Turner Judy: Limited Partnerships Bill — First Reading 
Turner Judy: Limited Partnerships Bill — First Reading 
[Volume:641;Page:11322] 
JUDY TURNER (Deputy Leader—United Future) 
: 
 I stand on behalf of United Future to speak to the first reading of the Limited Partnerships Bill. We are very pleased to support the introduction of this bill which proposes regulatory rules designed specifically for limited partnerships—an investment vehicle that is widely used in other countries for venture capital investment. 
Having an internationally recognised legal and tax structure for limited partnerships in New Zealand will obviously make it easier for our businesses to gain access to investment capital. The associated tax changes are contained in Parts 5 and 6 and they introduce new tax rules for limited partnerships and clarify and modernise the tax rules on general partnerships. Under the proposed rules limited partnerships will be taxed as general partnerships are taxed: each partner will be taxed individually in proportion to his or her share of the partnership income. Limited partners will be subject to new tax loss limitation rules in order to ensure that the losses they claim reflect the level of their economic loss. For tax purposes limited partners will be able to offset only the tax losses to which they have exposure which will help to prevent limited partnerships from being used as tax shelters. 
The bill introduces a new comprehensive definition of “partnership” into the Income Tax Act and clarifies which forms of co-ownership are covered by the partnership rules. At present the Act does not contain a general definition of partnership. The new tax definition will be based on the definition of “partnership” contained in the Partnership Act. It will cover not only partnerships as defined under the Act but also other types of partnerships including New Zealand resident partners of foreign general partnerships and foreign limited partnerships; joint ventures whose members choose to be treated as a partnership for tax purposes; and co-owners of property though not companies or trusts if all the co-owners choose to be treated as a partnership for tax purposes. 
The bill clarifies the apportionment of income expenses and the other items to partners for tax purposes. The new rules will ensure that income expenses tax credits rebates gains and losses flow through to individual partners and those items will generally be allocated to partners in proportion to each partner’s share in the partnership income. The proposed rules will allocate deductions for expenditure incurred through the original partnership to be claimed by new partners subject to their meeting the other tests of deductibility in income tax law. The proposed rules will provide that for tax purposes partnerships will not automatically be treated as having dissolved when there is a change in partners. Furthermore people leaving a partnership will not have to make tax adjustments when the tax effect is not significant. 
In closing we welcome the introduction of this bill. The tax changes it proposes are designed to bring greater clarity and certainty to the rules governing the taxation of partnership income as well as to clarify and simplify the record-keeping requirements for partnerships. We are happy to support this first reading.