Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Bill

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Explanatory note

General policy statement

This bill proposes measures foreshadowed in Budget 2012, to broaden the tax base. The budget-related measures tighten the rules for deducting costs of assets that are used both privately by the person who has the asset, and also used to earn income. Holiday homes, boats, and aircraft are often used in this way. Also, following on from the changes to livestock valuation rules in Budget night legislation, there are further supporting provisions proposed.

Several important GST-related changes are proposed. Among them, supplies by agents are better accounted for, and debts to the Crown from local authorities changing GST accounting basis will be spread over 72 months with no penalties or interest imposed. In addition, it is proposed that certain non-resident businesses may register for GST and claim input tax deductions for GST incurred on approximately the same basis as a resident registered person.

Other substantive measures include changes to the time periods for claiming refunds under the Income Tax Act 2007, ensuring that expenditure on trees and plantings for erosion, shelter and water protection purposes is tax deductible, and clarification of the definition of dividend in relation to certain rights issues, premiums paid under bookbuild arrangements, and share splits by companies. Also, the removal of tax concessions for certain non-resident investment companies is proposed.

Several remedial and technical changes are proposed as well, including better aligning the primary sector amortisation rules with the general depreciation rules, eliminating tax treatment mismatches for certain foreign currency hedges, and fixing the tax treatment of MPs' allowances.

Donee status is proposed for 3 organisations, namely The Hunger Project New Zealand, OneSight New Zealand, and Fund for Timor.

Regulatory impact statement

Inland Revenue produced regulatory impact statements to help inform the main policy decisions taken by the Government relating to the contents of this Bill.

A copy of these regulatory impact statements can be found at—

Livestock valuation

The specified livestock amendments proposed in this bill flesh out the Budget 2012 provision which provides the rule that elections to use the herd scheme are generally irrevocable, effective 18 August 2011.

The bill provides an exception to this irrevocability rule where a farmer changes to a fattening operation. In such a case, a farmer may make a one-off election to change, in the year that the last of the female breeding livestock is disposed of. This exception will also be effective from 18 August 2011.

Also, it is proposed to amend section EC 20 and repeal section EC 21 of the Income Tax 2007, with effect from 28 March 2012.

The section EC 20 rule about disposals and the cessation of farming is amended by providing that if the livestock are sold before 1 November of an income year, the herd values that were announced in May of the calendar year of the sale must be used to value the opening herd scheme livestock for taxation purposes. By default, if the sale is completed on or after 1 November of an income year, the normal opening herd scheme adjustment will be made.

Section EC 21, which relates to disposals of livestock on a person's death, is repealed and is effectively replaced by the associated person transfer rule, discussed immediately below.

It is proposed that, for associated person transfers of livestock, if a person (the transferor) is disposing of the livestock other than in the ordinary course of business, and they are using the herd scheme, then their herd scheme election and base herd scheme numbers will transfer to the associated person who acquires the livestock (the transferee). There is an exception for certain intergenerational transfers.

A herd scheme election and base herd scheme numbers may not transfer to a transferee if it is an intergenerational transfer in situations where the only association between the parties is because of their blood relationship. Other criteria have to be met, including that the transferor has to cease deriving income from the disposal of livestock and that the transferee makes a one-off election in the year of the transfer.

The associated person transfer rule and intergenerational exception will have effect from 28 March 2012, and may also apply on death and to matrimonial property transfers.

Also, 2 sets of classes, for Friesian and Jersey dairy cattle, and Red and Wapiti deer will be combined, in schedule 17 of the Income Tax Act 2007. This will apply for the 2012–13 income year.

Apportionment of expenditure for certain assets

New rules are proposed to limit the amount of an income tax deduction that a person is allowed in relation to the use of certain assets, such as holiday homes, aircraft, and boats, which are used for both income-earning and private purposes.

Generally, a person is allowed an income tax deduction for expenditure if it is incurred in deriving their income or in the course of carrying on a business. The private limitation, however, denies a deduction if the expenditure is private or domestic. These 2 rules are difficult to apply in relation to assets such as holiday homes.

For assets that are used partly for private purposes and partly to derive income, the new rules will determine whether an expense is explicitly allowed as a deduction and provide a method of apportioning that amount.

The proposed rules will apply to assets that are comprised of land or are valued over $50,000, and that are not used for at least 62 days in an income year. Motor vehicles are excluded from the rules, as are assets whose expenditure is apportioned on an area basis.

A person will be allowed a full deduction for certain expenditure directly related to income-earning use of an asset, and an apportioned amount for other expenditure, other than purely private expenditure. Depreciation loss and GST input tax deductions will be calculated along similar lines. Some losses arising in relation to these assets will be ring-fenced.

Under the proposed rules, private use of an asset is any use of the asset by the person or a relative, whether or not rent is paid. Relative is defined for the purposes of the new rules.

Some modifications are proposed when it is impossible to attribute income separately to the use of an asset. Any losses that the person has are not ring-fenced unless the income derived from the use of the asset is substantially rental income.

If the income that a person derives from the use of the asset is less than $1,000 for an income year, or if they have a loss, they may choose to treat the income relating to the use of the asset as exempt income in relation to which no deduction is allowed.

Primary sector businesses

The Income Tax Act 2007 allows primary sector businesses (farming, horticulture, forestry, and aquaculture) to amortise the costs of certain capital expenditure that are not expressly depreciable. This amortisation is similar to taxpayers' entitlement to claim depreciation on fixed assets. Two minor amendments are proposed, to better align the amortisation rules for primary sector businesses more closely with the general rules on depreciation in the Income Tax Act 2007.

The bill proposes the removal of the remnants of depreciation loading for primary sector assets.

The bill also ensures the tax deductibility of expenditure on trees and plantings for erosion, shelter, and water protection purposes.

Fair dividend rate foreign currency hedges

At present, there is a mismatch in the income tax treatment for a person who enters into a foreign currency hedge in relation to certain offshore assets. Generally, the mismatch arises for assets that are taxed under the fair dividend rate (FDR) regime and for some ASX-listed shares, because the tax treatment of those assets is different from the current tax treatment of foreign currency hedges made in relation to them. This mismatch makes it more difficult to effectively hedge investments in those assets.

The bill proposes rules designed to eliminate the tax mismatch as much as possible. The rules are optional, and allow eligible taxpayers to apply FDR to their foreign currency hedges, rather than apply the financial arrangement rules. The rules are restricted to hedging those offshore assets for which the tax mismatch would normally arise.

Clarification of dividend definition

The dividend definition is being clarified to ensure that certain transactions are not dividends for tax purposes. From a policy perspective, transactions like rights issues, premiums paid under bookbuild arrangements, and share splits should not be treated as a taxable dividend because the company does not give up anything of value.

Refund request time period

The bill proposes a reduction in the time period allowed to some taxpayers for requesting a refund under the Income Tax Act 2007. The current period is generally 4 years from the year of assessment. An extra 4 years is allowed, for taxpayers other than those who receive personal tax summaries, if the overpayment resulted from a clear mistake or simple oversight. The proposal is to remove the extra 4 years from the period so that the same time is allowed for all taxpayers. The change would align the period in which a taxpayer must apply for a refund with the 4-year period in which the Commissioner must amend an assessment. It would result in taxpayers being treated equally for refund purposes.

Consistent with this amendment to the Income Tax Act 2007, the time period for requesting refunds of donations tax credits is being limited to 4 years from the relevant year.

Expenditure for a building's commercial fit-out

The bill proposes an amendment to the Income Tax Act 2007 to ensure that expenditure on a building's commercial fit-out is only immediately deductible if the capital / revenue boundary would allow the deduction ignoring the expenditure's relationship to the building. If the expenditure is not immediately deductible, it may be capitalised and depreciated over the fit-out's useful life.

Tax concessions for certain non-resident investment companies

The bill proposes the repeal of residual income tax concessions for certain non-resident companies investing in projects specified in 4 Orders in Council. The concessions have outlived their original purpose.

MPs' allowances

Minor technical changes are proposed, to correct an unintended anomaly following the rewrite of the Income Tax Act 1994. The changes apply from 1 April 2005, to restore the rules to the original position, and ensure that only the private element of payments and services provided to members of Parliament is taxed. Without the change, the full amount of payments and services to MPs, to carry out their Parliamentary duties, would be taxed.

Donee status

Donee status is proposed for 3 organisations, namely The Hunger Project New Zealand, OneSight New Zealand, and Fund for Timor.

GST issues

Cross border business to business neutrality

Under existing GST rules, a non-resident business that buys goods or services can incur a GST cost that would not be incurred by a resident business buying the same goods or services. Amendments are proposed to allow certain non-resident businesses to register for GST and claim input tax deductions for GST incurred on approximately the same basis as a resident registered person.

Deductibility of cash prizes

When the Gambling Act 2003 was enacted, consequential amendments were made to the Goods and Services Tax Act 1985. However, the changes had the unintended result of narrowing the range of circumstances in which cash prizes are able to be deducted when calculating the consideration for a supply. Amendments are proposed to restore the legislation in line with the original policy, and to slightly widen the range of circumstances in which cash prizes can be deducted.

Supplies by agents

An agent may make a supply to a recipient on behalf of a principal, and, for the purposes of the Goods and Services Tax Act 1985, the supply is treated as made by the principal with 1 invoice issued for the supply. In practice, however, some accounting systems automatically issue a tax invoice when goods or services are provided to another party, causing 2 invoices to be issued in an agency situation for what is in effect a single supply. The bill proposes to enable principals and agents to agree to treat the principal's provision of the goods and services to the agent and the agent's supply to the customer as separate supplies for GST purposes so allowing 2 tax invoices to be issued. Other changes include limiting the use of the bad debt rules when principals and agents use this new invoicing procedure.

Local authorities' change of accounting basis

In 2001, a temporary exemption was provided for certain local authorities from a requirement to change to the invoice accounting basis. The exemption expires on 30 June 2013. Eight local authorities are still to make the change but they have large rates debts on which output tax will be payable once the change is made. An amendment proposes the payment of the debt by instalment spread over 72 months with no penalties or interest imposed.

Record keeping

Changes are proposed to GST taxpayer record-keeping requirements so that they align with proposed Tax Administration Act 1994 requirements that allow flexibility in keeping records overseas.

KiwiSaver

This bill proposes an amendment to the definition of salary and wages in the KiwiSaver Act 2006 to exclude Voluntary Bonding Scheme payments from the KiwiSaver deduction regime. Voluntary Bonding Scheme payments are made under the auspices of the Ministry for Primary Industries, the Ministry of Health, and the Ministry of Education, to encourage graduates in veterinarian science, medicine, midwifery, nursing, and teaching to work in hard-to-staff specialities and geographical locations within New Zealand.

As a separate remedial matter, a cross-reference in section 4 of the KiwiSaver Act 2006 is corrected.

Remedial matters

The bill proposes various remedial amendments to various Revenue Acts, and to other Acts, consequentially. They are mainly of a technical nature. The more significant are:

  • ensuring that the current outstanding claims reserve provisions do not apply to general insurance policies with risk periods straddling 1 July 1993:

  • ensuring that transitional imputation penalty tax does not apply earlier than it should:

  • correcting a drafting mistake, to ensure that certain livestock valuation elections are in writing:

  • correcting cross-references in the calculation of net family scheme income for the minimum family tax credit:

  • correcting a drafting mistake in the CFC tax credit rules for foreign tax paid by a foreign company:

  • amending section EE 60 of the Income Tax Act 2007, and section EE 51 of the Income Tax Act 2004, on the advice of the Rewrite Advisory Panel:

  • amending the AIL rules to re-instate a DTA-related rule mistakenly removed:

  • correcting and rationalising cross-references for the income tax exemption of parts of overseas benefits:

  • amending the Schedule of the Search and Surveillance Act 2012 and the Tax Administration Act 1994, to ensure that the Inland Revenue's search and seizure powers are appropriate and harmonised between the 2 Acts.

Clause by clause analysis

Clause 1 gives the title of the Act.

Clause 2 gives the dates on which clauses come into effect.

Part 1 Amendments to Income Tax Act 2007

Clause 3 gives the clauses that affect the Income Tax Act 2007.

Clause 4 amends section CC 1 to clarify that the income that a person derives from the use of an asset referred to in subpart DG when they choose to opt out of the apportionment rules is not a payment of rent for the purposes of the section.

Clause 5 inserts new section CD 29B to ensure that certain transactions do not constitute a dividend.

Clause 6 amends section CD 40 by removing a cross-reference to repealed section RM 6.

Clause 7 amends section CD 41 by removing 2 cross-references to repealed section RM 6.

Clause 8 amends section CR 4 to ensure that the current outstanding claims reserve provisions do not apply to general insurance policies with risk periods straddling 1 July 1993.

Clause 9 inserts new section CV 18 as part of removing tax volatility for certain foreign exchange hedging transactions.

Clause 10 inserts new section CW 8B to treat the income that a person derives from the use of an asset referred to in subpart DG when they choose to opt out of the apportionment rules as exempt income.

Clause 11 amends section CW 28 as part of correcting and rationalising cross-references for the income tax exemption of parts of overseas benefits.

Clause 12 replaces section CW 31 to ensure, as a remedial matter, that only the private element of payments and services provided to members of Parliament is taxed.

Clause 13 replaces section CX 12 to ensure, as a remedial matter, that only the private element of payments and services provided to members of Parliament is taxed.

Clause 14 inserts new section DA 5 to ensure that expenditure on a building's commercial fit-out is only immediately deductible if the capital / revenue boundary would allow the deduction ignoring the expenditure's relationship to the building.

Clause 15 amends section DB 5 to clarify the relationship with the new rules in subpart DG.

Clause 16 amends section DB 7 to clarify the relationship with the new rules in subpart DG.

Clause 17 amends section DB 8 to clarify the relationship with the new rules in subpart DG.

Clause 18 amends section DB 64 to align primary sector amortisation deductions with general rules on capital contributions and depreciation.

Clause 19 inserts new subpart DG to provide the deductibility and apportionment rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Sections DG 1 and DG 2 provide an outline of the subpart and describe how it is to apply. Section DG 3 defines the assets to which the subpart applies, section DG 4 defines private use for the purposes of the subpart, and section DG 5 defines what is meant by interest expenditure. Section DG 6 modifies the rules related to persons associated with companies. Sections DG 7 to DG 9 determine the deductibility of expenditure when the asset is held simply by either a natural person or a close company. Section DG 8 provides the main expenditure limitation rule for expenditure related to the mixed-use of the asset, and section DG 9 sets out the apportionment formula that is used in a number of sections. Sections DG 10 to DG 14 outline the approach to the deductibility and apportionment of interest expenditure when the asset is held in complex structures involving related companies. Sections DG 15 to DG 19 provide for the treatment of quarantined expenditure, the calculations for determining the quarantined amounts, and the allocation of the expenditure. Sections DG 20 to DG 22 modify the earlier provisions for situations when amounts of income cannot be separately attributed to the use of an asset, when a person may choose to opt out of the rules, and when an asset is acquired or disposed of during the year.

Clause 20 amends section DO 1 as part of ensuring that expenditure on trees and plantings for erosion, shelter, and water protection purposes is tax deductible.

Clause 21 amends section DO 2 to ensure that expenditure on trees and plantings for erosion, shelter, and water protection purposes is tax deductible.

Clause 22 amends section DO 5 to remove depreciation loading for listed horticultural plants.

Clause 23 amends section DO 11 to allow deductions for expenditure on certain primary industry improvements to land, where the improvements have been rendered useless.

Clause 24 inserts new section DV 25 as part of removing tax volatility for certain foreign exchange hedging transactions.

Clause 25 amends section DW 4 to ensure that the current outstanding claims reserve provisions do not apply to general insurance policies with risk periods straddling 1 July 1993.

Clause 26 inserts new section EC 4B to ensure that a person receiving herd scheme animals from an associate must themselves use the herd scheme, except if the person is the direct descendant of the associate.

Clause 27 amends section EC 7 to ensure, as a remedial matter, that written notice is required for certain livestock valuation method elections.

Clause 28 amends section EC 8 as part of ensuring that a person receiving herd scheme animals from an associate must themselves use the herd scheme, and to allow the use of a valuation method other than the herd scheme, in limited circumstances.

Clause 29 amends section EC 11 as part of allowing the use of a valuation method other than the herd scheme, in limited circumstances.

Clause 30 amends section EC 20 as part of ensuring that a person receiving herd scheme animals from an associate must themselves use the herd scheme, and to prescribe outcomes when livestock is disposed of before values are determined.

Clause 31 repeals section EC 21 as part of ensuring that a person receiving herd scheme animals from an associate must themselves use the herd scheme.

Clause 32 amends section EE 60 to clarify that it applies to assets that are not available for use, including assets that are withdrawn from use.

Clause 33 inserts new subpart EM to remove tax volatility for certain foreign exchange hedging transactions. Section EM 1 provides general rules for applying subpart EM. Section EM 2 provides rules for who subpart EM applies to. Section EM 3 provides rules for what hedges subpart EM applies to. Section EM 4 provides rules for irrevocable elections to choose that eligible hedges are subject to subpart EM. Section EM 5 provides rules that set maximum fair dividend rate hedge portions for a person's eligible hedges. Section EM 6 provides the calculation to determine the income and expenditure for a person's fair dividend rate hedge portions. Section EM 7 provides a quarterly test of the person's fair dividend rate hedge portions, and provide rules that apply if the ratio of hedge portions to eligible hedged assets exceeds 1.05, including a rule to not apply subpart EM. Section EM 8 provides some definitions for subpart EM.

Clause 34 amends section EX 21 consequential to ensuring that expenditure on trees and plantings for erosion, shelter, and water protection purposes is tax deductible.

Clause 35 amends section GC 5 to ensure that the section does not apply in relation to assets referred to in subpart DG.

Clause 36 amends section HA 33 to correct a cross-reference as a remedial matter.

Clause 37 amends section LK 1 to allow a CFC credit for foreign tax paid by a foreign company as a remedial matter.

Clause 38 repeals sections LZ 2 to LZ 5 which relate to credits for certain non-resident investment companies.

Clause 39 amends section MB 1 as part of correcting and rationalising cross-references for the income tax exemption of parts of overseas benefits.

Clause 40 amends section ME 3 to correct cross-references in the calculation of net family scheme income for the minimum family tax credit.

Clause 41 amends section OB 71 by removing a cross-reference to repealed section RM 6.

Clause 42 amends section OB 72 by removing a cross-reference to repealed section RM 6.

Clause 43 amends section OB 72B by removing 2 cross-references to repealed section RM 6.

Clause 44 amends section OP 6 by removing a cross-reference to repealed section RM 6.

Clause 45 amends section RD 60 to insert a cross-reference to clarify the relationship between sections RD 60 and RA 20(2).

Clause 46 amends section RM 2 by removing a cross-reference to repealed section RM 6.

Clause 47 amends section RM 4 by removing a cross-reference to repealed section RM 6.

Clause 48 repeals section RM 6 which provides taxpayers who are required to make a tax return with an extra 4 years in which to apply for refunds arising from a clear mistake by or simple oversight of the taxpayer.

Clause 49 amends section RM 10 by removing a cross-reference to repealed section RM 6.

Clause 50 amends section RM 13 by removing a cross-reference to repealed section RM 6.

Clause 51 amends section RM 17 by removing a cross-reference to repealed section RM 6.

Clause 52 amends section RM 22 by removing a cross-reference to repealed section RM 6.

Clause 53 amends section RM 23 by removing a cross-reference to repealed section RM 6.

Clause 54 amends section RM 26 by removing a cross-reference to repealed section RM 6.

Clause 55 amends section RM 28 by removing a cross-reference to repealed section RM 6.

Clause 56 amends section RM 33 by removing a cross-reference to repealed section RM 6.

Clause 57 amends section YA 1. Subclause (1) amends the definition of asset as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclause (2) inserts a new definition of asset value as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclause (3) inserts a new definition of Australian non-attributing shares as part of removing tax volatility for certain foreign exchange hedging transactions. Subclauses (4) and (5) replace the definition of bonus issue to ensure that a share split involving the subdivision of shares does not constitute a dividend. Subclause (6) amends the definition of capital contribution as part of aligning primary sector amortisation deductions with general rules on capital contributions and depreciation. Subclause (7) inserts a new definition of capital contribution property as part of aligning primary sector amortisation deductions with general rules on capital contributions and depreciation. Subclause (8) inserts a new definition of class closing animal balance as part of Budget-related livestock valuation changes. Subclause (9) amends the definition of cost as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclause (10) inserts a new definition of debt value as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclause (11) inserts a new definition of descendant as part of Budget-related livestock valuation changes. Subclause (12) inserts a new definition of descended associate as part of Budget-related livestock valuation changes. Subclause (13) repeals the definition of development investments as part of removing tax concessions for certain non-resident investment companies. Subclause (14) inserts a new definition of eligible hedge as part of removing tax volatility for certain foreign exchange hedging transactions. Subclause (15) inserts a new definition of fair dividend rate hedge portion as part of removing tax volatility for certain foreign exchange hedging transactions. Subclause (16) amends the definition of FDP rules as a remedial matter. Subclause (17) inserts a new definition of hedge as part of removing tax volatility for certain foreign exchange hedging transactions. Subclause (18) inserts a new definition of interest expenditure as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclause (19) replaces the definition of investor interest as part of removing tax volatility for certain foreign exchange hedging transactions. Subclause (20) amends the definition of market value as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclauses (21) and (22) amend the definitions of New Zealand superannuation and New Zealand superannuitant as part of correcting and rationalising cross-references for the income tax exemption of parts of overseas benefits. Subclause (23) repeals the definition of non-resident investment company as part of removing tax concessions for certain non-resident investment companies. Subclause (24) replaces the definition of private use as part of the rules for expenditure that a person incurs in relation to certain assets when the person uses the asset partly for deriving income and partly for private purposes. Subclause (25) inserts a new definition of quarterly FDR hedging ratio as part of removing tax volatility for certain foreign exchange hedging transactions. Subclause (26) amends the definition of significant capital activity as part of ensuring that expenditure on trees and plantings for erosion, shelter, and water protection purposes is tax deductible. Subclause (27) replaces the definition of veteran's pension as part of correcting and rationalising cross-references for the income tax exemption of parts of overseas benefits. Subclauses (28) to (31) give dates for which the subclauses of clause 57 apply.

Clause 58 amends schedule 3 to insert a cross-reference as a remedial matter.

Clause 59 amends schedule 17 to consolidate the listed types and classes of livestock.

Clause 60 amends schedule 20 to remove depreciation loading for primary sector assets.

Clause 61 amends schedule 32 to add 3 new organisations to the list of recipients of charitable or other public benefit gifts.

Part 2 Amendments to other Acts

Amendments to Tax Administration Act 1994

Clause 62 gives the clauses that affect the Tax Administration Act 1994.

Clause 63 repeals section 2(4) which dates from the enactment of the Tax Administration Act 1994 and is now obsolete.

Clause 64 amends section 16, to ensure that the Inland Revenue's search and seizure powers are appropriate and harmonise with the Search and Surveillance Act 2012.

Clause 65 amends section 16C, to ensure that the Inland Revenue's search and seizure powers are appropriate and harmonise with the Search and Surveillance Act 2012.

Clause 66 inserts new section 30D for the notification that a company must provide to its shareholders when expenditure is incurred in relation to an asset that is used partly for deriving income and partly for private purposes.

Clause 67 amends section 41A to ensure a 4–year refund timeframe for donations tax credits.

Clause 68 amends section 120C as a consequential measure in relation to refunds owing to non-residents.

Clause 69 amends section 125 by removing a cross-reference to repealed section RM 6.

Clause 70 amends section 138E by removing a cross-reference to repealed section RM 6.

Clause 71 amends section 140C to ensure that transitional imputation penalty tax does not apply earlier than it should.

Clause 72 amends section 184 by removing a cross-reference to repealed section RM 6.

Amendments to Goods and Services Tax Act 1985

Clause 73 gives the clauses that affect the Goods and Services Tax Act 1985.

Clause 74 amends section 2 to insert a new definition of prize competition.

Clause 75 amends section 5 to provide for the treatment of the goods and services supplied by a non-resident person at the time they cease to be a registered person, and to restore the effect of the original policy in relation to prize competitions.

Clause 76 amends section 9 to restore the effect of the original policy in relation to prize competitions.

Clause 77 amends section 10. Subclauses (1), (2), and (4) clarify that the definition of market value in the Income Tax Act 2007 applies in relation to the new asset expenditure provisions. Subclause (3) restores the effect of the original policy in relation to prize competitions.

Clause 78 amends section 11 to zero-rate the costs of tools used exclusively to make exported goods.

Clause 79 amends section 19 to require a non-resident registered person to account for tax payable on a payments basis.

Clause 80 amends section 19A as a consequential amendment on the expiry of the exemption for certain local authorities from the requirement to account for GST on an invoice basis, and also to enable the Commissioner to require a non-resident registered person to account on a payments basis.

Clause 81 repeals section 19AB as a consequential amendment on the expiry of the exemption for certain local authorities from the requirement to account for GST on an invoice basis.

Clause 82 amends section 19C to update a cross-reference.

Clause 83 amends section 20. Subclauses (1), (3), (4), and (7) determine the amount of tax payable in relation to the use of an asset that is partly used for deriving income and partly for private purposes. Subclauses (2), (5), and (6) provide that non-resident registered persons may deduct input tax only to the extent to which goods or services are used for making taxable supplies.

Clause 84 inserts new section 20G to calculate the amount of an input tax deduction for expenditure on an asset described in subpart DG of the Income Tax Act 2007.

Clause 85 amends section 21B to update cross-references.

Clause 86 amends section 21D to update cross-references.

Clause 87 amends section 21G to update cross-references.

Clause 88 amends section 26 to exclude the application of the bad debt provisions in relation to certain supplies involving a principal and an agent.

Clause 89 amends section 46 to extend the refund period when the registered person is non-resident.

Clause 90 repeals section 52(7) as a consequential amendment on the insertion of new section 54C.

Clause 91 inserts new sections 54B and 54C to provide the rules for the registration and deregistration of non-residents.

Clause 92 amends section 55 to clarify the treatment of groups of companies who have both resident and non-resident registered persons as members.

Clause 93 amends section 60 to provide an opt-out provision for principals and agents so that 2 invoices can be issued for what is in effect a single supply.

Clause 94 amends section 75 to provide record keeping requirements that align with proposed Tax Administration Act 1994 requirements that allow flexibility in keeping records overseas.

Clause 95 inserts new section 87 to provide a transitional provision for certain local authorities who are required to account on an invoice basis from 1 July 2013.

Amendment to KiwiSaver Act 2006

Clause 96 amends the definition of salary and wages in section 4 of the KiwiSaver Act 2006 to exclude Voluntary Bonding Scheme payments from the KiwiSaver deduction regime, and to correct a cross-reference.

Amendment to Student Loan Scheme Act 2011

Clause 97 amends section 202 of the Student Loan Scheme Act 2011 by removing a cross-reference to repealed section RM 6.

Amendment to Stamp and Cheque Duties Act 1971

Clause 98 amends section 86I of the Stamp and Cheque Duties Act 1971 to re-instate a DTA-related rule mistakenly removed.

Amendments to Income Tax Act 2004

Clause 99 gives the clauses that affect the Income Tax Act 2004.

Clause 100 inserts new section CD 21BA to ensure that certain transactions do not constitute a dividend.

Clause 101 amends section CR 3 to ensure that the current outstanding claims reserve provisions do not apply to general insurance policies with risk periods straddling 1 July 1993.

Clause 102 replaces section CW 25 to ensure, as a remedial matter, that only the private element of payments and services provided to members of Parliament is taxed.

Clause 103 replaces section CX 11 to ensure, as a remedial matter, that only the private element of payments and services provided to members of Parliament is taxed.

Clause 104 amends section DW 3 to ensure that the current outstanding claims reserve provisions do not apply to general insurance policies with risk periods straddling 1 July 1993.

Clause 105 amends section EC 7 to ensure, as a remedial matter, that written notice is required for certain livestock valuation method elections.

Clause 106 amends section EE 51 to clarify that it applies to assets that are not available for use, including assets that are withdrawn from use.

Clause 107 amends section OB 1 to replace the definition of bonus issue as part of ensuring that a share split involving the subdivision of shares does not constitute a dividend.

Amendment to Social Security Act 1964

Clause 108 amends section 70(4) of the Social Security Act 1964 consequentially, as part of correcting and rationalising cross-references for the income tax exemption of parts of overseas benefits.

Non-resident investment companies Orders in Council

Clause 109 revokes 4 Orders in Council, consequential to the repeal of sections LZ 2 to LZ 5 of the Income Tax Act 2007 which relate to credits for certain non-resident investment companies.

Amendment to Search and Surveillance Act 2012

Clause 110 amends the Schedule of the Search and Surveillance Act 2012, consequential to ensuring that the Inland Revenue's search and seizure powers are appropriate and harmonise with that Act.