The Finance and Expenditure Committee has examined the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill and recommends that it be passed with the amendments shown.

Introduction

The bill seeks to amend various Acts, including the Income Tax Act 2007, the Tax Administration Act 1994, and the KiwiSaver Act 2006. The resulting legislation would confirm the annual rates of income tax for the 2013/14 tax year, and effect the following principal changes:

•Replacing the existing tax rules for New Zealand residents with interests in foreign superannuation schemes. The new rules aim to be simpler and fairer, and to make it easier for people who have not paid tax on their foreign superannuation in the past to comply.
•Changing the tax rules relating to the mining of specified minerals to make them less concessionary and more consistent with those for taxpayers generally.
•Clarifying the rules for Working for Families tax credits.
•Making a number of remedial technical changes to the rules for general and life insurance businesses.
•Addressing a mismatch in the tax rules relating to imputation credits and Australian dividends, to prevent the over-crediting of imputation credits in excess of the tax payable under foreign investment fund rules.
•Refining the rules for the deductions available to holders of bad debt.
•Allowing a company’s minimum financial reporting requirements to be set by Order in Council, if it would not otherwise be required to prepare financial statements following the repeal of the Financial Reporting Act 1993.
•Making it clear that holders of interest-free or low-interest loans cannot claim deductions for interest they have not incurred.
•Granting donee status to three charitable organisations.

Supplementary Order Paper 257

The Minister of Revenue released Supplementary Order Paper 257 to the bill on 25 June 2013. The SOP addresses tax issues arising from the Canterbury earthquakes by proposing amendments to the Income Tax Act 2007 including

•extending the time limit for tax measures introduced to address Canterbury earthquake-specific issues
•extending the availability of depreciation rollover relief.

The Minister wrote to the committee on 25 June 2013 inviting us to include the SOP in our consideration of the bill. We have done so, and are recommending that the amendments proposed in the SOP be incorporated into the bill, with a few adjustments.

Proposed amendments

This commentary discusses the more significant amendments we recommend to the bill. It does not discuss minor or technical amendments. For example, our proposed changes to clauses 26 and 29, relating to deductions for bad debt, and to clauses 44 to 52, relating to remedial changes to the taxation of insurance businesses, are largely technical refinements to ensure the rules are clear and work as intended.

Commencement

Clause 2 provides for a number of the bill’s provisions to apply retrospectively; we are also recommending the retrospective application of several amendments. We are satisfied that the justification for backdating these provisions is sound, and that taxpayers would not be unreasonably affected.

Taxation of foreign superannuation

The bill proposes a much simpler regime for taxing New Zealand residents who receive foreign superannuation. People who migrate to New Zealand, or return after a period overseas, often have superannuation interests in their previous country of residence. The bill would make lump-sum withdrawals from such schemes taxable on receipt, allowing taxpayers to choose one of two calculation methods.

Because the current rules are complex, many people are unaware of the tax treatment of these interests in New Zealand, which has contributed to high rates of non-compliance. The bill proposes a simple way for people to remedy their previous position and start afresh under the new regime; a concessionary approach encourages them to do so.

Clause 8 contains the main provisions on foreign superannuation, but numerous other clauses are also relevant. We recommend several amendments to ensure the bill works as intended and avoids unintended consequences, and for clarification and consistency.

Pensions from trusts and companies

Clause 6 would insert new section CD 36B into the Income Tax Act 2007, relating to the treatment of distributions from foreign superannuation schemes that are trusts or companies. We recommend amending this clause, with a related amendment in clause 66(1), to include pensions and make it clear that they would be subject to the general tax rules applying to pensions, rather than treated as dividends or taxed under the trust rules.

Social security schemes

We are recommending several amendments in clause 8 and elsewhere to make it clear that the definition of a foreign superannuation scheme does not include overseas social security schemes. Such schemes make payments similar to New Zealand Superannuation, and we consider it appropriate that they be treated under the normal tax rules that apply to New Zealand pensions, rather than under the foreign investment fund (FIF) rules or under the regime proposed in the bill. This would be consistent with the original intention of the 1976 and 1994 Income Tax Acts, and would correct some ambiguity resulting from the rewriting of the Act in 2004. We recommend making this change retrospective to 1 April 2005, when the rewritten Act came into effect.

The amendments we recommend are to insert new section CF 3(1A)(a) in clause 8, clause 103(51B), and clause 116B amending the Income Tax Act 2004.

Definition of foreign superannuation interest

We recommend amending clause 8 to specify that the regime proposed in the bill would be available only if a person first acquired the rights in a foreign superannuation scheme while they were non-resident. This would avoid a situation in which a person who intended to retire overseas could invest in a foreign superannuation fund while resident in New Zealand, and withdraw the funds once they moved overseas, paying no tax on the fund’s earnings while they were resident in New Zealand, when ordinarily they would be subject to the foreign investment fund rules. This would be inconsistent with the policy intent of New Zealand’s tax rules, and in particular the FIF rules.

Our recommended change would be effected by inserting in clause 8 new sections CF 3(1A)(b)(ii) and CF 3(3)(b), and amending the definition of “FIF superannuation interest” in clause 103(9).

Eligibility for exemption period

The provisions in clause 8 sections CF 3(3) and CF 3(4) are designed to simplify the current rules that allow new migrants who qualify as transitional residents a four-year period in which withdrawals from foreign superannuation schemes are not counted as income. The bill’s provisions would extend the four-year exemption to any taxpayer who acquired an interest in a foreign superannuation scheme while living overseas. This is designed to apply the exemption more fairly, as some people who otherwise qualify as transitional residents do not qualify for the existing exemption, for example if they receive Working for Families tax credits.

We recommend amending these provisions to ensure that the underlying policy intent is achieved; that is, that the same exemption period be available to people whether or not they qualify as transitional residents.

We also recommend consequential amendments in clause 18, new section CW 28B, to ensure that amounts received in this period would not be counted as taxable income.

Assessable period

We consider that some amendments are needed to ensure the legislation works as intended if a person has more than one period of residence for a given foreign superannuation interest; that is, when they have moved back and forth between New Zealand and an overseas country. As introduced, the bill would calculate the assessable period on the basis of the latest period of residence only.

We recommend amending clause 8, section CF 3(5), and inserting section CF 3(5B), to reflect the policy intent that all periods of residence in New Zealand during which a person held a foreign superannuation interest should be aggregated in calculating the assessable period.

Exception for transfers on death or relationship cessation

We recommend amending the provisions in clause 8 relating to the transfer of an interest in a foreign superannuation scheme to another person following a relationship split, or upon death. Under existing law such a transfer is a taxable event; the bill as introduced would retain this treatment with one exception: where the interest was transferred from one New Zealand resident to another upon death, rollover relief would be provided so the interest was not taxable until the recipient ultimately made a withdrawal.

We consider that the exception proposed would be inconsistent with other parts of the Income Tax Act that deal with property transfers in the event of death or a relationship break-up. The changes we recommend would broadly align the treatment of foreign superannuation interests with other relief provisions in the Act, and should result in less confusion.

Under the amendments we propose, rollover relief would be provided where the transfer occurred as a result of a relationship break-up, or upon the death of the transferor, but only where the transferee was a New Zealand resident and the surviving or former spouse or partner.

The amendments we recommend in clause 8 entail amending sections CF 3(1)(d), CF 3(6)(b)(v), and CF 3(18)(d), and inserting sections CF 3(1A)(b)(ii), and CF 3(1B).

Formula method

Clause 8, new sections CF 3(6) to CF 3(15), would establish two alternative methods for calculating the tax on a lump-sum withdrawal from a foreign superannuation scheme. The default would be the schedule method, under which the percentage of the sum withdrawn that would be taxed would depend on the number of years a person had been a New Zealand resident. People would have the option of choosing to calculate their tax using the more complicated formula method; this would tax the actual gains made by the scheme while they were resident in New Zealand, plus an interest charge to recognise that payment of the tax had been deferred until money was withdrawn from the scheme. In calculating the amount of tax deferred, the formula method, as introduced, would assume that the person was on the highest marginal tax rate.

We considered whether it would be fairer to base this calculation on a person’s average marginal tax rate, but concluded that this would be overly complex. Instead, we recommend amending the formula to use the top portfolio investment entity (PIE) tax rate, currently 28 percent, rather than the top personal tax rate. We believe this would reflect better the rate that would have been paid had the funds been invested in a New Zealand superannuation fund. We recommend amending clause 8, new section CF 3(15)(b), accordingly.

Relationship to the rest of the Act

We recommend amending clause 8 by inserting new section CF 3(19) to avoid the possibility of double taxation by making it clear that a person who was subject to the proposed new rules would not also remain liable for their unpaid FIF tax. This is because the proposed rules for taxing lump sums would account for any tax that should have been paid, whether or not it was. However, where a taxpayer had acquired the interest in the foreign superannuation scheme while already a New Zealand resident, they would still be subject to the FIF rules and remain liable for unpaid FIF tax.

Past withdrawals

Clause 25 of the bill, inserting new section CZ 21B, would allow people who had made lump-sum withdrawals from foreign superannuation schemes prior to 1 April 2014 but not complied with their tax obligations two options for getting their tax affairs in order: they could choose between applying the law as it was at the time of each withdrawal, or paying tax on 15 percent of the amount withdrawn. The 15 percent option is intended to be a low-cost way for non-compliant taxpayers to square up their outstanding obligations.

We recommend some amendments to clause 25 to ensure that the intention is clear and that the legislation would operate as intended. Under the changes we recommend, taxpayers who chose to use the 15 percent option in subsequent income years would have their 2014/15 income year reassessed so as to apply that concessionary tax rate.

“Grandparenting” under the FIF rules

To ensure that taxpayers who have already complied with the FIF rules do not face higher compliance costs, the bill would permit them to continue using the FIF rules rather than requiring them to comply with the new regime. However, the bill as introduced does not make it clear whether this would also apply where a taxpayer had earned no income, or incurred a loss, from the foreign investment fund, in which case no evidence of compliance would be recorded in their tax return.

We recommend amending the definition of FIF superannuation interest in clause 103(9) to make it clear that a taxpayer who had complied with the FIF rules in relation to a foreign superannuation interest, but had earned no income from the foreign investment fund, or incurred a loss, would remain free to use the FIF rules.

Withdrawals from KiwiSaver

Clause 115 of the bill proposes changes to the KiwiSaver Act 2006 to allow taxpayers who transfer from a foreign scheme to a KiwiSaver scheme to withdraw sufficient funds from the KiwiSaver scheme to pay the tax that arises on transfer. We propose a few amendments to these provisions, as discussed below.

Student loan obligations

We note that a student loan repayment obligation may also arise where a portion of a foreign superannuation transfer is counted as taxable income. We consider it appropriate to allow a taxpayer to withdraw funds from KiwiSaver to cover their repayment obligation arising from such a transfer, as well as the tax obligation. We recommend amending clause 115 accordingly, to amend clause 14C(1)(b) in Schedule 1 of the KiwiSaver Act.

Time limit for withdrawals

The bill’s provisions relating to withdrawals from KiwiSaver would require an application for a withdrawal to be made within two years of a transfer from a foreign superannuation scheme. We consider it more appropriate that the two-year period commence when the tax liability arises; that is, after an income tax return has been submitted and the transfer has been assessed as income. We recommend amending clause 115 accordingly, to amend the requirement in clause 14C(3)(a) in Schedule 1 of the Act.

Payment to Inland Revenue

To prevent a person withdrawing funds under this provision but then failing to pay their tax liability, we recommend amending clause 115 to insert clause 14C(4) in Schedule 1 of the KiwiSaver Act, to require the KiwiSaver provider to make the payment direct to the Inland Revenue Department if their systems allow them to do so. Whether or not the payment was made direct to Inland Revenue, the KiwiSaver provider would be required to notify the Commissioner of Inland Revenue that such a withdrawal had been made.

UK rules for transfers to foreign schemes

We are aware of concern about the UK’s “QROPS”¹ rules for transfers of superannuation savings. While transfers to foreign locked-in schemes such as KiwiSaver are allowed without incurring tax, any withdrawal from such a scheme within five years of becoming non-resident in the UK could trigger a surcharge of up to 55 percent.

We are concerned about the complexity of the rules and the potential for taxpayers to incur a significant tax liability. We consider it important that people considering making a transfer are made aware of their potential tax obligations, and of how to time the transfer so as to minimise any penalties. We understand that most transfers are made using the services of an agent, and strongly recommend that Inland Revenue undertake a campaign to educate agents and their clients about their options and obligations under the proposed regime.

Mineral mining

Clauses 13 and 35, replacing subparts CU and DU of the Income Tax Act 2007, propose a new regime for the taxation of mineral mining. It would be less concessionary than current law, and more in line with the way other businesses are taxed. There would still be some specific provisions to take into account particular features of the mining industry. We agree with the policy intent of tightening an overly concessionary treatment of mineral miners; our consideration focused on whether the proposed regime would lean too far the other way, penalising miners and jeopardising their international competitiveness. The amendments we propose below seek to strike an appropriate balance.

Treatment of mining land

The bill treats land acquired for the purposes of mining as revenue account property, so the cost of the land would be deductible when the land was sold, and the proceeds from its sale would be taxable.

We recommend amending clause 13, section CU 2(1), to make it clear that land acquired away from the permit area, for example for administrative purposes, would not be counted as mining land; the mining land rules would apply only to land that included, or was intended to include, all or part of a permit area or was adjacent to it. We recommend that clause 35, section DU 3(2), be similarly amended.

We also believe it should be made clear that the specific land rules in the bill would apply in preference to general revenue account property rules. To do so, we recommend inserting clause 27B, amending section DB 23.

Prospecting and exploration expenditure

Clauses 13 and 35 would make expenditure on exploration fully deductible, but with provision for deductions to be clawed back if an asset created during the exploration phase, such as a road, was later used in a mine’s development or operation. We consider this a reasonable approach. It recognises that mining requires hefty investment in the exploration phase, remaining more generous than the treatment of some other businesses, which are not always allowed to deduct feasibility expenditure.

We note, however, that the bill as introduced leaves open-ended the period for which a miner is required to keep records of expenditure that might later be clawed back. We consider that this could be onerous and unrealistic, and recommend amending clause 13 by inserting new subsection CU 4(1)(cb) to require records to be kept for the same period required of other taxpayers under the Tax Administration Act 1994, being seven years from the end of the income year to which they relate.

We also recommend amending clause 13, section CU 4(1)(c), so that the claw-back rule would apply only to expenditure incurred after the new rules took effect. This would avoid their retrospective application, which was not intended.

Development and operational expenditure

We recommend changes to the definition of development expenditure in the bill as introduced (clause 35, section DU 12); in some respects we consider it unduly broad, and in others incomplete. The definition is intended to cover expenditure on developing a mine to the point where commercial extraction can begin, or subsequent expenditure that is capital in nature and therefore appropriate to deduct over the life of the mine. The definition as introduced, however, could also capture expenditure related to the day-to-day operation of a mine after production had commenced. We propose adding a new definition of “operational expenditure” to cover such expenditure, and excluding it from the definition of development expenditure. We recommend amending clause 35 by inserting sections DU 12(3)(ab) and DU 12(4) accordingly.

To accommodate the fact that mining can take place offshore, we recommend amending clause 35, section DU 12(2)(c)(i), by expanding the definition of development expenditure to include vessels.

Rehabilitation expenditure

As introduced, the bill would allow a deduction for rehabilitation expenditure when it was paid; we note that this differs from the general rule, which is to allow a deduction when expenditure is “incurred”, that is, when a legal liability to pay has been taken on. In the interests of avoiding unnecessary compliance costs, we recommend amending clause 35, sections DU 2(2) and DU 2(4), so that rehabilitation expenditure would be deductible when it was incurred.

We also recommend amending clause 35, section DU 13(a), by broadening the definition of “rehabilitation expenditure” to accommodate other legislation that may require rehabilitation work, such as the Conservation Act 1987 and the Historic Places Act 1993.

Depreciation rules

We recommend changing the approach proposed in the bill for the calculation of depreciation on mineral mining.

As introduced, the bill would require the depreciation of a mining asset to be spread over the assumed life of the mine. While it is normal practice for depreciation to be based on the estimated useful life of the income-producing asset, we accept the view that the methods provided for in the bill as introduced would not adequately reflect the nature of the industry, where income tends to be very uneven. After considering possible alternatives, we recommend amending the bill to allow depreciation to be calculated using a unit of production method, based on proven and probable reserves, provided the miner produces accounts using international financial reporting standards (IFRS), or otherwise keeps records that would allow this method to be verified. To avoid unnecessary compliance costs for smaller operators, we recommend retaining the methods provided for in the bill as introduced as an option for those who do not keep IFRS accounts.

To effect these changes, we recommend amending clause 35 by inserting sections DU 5B and DU 5C and deleting sections DU 6 to DU 8, and inserting clause 37G, sections EJ 20B to EJ 20E. We note in particular that “proven and probable reserves” would be defined by section EJ 20E(4)(d) in relation to established classification codes recognised under the Crown Minerals (Minerals other than Petroleum) Regulations 2007.

We have also considered whether, for depreciation purposes, expenditure should be related to a permit area, as in the bill as introduced, or to a mine, since a miner may have several mines within a permit area, with different life-spans. A miner could also have a single mine covering several permit areas. The amendments we recommend above, particularly the insertion of clause 37G, sections EJ 20B(6) and EJ 20E(6), would allow miners to use the unit of measure best suited to their actual operations, while limiting the scope for inappropriate allocation of expenses to selected projects with the shortest life. This would mean that the “mine” option would be available only to miners who produce IFRS accounts, if the accounts allowed expenses to be allocated to individual mines.

Tax credits for mineral miners

Clause 88, inserting new subpart LU, would create a refundable credit mechanism to allow for the fact that a miner will generally incur rehabilitation expenditure at the end of a mine’s life, when it generates no income to offset the expenditure. We note, however, the potential for “black-hole” expenditure if the depreciation deductions in the final year of a mine’s operation exceeded income derived from the mine in that year. To avoid this unintended result, while ensuring that the credit was not available prematurely (for example, if a mine was mothballed, rather than closed permanently), we recommend amending clause 88, section LU 1(1), to provide for the refundable credit to be tied to the date on which the miner relinquished rights under the relevant permit.

We are also recommending changes in section LU 1(4) to clarify how the credit would be calculated, particularly for trustees and individuals.

Loss continuity rules

The bill would retain the existing concessionary departure from normal shareholder continuity rules, which do not allow deductions for losses to be carried over when a company’s ownership structure changes significantly. The retention of this concession is designed to acknowledge that changes in a company’s structure are a common feature of the mineral mining industry between the exploration and development stages, when large amounts of new capital must be raised. We consider this concession appropriate, in combination with existing rules which prevent a mineral mining company from forming a tax group except with other mineral mining companies, thus precluding inappropriate trading of losses between companies. We will, however, expect Inland Revenue to monitor compliance carefully.

We recommend amending clause 80(1B) to make it clear what expenditure the bill’s provisions regarding shareholder continuity would apply to. While the existing Act divides mining expenditure into just two types, exploration expenditure and development expenditure, clause 35 of the bill, if enacted as we recommend, would subdivide the types of spending into prospecting, exploration, development, operating, and rehabilitation expenditure. Our recommended amendment would make it clear that all such types of mining expenditure apart from rehabilitation expenditure would survive a breach of shareholder continuity, not just expenditure on exploration or development. Rehabilitation expenditure is expected to be eligible for a tax credit, rather than being carried forward, and so is not included.

Canterbury earthquake tax measures

Tax measures introduced to address issues arising from the Canterbury earthquakes are due to expire at the end of 2015/16. As it has become clear that rebuilding will take longer than initially estimated, SOP 257 proposes to extend the duration of the measures by three years. We recommend that the SOP be incorporated into the bill with some amendments, which we discuss below.

We note that a further extension of the expiry dates for relief measures beyond 2018/19 is not expected to be needed, but the possibility cannot be ruled out given the uncertainties of Canterbury’s rebuilding. We urge Inland Revenue to announce any further review well in advance of the expiry dates to give taxpayers the certainty they need.

Deductions for interruption expenditure

We recommend inserting clause 37BA to replace section DZ 20 of the Income Tax Act relating to deductions for expenditure incurred while income-earning activity was interrupted by the Canterbury earthquakes. This amendment would correct an inadvertent omission from the SOP, extending the life of this relief provision to the end of 2018/19.

Application for building consent

While the provisions in the SOP would move the time limit for the tax relief measures to the end of 2018/19, they would still require a person to have applied for a building consent by the end of 2015/16 to qualify. In view of continuing uncertainty about planning and rebuilding in Canterbury, we consider this requirement unnecessarily onerous. We recommend removing the requirement for taxpayers to have applied for building consent by the end of the 2015/16 income year.

To effect this change, we recommend amending clauses 52B and 52C of the SOP as introduced by removing sections EZ 23B(7) and (7B), and amending sections EZ 23BB(9) and (10).

Transition to new rules for depreciation rollover relief

Clause 52B, as proposed on the SOP, would amend section EZ 23B of the Income Tax Act 2007, which provides tax relief regarding a person’s income from proceeds of insurance on earthquake-damaged depreciable property. Clause 52C would extend this relief, to recognise the fact that many owners of buildings damaged in the earthquakes will be investing in larger replacement buildings as members of groups of investors. To access relief under new section EZ 23BB, a person would generally be required to meet the same criteria applying in existing section EZ 23B, but would also need to have an interest in a joint investment company that will acquire replacement property.

We recommend amending clauses 52B and 52C to provide a transition between the two relief provisions, so that a taxpayer who had previously relied on existing section EZ 23B could claim relief under new section EZ 23BB. The new section would take retrospective effect from 4 September 2010, the date of the first Canterbury earthquake. The changes we recommend entail inserting clause 52B(8), section EZ 23B(11)B, and amending clause 52C, sections EZ 23BB(1)(a)(iv) and EZ 23BB(11)(c).

We are also recommending some amendments in clause 52C to clarify the meanings of several terms in the context of new section EZ 23BB.

Working for Families tax credit rules

The bill proposes various changes to the provisions for Working for Families tax credits to ensure they operate as intended. We have considered ways of simplifying the rules to reduce the difficulty and cost of compliance. We propose some relatively minor changes that would help by reducing compliance costs, and would mean only a small increase in Government spending.

We recommend amendments in clauses 91 and 92, sections MB 4 and MB 7, and the insertion of new clauses 92B and 92C, amending sections MB 8 and MB 9. These sections relate to close companies, trusts, and companies owned by trusts; the changes are designed to rationalise the provisions by aligning the wording and formulae. We understand that Inland Revenue also intends to review the IR215 form and supporting information to try to improve guidance about the income information required from families.

Appendix

Committee process

The Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill was referred to the committee on 12 June 2013. The closing date for submissions was 24 July 2013. Supplementary Order Paper 257 was released by the Minister of Revenue on 25 June 2013 and we called for submissions with a closing date of 7 August 2013.

We received and considered 24 submissions from interested groups and individuals. We heard nine submissions.

We received advice from the Inland Revenue Department, the Treasury, and our specialist tax advisor, Therese Turner.

Committee membership

Paul Goldsmith (Chairperson)

Maggie Barry

David Bennett

Dr David Clark

John Hayes

Hon Shane Jones

Dr Russel Norman

Hon David Parker

Rt Hon Winston Peters

Jami-Lee Ross

Hon Kate Wilkinson

Julie Anne Genter replaced Dr Russel Norman for this item of business.

Key to symbols used

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Hon Todd McClay

Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill

Government Bill

112—2

1 Title

2 Commencement

Part 1
Annual rates of income tax

3 Annual rates of income tax for 2013–14 tax year

Part 2
Amendments to Income Tax Act 2007

4 Income Tax Act 2007

5 Section CB 36 amended (Disposal of emissions units)

6 New section CD 36B inserted (Foreign superannuation withdrawals and pensions from foreign superannuation scheme)

CD 36B Foreign superannuation withdrawals and pensions from foreign superannuation scheme

7 Subpart CF heading amended (Income from living allowances, compensation, and government grants)

8 New section CF 3 inserted (Withdrawals from foreign superannuation scheme)

CF 3 Withdrawals from foreign superannuation scheme

9 Section CQ 5 amended (When FIF income arises)

9B Section CR 4 amended (Income for general insurance outstanding claims reserve)

10 Section CT 1 amended (Disposal of exploratory material or petroleum mining asset)

11 Section CT 4 amended (Partnership interests and disposal of part of asset)

12 Section CT 5 amended (Petroleum mining operations outside New Zealand)

13 Subpart CU replaced (Income from mineral mining)

14 Section CV 2 amended (Consolidated groups: income of company in group)

15 New section CV 19 inserted (Additional income for certain imputation credits)

CV 19 Additional income for certain imputation credits

16 Section CW 12 amended (Proceeds of share disposal by qualifying foreign equity investor)

17 Heading before section CW 28 amended (Income from living allowances, compensation, and government grants)

18 New sections CW 28B and CW 28C inserted

CW 28B Foreign superannuation withdrawal in initial period of residency

CW 28C Foreign superannuation withdrawal exceeding given amount

18B New section CW 55BAB inserted (Rebate of fees paid by FIF)

CW 55BAB Rebate of fees paid by FIF

19 Section CX 43 replaced (Farm-out arrangements for petroleum mining)

CX 43 Farm-out arrangements for mining operations

~~20 Section CX 44 repealed (Disposal of mining shares)~~

20 Heading and section CX 44 repealed (Disposal of mining shares)

21 Section CX 45 repealed (Disposal of mining shares acquired with reinvestment profit)

22 Section CX 46 repealed (Repayment of loans made from reinvestment profit)

23 Section CZ 2 repealed (Mining company's 1970–71 tax year)

24 Section CZ 4 repealed (Mineral mining: company making loan before 1 April 1979)

25 New section CZ 21B inserted (Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014)

CZ 21B Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014

25B Section CZ 25 amended (Land and buildings as revenue account property affected by Canterbury earthquakes and replaced—insurance or compensation, Government purchase)

25C Section CZ 26 replaced (Land and buildings affected by Canterbury earthquakes—sections CB 9 to CB 12 overridden for Government purchases)

CZ 26 Land and buildings affected by Canterbury earthquakes—sections CB 9 to CB 12 and CB 14 overridden for Crown purchases

26 New section CZ 27 inserted (Prior bad debt deductions clawback)

CZ 27 Prior bad debt deductions clawback

27 New section CZ 28 inserted (Transitional provision for mineral mining: previously appropriated mining expenditure)

CZ 28 Transitional provision for mineral mining: previously appropriated mining expenditure

27B Section DB 23 amended (Cost of revenue account property)

28 Section DB 30 amended (Cost of non-specified mineral)

29 Section DB 31 amended (Bad debts)

30 Section DN 6 amended (When FIF loss arises)

31 Section DP 11 amended (Cost of timber)

32 Section DR 3 amended (Life reinsurance outside New Zealand)

33 Section DR 4 amended (Life insurers' claims reserves)

34 Section DT 17 amended (Attribution of expenditure)

35 Subpart DU replaced (Mineral mining expenditure)

Subpart DU —Mineral mining expenditure

DU 1 Mining expenditure: prospecting and exploration expenditure

DU 2 Mining expenditure: rehabilitation expenditure

DU 3 Acquisition of land for mining operations

DU 4 Acquisition of mineral mining assets

DU 5 Farm-out arrangements

DU 5B Deduction for certain mining expenditure spread over assumed life of mine

DU 5C Deduction for certain mining expenditure spread on basis of units of production

~~Spreading rule for certain expenditure~~

~~DU 6 Spreading rule for certain expenditure~~

~~DU 7 Length of spreading period~~

~~DU 8 Measurement of assumed life of mine and application to rate~~

Classes of mining expenditure

DU 9 Classes of mineral mining expenditure

DU 10 Some definitions

DU 11 Meaning of mining exploration expenditure

DU 12 Meaning of mining development expenditure

DU 13 Meaning of mining rehabilitation expenditure

36 Section DW 4 amended (Deduction for general insurance outstanding claims reserve)

37 Section DZ 12 repealed (Mineral mining: 1954–2005)

37BA Section DZ 20 replaced (Expenditure incurred while income-earning activity interrupted by Canterbury earthquake)

DZ 20 Expenditure incurred while income-earning activity interrupted by Canterbury earthquake)

37B Section EA 2 amended (Other revenue account property)

37C Section EA 3 amended (Prepayments)

37D Section ED 3 amended (Part-year tax calculations for transfers: general insurance OCR)

37E Section EE 1 amended (What this subpart does)

37F Section EE 52 amended (Amount of depreciation recovery income when compensation received)

37G New heading and sections EJ 20B to EJ 20E inserted

Mineral mining

EJ 20B Certain mining expenditure spread over assumed life of mine

EJ 20C Length of spreading period

EJ 20D Measurement of assumed life of mine and application to rate

EJ 20E Certain mining expenditure spread on basis of units of production

38 Section EW 15D amended (IFRS financial reporting method)

39 Section EX 21 amended (Attributable CFC amount and net attributable CFC income or loss: calculation rules)

40 Section EX 29 amended (Attributing interests in FIFs)

41 Section EX 33 repealed (Exemption for Australian regulated superannuation savings)

42 Section EX 42 repealed (New resident's accrued superannuation entitlement exemption)

43 New section EX 42B inserted (Interests in foreign superannuation scheme other than FIF superannuation interests)

EX 42B Interests in foreign superannuation scheme other than FIF superannuation interests

44 Section EY 5 amended (Part-year tax calculations)

45 Section EY 15 amended (Policyholder base income: non-participation policies)

45B Section EY 16 amended (Policyholder base allowable deductions: non-participation policies)

46 Section EY 17 amended (Policyholder base income: profit participation policies)

47 Section EY 19 amended (Shareholder base income: non-participation policies)

48 Section EY 20 amended (Shareholder base allowable deductions: non-participation policies)

49 Section EY 21 amended (Shareholder base income: profit participation policies)

~~50 Section EY 24 amended (Outstanding claims reserving amount: non-participation policies not annuities)~~

~~51 Section EY 28 amended (Shareholder base other profit: profit participation policies that are existing business)~~

~~52 Section EY 29 amended (Shareholder base other profit: profit participation policies that are new business)~~

52B Section EZ 23B amended (Property acquired after depreciable property affected by Canterbury earthquakes)

52C New section EZ 23BB inserted (Interest in property acquired after depreciable property affected by Canterbury earthquakes)

EZ 23BB Interest in property acquired after depreciable property affected by Canterbury earthquakes

52D Sections EZ 23C to EZ 23G repealed

~~53 Section EZ 56 amended (Expected death strain formula (life): when annuity payable on death)~~

~~54 Section EZ 57 amended (Expected death strain formulas: when annuity payable on survival to date or age specified in policy)~~

55 New heading and section EZ 69 inserted (IFRS financial reporting method: interest-free and low-interest loans)

IFRS financial reporting method

EZ 69 IFRS financial reporting method: interest-free and low-interest loans

55B New heading and sections EZ 70 to EZ 74 inserted

Damage from Canterbury earthquakes

EZ 70 Insurance for Canterbury earthquake damage of property: deemed sale and purchase

EZ 71 Insurance for Canterbury earthquake damage of property: limit on depreciation recovery income

EZ 72 Item treated as available for use if access restricted due to Canterbury earthquake

EZ 73 Insurance for Canterbury earthquake damage causing disposal: optional timing rule for income, deductions

EZ 74 Insurance for repairs of Canterbury earthquake damage: optional timing rule for income, deductions

56 Section FB 20 repealed (Mining assets)

57 Section FB 21 amended (Depreciable property)

57B Section FE 41 amended (Treatment of associated persons' interests)

58 Section FM 31 amended (Eligibility rules)

59 Section FN 4 amended (Eligibility rules)

59B Section FZ 7 replaced (Valuation of group assets: insurance proceeds from Canterbury earthquake)

FZ 7 Valuation of group assets: insurance proceeds from Canterbury earthquake

60 Heading before section GB 20 replaced (Arrangements involving petroleum mining)

61 Section GB 20 replaced (Arrangements involving petroleum mining)

GB 20 Arrangements involving petroleum and mineral mining

62 Section GB 32 amended (Benefits provided to employee's associates)

63 Section GB 44 amended (Arrangements involving tax credits for families)

64 Section GZ 1 amended (Limitation on section GB 20: petroleum mining arrangements)

65 Section HA 4 amended (Conditions applying)

66 Section HC 15 amended (Taxable distributions from non-complying and foreign trusts)

67 Section HC 27 amended (Who is a settlor?)

68 Section HM 8 amended (Residence in New Zealand)

69 Section HM 11 amended (Investment types)

70 Section HM 12 amended (Income types)

71 Section HM 13 amended (Maximum shareholdings in investments)

71B Section HM 36 amended (Calculating amounts attributed to investors)

72 Section HM 50 amended (Attributing credits to investors)

73 Section HM 55FB amended (Notified foreign investors and tax credits for supplementary dividends)

74 Section HM 72 amended (When elections take effect)

75 Section HR 8 amended (Transitional residents)

76 Section IA 7 amended (Restrictions relating to ring-fenced tax losses)

77 Section ID 1 amended (Treatment of tax losses by consolidated groups)

78 Heading to subpart IS replaced (Mining companies' and petroleum miners' tax losses)

79 Section IS 1 amended (General treatment of mining companies' net losses)

80 Section IS 2 amended (Treatment of net losses resulting from certain expenditure)

81 Section IS 3 repealed (Holding companies' tax losses)

82 Section IS 4 repealed (Adjustments in certain circumstances)

83 Section IS 6 amended (When company stops being mining company)

~~84 Section IV 1 amended (Supplementary dividend holding companies)~~

85 Section LA 6 amended (Remaining refundable credits: PAYE, RWT, and certain other items)

85B Section LD 3 amended (Meaning of charitable or other public benefit gift)

86 New section LE 8B inserted (Dividends from certain FIF interests)

LE 8B Dividends from certain FIF interests

87 Subpart LR repealed (Tax credits for policyholder income)

88 New subpart LU inserted (Tax credits for mineral miners)

Subpart LU —Tax credits for mineral miners

LU 1 Tax credits for mineral miners

89 Section MA 8 amended (Some definitions for family scheme)

90 Section MB 1 amended (Adjustments for calculation of family scheme income)

91 Section MB 4 replaced (Family scheme income of major shareholders in close companies)

~~MB 4 Family scheme income of major shareholders in close companies~~

MB 4 Family scheme income of major shareholders in close companies

92 Section MB 7 amended (Family scheme income of settlor of trust)

92B Section MB 8 amended (Family scheme income from fringe benefits: controlling shareholders)

92C Section MB 9 amended (Family scheme income from deposits in main income equalisation accounts)

93 Section MC 6 amended (When person does not qualify)

94 Section MD 1 amended (Abating WFF tax credit)

95 Section MD 2 amended (Calculating net contributions to credits)

96 Section MD 12 amended (Calculation of parental tax credit)

97 Section MD 13 amended (Calculation of family credit abatement)

98 Section MD 16 amended (Calculation of parental tax credit abatement)

99 Section OB 1 amended (General rules for companies with imputation credit accounts)

99B Section OB 2 amended (Australian companies with imputation credit accounts)

100 Section OB 47 amended (Debit for policyholder base imputation credits)

101 Section OP 44 amended (Consolidated ICA debit for policyholder base imputation credits)

102 Section RD 5 amended (Salary or wages)

103 Section YA 1 amended (Definitions)

104 Schedule 1 amended (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits)

105 Schedule 32 amended (Recipients of charitable or other public benefit gifts)

106 New schedule 33 inserted (Default fractions of foreign superannuation withdrawals)

107 Removal of redundant headings and readers' aids

Part 3
Amendments to other Acts

Tax Administration Act 1994

108 Tax Administration Act 1994

109 Section 17 amended (Information to be furnished on request of Commissioner)

110 New sections 21B and 21C inserted

21C Preparing financial statements: Orders in Council

21B Preparing financial statements

111 Section 22 amended (Keeping of business and other records)

112 Section 24O amended (Certain information required from agricultural, horticultural, or viticultural employers)

112B Section 83 amended (Disclosure of information for purposes of entitlement card)

112C Section 84 amended (Disclosure of information for family support double payment identification)

~~113 Section 91C amended (Taxation laws in respect of which binding rulings may be made)~~

114 Section 108 amended (Time bar for amendment of income tax assessment)

KiwiSaver Act 2006

115 Schedule 1 amended (KiwiSaver scheme rules)

14C Withdrawal to meet tax liability on foreign superannuation withdrawal

Income Tax Act 2004

116 New section CF 3 inserted (Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014)

CF 3 Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014

116B Definitions

Income Tax Act 1994

117 New section CC 4 inserted (Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014)

CC 4 Optional treatment of withdrawals from foreign superannuation schemes not included in return or assessed before 1 April 2014

Health Entitlement Cards Regulations 1993

117B Regulation 2 amended (Interpretation)

118 Regulation 8 amended (Eligibility for community services cards)

Schedule 1
New schedule 33 inserted

Schedule 2
Removal of redundant headings and readers' aids

The Parliament of New Zealand enacts as follows: