exempt activities of the trade association before the 1st day of April 1992,- the Commissioner shall, subject to subsection (3) of this section, have regard to the cost of the asset and to all amounts that the Commissioner would have allowed as a deduction under 35 section 108 of this Act if the asset had been used m the production of assessable income of the trade association for- "(c) The income year in which the asset was acquired; and "(d) Every subsequent income year up to and including the income year. 40 "(3) Where any asset to which subsection (2) of this section applies is a building, the Commissioner shall, when determining the amount of the deduction allowable in respect of the asset under section 108 of this Act, have regard to the amount of

20 12 Taxation Re/brm (No. 4) expenditure that the trade association incurred in acquiring the asset. "(4) Where there is any question under this section as to- "(a) The cost of any asset acquired by a trade association before the 1st day of April 1992; or 5 "(b) The date on which a trade association acquired, altered, or added to such asset,- it shall be determined by agreement between the trade association and the Commissioner or, in default of such agreement, by the Commissioner." 10 (2) This section shall come into force on the 1st day of April Transitional provisions-attributed foreign income and losses and foreign investment fund income and losses-(1) Section 15 of the Income Tax Amendment Act 15 (No. 5) 1988 is hereby amended by omitting from the proviso (as added by section 9 (1) of the Income Tax Amendment Act (No. 2) 1991) the expression "1991", and substituting the expression "1992". (2) Section 245y of the principal Act (as inserted by section of the Income Tax Amendment Act (No. 5) 1988 and amended by section 55 (1) of the Income Tax Amendment Act 1989 and sect ion 9 of the Income Tax Amendment Act (No. 2) 1991) is hereby amended- (a) By omitting from subsection (1) the expression "1991" in 25 the 5 places it occurs, and substituting in each case the expression "1992": (b) In subsection (l A)- (i) By omitting the expression "or foreign entity": (ii) By omitting the words "or entity" where they 30 twice occur: (c) By omittin from subsection (2) the expression "1991", and substituting the expression "1992": (d) In subsection (3A)- (i) By omitting the expression "1991" in the 2 35 places it occurs, and substituting in each case the expression "1992": (ii) By omitting the expression "1992", and substituting the expression "1993". (e) By omitting from subsection (5) the expression "1991", 40 and substituting the expression "1992": (f) By omitting from subsection (6) the expression "1991" in the 2 places it occurs, and substituting in each case the expression "1992":

21 Taxation R«orm (No. 4) 13 (g) In subsection (9)- (i) By omitting the expression "6th day of March 1991" in the 3 places it occurs, and substituting in each case the expression "19th day of December ": (ii) By omitting the expression "31st day of March 1991" and substituting the expression 'Slst day of March 1992": (iii) By omitting the expression " 1 st day of April " and substituting the expression "lst day of April 1992": (h) In subsection (10)- (i) By omitting the expression "1991", and substituting the expression ' 1992": 15 (ii) By omitting the expression "1992", and substituting the expression "1993": (i) By omitting from subsection (11) the expression "1991", and substituting the expression "1992". (3) Section 9 (2) of the Income Tax Amendment Act (No. 2) is hereby consequentially repealed. 17. Interpretation-resident withholding tax deductions-section 32 h (1) of the principal Act (as inserted by section 12 (1) of the Income Tax Amendment Act (No. 2) 1989) is hereby amended by repealing the definition of the 25 term "tax file number". 18. Records to be kept-(1) Section 327p (6) (b) of the principal Act (as inserted by section 12 (1) of the Income Tax Amendment Act (No. 2) 1989) is hereby amended- (a) By omitting the expression "10 years", and substituting 30 the expression '7 years": (b) By adding the expression "; and". (2) Section 327p (6) of the principal Act (as so inserted) is hereby amended by adding the following paragraph: "(c) Where the Commissioner so notifies the person in 35 writing in accordance with subsection (8) of this section, retain such of those records as may be specified by the Commissioner for such further period as the Commissioner may specify under that subsection." 40 (3) Section 327p of the principal Act (as so inserted) is hereby further amended by adding the following subsection: "(8) The Commissioner may, by notice in writing given before the expiry of the 7-year retention period specified in

22 14 Taxation Rdorm (No. 4) subsection (6) of this section, require a person to retain any records specified by the Commissioner for a further period not exceeding 3 years following the expiry of the 7-year period where-- "(a) The affairs of the person are or have been under audit or 5 investigation Dy the Commissioner; or "(b) The affairs of any person to whom the records relate are or have been under audit or investigation by the Commissioner; or "(c) The Commissioner intends to conduct such an audit or 10 investigation before the expiry of the retention period as so extended, or is actively considering any such audit or investigation." (4) This section shall come into force on the 1st day of April Taxable value of fringe benefit-section 336p (1) (a) of the principal Act (as inserted by section 34 (1) of the Income Tax Amendment Act (No. 2) 1985) is hereby amended- (a) By insertin* after the words "paid by the employee", the words '(or, where section 3363 (3) of this Act applies, 20 by the associated person)": (b) By insertmg, after the words "improvement by the employee", the words "or associated person". 20. Assessment and payment of tax-(1) Section 361 of the principal Act is hereby amended by repealing subsection (2) 25 (as substituted by section 24 of the Income Tax Amendment Act (No. 3) 1990), and substituting the following subsection: "(2) All income tax payable under an assessment made in accordance with subsection (1) of this section and not otherwise due and payable shall be due and payable on the 7th day of 80 February in the next income year or on such earlier date as is specified in the notice of assessment given to the taxpayer, not being a date that is less than 30 days after the date of the notice." (2) Section 24 of the Income Tax Amendment Act (No. 3) is hereby consequentially repealed. (3) This section shall apply with respect to the tax on income derived in the income year and subsequent years. 21. Family support credit of tax-section 374[, of the principal Act (as inserted by section 17 (1) of the Income Tax 40 Amendment Act (No. 2) 1986) is hereby amended-

23 Taxation R /orm (No. 4) 15 (a) By omitting from item y of the formula in subsection (2) (as substituted by section 70 of the Income Tax Amendment Act (No. 5) 1988)the words "entitled to receive a family benefit", and substituting the words 5 "a principal caregiver": (b) By omitting trom item y of the formula in subsection (3) (as so substituted) the words "entitled to receive a family benefit", and substituting the words "a principal caregiver" Guaranteed minimum family income credit of tax-section 374E (1) of the principal Act (as inserted by sect ion 17 of the Income Tax Amendment Act (No. 2) 1986) is hereby amended b omitting from the definition of the term "qualifying person ' (as substituted by section 15 (1) of the 15 Income Tax Amendment Act (No. 2) 1991) the words "specified war pension", and substituting the words "veteran's pension". 23. Assessment and payment of terminal tax- (1) Section 388 of the principal Act (as inserted by section 17 of 20 the Income Tax Amendment Act (No. 3) 1988) is hereby amended by repealing subsection (2) (as substituted by section 28 of the Income Tax Amendment Act (No. 3) 1990), and substituting the following subsection: "(2) All income tax payable in accordance with subsection (1) 25 of this section and not previously due and payable shall be due and payable on the 7th day of the month specified in the Eighth Schedule to this Act as being the month for payment of terminal tax." (2) Section 28 of the Income Tax Amendment Act (No. 3) is hereby consequentially repealed. (3) This section shali apply with respect to the tax on income derived in the income year and subsequent years. 24. Payment of tax-(1) Section 395 of the principal Act is hereby amended by repealing subsection (2) (as substituted by 35 section 29 of the Income Tax Amendment Act (No. 3) 1990), and substituting the following subsection: "(2) All income tax payable on income derived in any income year by any person (other than a company to which subsection (1) of this section applies) and not otherwise due and payable 40 under this Act shall be due and payable on the 7th day of the month specified in the Eighth Schedule to this Act as being the month tor payment of terminal tax."

24 16 Taxation Reform (No. 4) (2) Section 29 of the Income Tax Amendment Act (No. 3) 1990 is hereby consequentially repealed. (3) This section shali apply with respect to the tax on income derived in the income year and subsequent years. 25. Relief in cases of serious hardship-section 414 of 5 the principal Act is hereby amended by inserting, after subsection (2A), the following subsection: "(28) In any case where a new start grant (as defined in section 64FB of this Act) in respect of any of the adverse events specified in paragraphs (a) to (c) of the definition of the term 10 'adverse event' (as also so defined) is payable to a taxpayer, the Commissioner shall, in addition to any relief granted to a person referred to in subsection (2A) of this section, also grant to any such person relief from the payment of any unpaid tax deductions, or any amounts owing to the Commissioner under 15 Part XI of this Act, where the unpaid tax deductions or amounts owed relate to source deduction payments made in relation to the business of farming in respect of which the new start grant was paid." 26. Keeping of business records-(1) Section 428 (3) of 20 the principal Act (as substituted by section 41 (1) of the Income Tax Amendment Act (No. 2) 1982) is hereby amended- (a) By omitting the expression "subsection (4)" and substituting the expression "subsections (3A), (4), and (8)": (b) By omitting the expression "10 years" (where that 25 expression appears after paragraph (i)), and substitutin the expression "7 years". (2) Section 428 ot the principal Act (as so substituted) is hereby amended by inserting, aiter subsection (3), the following subsection: 30 "(3A) A pay-period taxpayer who has received in any income year income from which tax has been deducted at source need retain records of that income only until the expiry of 12 months after the end of that income year." (3) The said section 428 is hereby further amended by 35 repealing subsection (6) (as inserted by section 41 (2) of the Income Tax Amendment Act (No. Sj 1983). (4) The said section 428 is hereby iurther amended by adding the following subsections: "(7) The Cornrnissioner may, by notice in writing given 40 before the expiry of the 7 -year retention period specifled in subsection (3) of this section, require a taxpayer to retain all or any of the records specified in that subsection for a further