Taxation (Disaster Relief) Bill Government Bill (2004 No 107-1) Explanatory Note General policy statement This Bill introduces urgent changes to the Income Tax Act 1994 and to the Tax Administration Act 1994 that authorise the Commissioner of Inland Revenue to relax some provisions in the current legislation which operate to produce inappropriate outcomes for some taxpayers who are significantly affected by extreme natural events. Part 1 Amendments to Income Tax Act 1994 Amendments are proposed to the provisions that relate to the estimation of provisional tax. The amendments permit significantly affected taxpayers, after their 3rd provisional tax payment date, to request the Commissioner of Inland Revenue to accept estimates of residual income tax payable in an income year of the taxpayer in which an adverse event occurs. The Commissioner will be able to accept the estimate of residual income tax payable by the taxpayer in respect of the income year if the Commissioner is satisfied that--- o the taxpayer is significantly affected by a qualifying event; and o as a consequence of the occurrence of a qualifying event, the taxpayer was unable to deliver an estimate or a revised estimate of residual income tax payable by the taxpayer in respect of the income year in accordance with section MB 3(1); or it would be equitable for the taxpayer to make an estimate or revised estimate of residual income tax payable by the taxpayer; and o the taxpayer requested acceptance of the estimate or revised estimate as soon as practicable. These measures are intended to afford immediate relief to taxpayers adversely affected by the storms experienced in February 2004 in New Zealand and by other natural events which may subsequently occur. Section OB 1 is amended to include a definition of qualifying event. The criteria confirm that relief is not limited to the area in respect of which a state of emergency is declared. If a state of emergency is declared file:///t /_Kim/bills/PDFs/new/20041071.txt (1 of 7)24/03/2004 8:37:35 p.m.
and an Order in Council made, significantly affected taxpayers qualify regardless of their location. Part 2 Amendments to Tax Administration Act 1994 Amendments to the Tax Administration Act 1994 authorise the Commissioner of Inland Revenue to remit late filing penalties, non-electronic filing penalties and late payment penalties together with interest charged under Part 7 of that Act where the penalties or interest are charged to taxpayers who are significantly affected by a qualifying event. To simplify the process, applications for remission may be made verbally or in writing. Clause-by clause analysis Clause 1 sets out the Title of the Bill. Clause 2 relates to the commencement to the Bill. Clause 3 specifies that Part 1 amends the Income Tax Act 1994. Clause 4 amends section MB 3, consequential to the insertion of new section MB 3B in clause 5. Clause 5 inserts new section MB 3B which prescribes the circumstances in which a taxpayer may request permission to make a revised estimate of residual income tax. Clause 6 consequentially amends section OB 1 to insert a definition of qualifying event. Clause 7 specifies that Part 2 amends the Tax Administration Act 1994. Clause 8 inserts new section 183ABA which prescribes the circumstances in which penalties and use-of-money interest imposed on a taxpayer who has been affected by an adverse event may be remitted and authorises the Governor-General, from time to time, by Order in Council to declare further naturally occurring extreme events to be qualifying events. Regulatory impact and compliance cost statement Because the amendments contained in this Bill are of a minor nature a Regulatory Impact and Compliance Cost Statement is not required. Hon Dr Michael Cullen Taxation (Disaster Relief) Bill Government Bill file:///t /_Kim/bills/PDFs/new/20041071.txt (2 of 7)24/03/2004 8:37:35 p.m.
Contents 1 Title 2 Commencement Part 1 Amendments to Income Tax Act 1994 3 Income Tax Act 1994 4 Estimated provisional tax 5 New section MB 3B inserted MB 3B Provisional taxpayer affected by qualifying event 6 Definitions Part 2 Amendments to Tax Administration Act 1994 7 Tax Administration Act 1994 8 New section 183ABA inserted 183ABA Remission in circumstances of qualifying event The Parliament of New Zealand enacts as follows: 1 Title This Act is the Taxation (Disaster Relief) Act 2004. 2 Commencement file:///t /_Kim/bills/PDFs/new/20041071.txt (3 of 7)24/03/2004 8:37:35 p.m.
(1) This Act comes into force on the date on which it receives the Royal assent, except as provided in this section. (2) Sections 4 to 6 and section 8(2) are treated as coming into force on 1 February 2004. Part 1 Amendments to Income Tax Act 1994 3 Income Tax Act 1994 This Part amends the Income Tax Act 1994. 4 Estimated provisional tax (1) After section MB 3(6), the following is added: "(7) This section is subject to section MB 3B." (2) Subsection (1) is treated as coming into force on 1 February 2004. 5 New section MB 3B inserted (1) After section MB 3, the following is inserted: "MB 3B Provisional taxpayer affected by qualifying event "(1) This section applies to a taxpayer who is significantly affected by a qualifying event. "(2) A taxpayer to whom this section applies may, despite the provisions of section MB 3(1), request the Commissioner to accept an estimate or a revised estimate of the residual income tax payable by the taxpayer in respect of an income year. file:///t /_Kim/bills/PDFs/new/20041071.txt (4 of 7)24/03/2004 8:37:35 p.m.
"(3) The Commissioner may, despite section MB 3(1), accept an estimate or a revised estimate of residual income tax payable by a taxpayer to which this section applies in respect of an income year if the Commissioner is satisfied that--- "(a) the taxpayer is significantly affected by a qualifying event; and "(b) an effect on the taxpayer of the occurrence of a qualifying event is that--- "(i) it is not reasonable to require the taxpayer to deliver an estimate or a revised estimate of residual income tax payable by the taxpayer in respect of the income year in accordance with section MB 3(1): "(ii) the basis on which the taxpayer has chosen to pay provisional tax is now inappropriate; and "(c) the taxpayer requested acceptance of the estimate or revised estimate as soon as practicable. "(4) The effect of a revised estimate accepted under subsection (3) is that the revised estimate must be treated as the estimate applying on the third instalment date." (2) Subsection (1) is treated as coming into force on 1 February 2004. 6 Definitions (1) In section OB 1, after the definition of qualifying debenture, the following is inserted: "qualifying event, in section MB 3B, means--- "(a) the extreme climatic conditions which occurred during the month of February 2004 in New Zealand: "(b) any naturally occurring event which occurs in a subsequent year in respect of which a state of emergency is declared under Part 4 of the Civil Defence Emergency Management Act 2002 and which the Governor-General by Order file:///t /_Kim/bills/PDFs/new/20041071.txt (5 of 7)24/03/2004 8:37:35 p.m.
in Council declares to be a qualifying event:" Part 2 Amendments to Tax Administration Act 1994 7 Tax Administration Act 1994 This Part amends the Tax Administration Act 1994. 8 New section 183ABA inserted (1) After section 183A, the following is inserted: "183ABA Remission in circumstances of qualifying event "(1) This section applies when the Commissioner considers a taxpayer is significantly affected by a qualifying event as defined in section OB 1 of the Income Tax Act 1994. "(2) If this section applies and an affected taxpayer is liable to a late filing penalty or a non-electronic filing penalty, or is liable to pay a late payment penalty, or has been charged with interest under Part 7, the affected taxpayer may request the Commissioner to remit the penalty or the interest charged. "(3) The Commissioner may remit the penalty and interest referred to in subsection (2) if the Commissioner is satisfied that--- "(a) the effect on the taxpayer of the occurrence of the qualifying event makes it equitable that the penalty or interest be remitted; and "(b) the taxpayer applied for the remission as soon as practicable. "(4) For the purposes of this section and section MB 3B of the Income Tax Act 1994, the Governor-General may, from time to time, by Order in Council declare an event in respect of which a state of emergency has been declared under Part 4 of the Civil Defence Emergency Management Act 2002 to be a qualifying event. file:///t /_Kim/bills/PDFs/new/20041071.txt (6 of 7)24/03/2004 8:37:35 p.m.
"(5) An Order in Council made under subsection (4) may relate to an event that occurred after the commencement of this Act and before the commencement of the Order in Council." (2) Subsection (1) (other than for sections 183ABA(4) and (5)) is treated as coming into force on 1 February 2004. (3) Subsection (1) (in relation to sections 183ABA(4) and (5)) comes into force on the date on which this Act receives the Royal assent. file:///t /_Kim/bills/PDFs/new/20041071.txt (7 of 7)24/03/2004 8:37:35 p.m.