(ANZ, Corporate Taxpayers Group, Chartered Accountants Australia and New Zealand, New Zealand Bankers Association, KPMG) Submitters support the removal of the requirement to provide annual withholding tax certificates where the taxpayer has provided their IRD number, but consider a significant benefit will not result from this as financial institutions already have the systems in place to provide these certificates and are likely to continue to do so. (ANZ, Corporate Taxpayers Group, New Zealand Bankers Association, KPMG). Submitters have concerns with the removal of this requirement as it does not address the implications of taxpayers having to verify year-end tax position. For example, verification of the allocation of income from jointly held investments may be problematic without a year-end certificate. (Chartered Accountants Australia and New Zealand, Corporate Taxpayers Group) Comment the requirement to provide annual withholding tax certificates will be removed, this does not prevent payers of investment income continuing to provide these certificates to their customers if they are concerned about their customers being unable to verify their year-end tax position. Recommendation That the officials’ comments be noted. Issue: Streamlining information reporting Submission (KPMG) Consideration should be to how provision of investors’ identity information to Inland Revenue could be streamlined, such that only information that is “variable” in nature – for example, tax rate, the amount of investment income and tax deducted – is required to be transmitted periodically. Comment Large payers of investment income will be required to provide all the required information with each report as they will be providing this information in specialised files. For smaller payers of investment income, Inland Revenue will pre-populate online forms with information such as the name, date of birth and IRD number of the taxpayer that has been provided by the payer in previous returns. Recommendation That the officials’ comments be noted. variable
intended to incentivise taxpayers to provide their IRD numbers to their investment income provider. Currently 20 per cent of interest certificates received by Inland Revenue do not contain the recipient’s IRD number, if the increased non-declaration rate proposals only applied to new accounts, these taxpayers would have no incentive to provide their IRD number to their investment income payer. The non-declaration rate needs to be higher than 33% in order to incentivise taxpayers on a 33% marginal rate, and those with social policy entitlements/obligations who may have a higher effective tax rate, to provide their IRD number to their investment provider. In 2015, the average annual household income of taxpayers receiving Working for Families was $90,948 and the median was $75,920. Taxpayers on the 17.5% marginal tax rate would have an effective tax rate above 33% once Working for Families abatement is considered. A 45% non-declaration rate is consistent with the non-declaration rate applicable to salary and wage income. Inland Revenue intends to work with the banks to reduce the number of taxpayers subject to the non-declaration rate prior to its increase to 45%. Officials agree with Financial Services Council’s suggestion that provision be made for PIE investors that subsequently become residents. Officials recommend that these taxpayers are given 6 weeks from notifying their PIE that they have become resident to obtain an IRD number in order to remain a member of the PIE. Recommendation That the submission be accepted in part, subject to officials’ comments. Issue: Sharing IRD number data Submission (ANZ, New Zealand Bankers Association) It would be useful to share IRD number information between IRD and payers of investment income. It is highly likely that the IRD will have IRD number data which banks do not have. Sharing such information in advance of 1 April 2020 will minimise the number of taxpayers impacted by the increase in the non-declaration rate. Comment Officials agree with the submitter and propose that the matter be subject to consultation. It could then be included in a future tax Bill. As an interim measure, Inland Revenue will consider ways to work with banks to share IRD numbers on an administrative basis. Recommendation That the submission be accepted, subject to officials’ comments. Issue: Date of birth
Officials that it would be useful to revise the drafting to ensure that the gross amount of the dividend is correctly determined. Officials consider that the amendments in section RE 14B should not apply to dividends derived by a trustee that are retained as trustee income. The policy intent is to ensure that a company or trustee acting as an intermediary is not required to pay RWT on a non-cash dividend derived from a foreign company provided that the dividend passes through to the investor in the same income year. In the absence of this amendment, the company or trustee would be required to pay RWT on the non-cash dividend derived from a foreign company. The measure is a simplification that ensures a natural person investor is appropriately taxed on non-cash dividends derived from a foreign company, whether the dividend is derived directly or indirectly through a trust or a company. It is not consistent with the policy intent if a trustee retains the non-cash dividend as trustee income instead of passing the dividend through to the beneficiary. Officials believe the meaning of intermediary in context is clear and do not consider it is necessary to define the term. Officials consider the proposed amendments do not apply to dividends that arise from dividend reinvestment plans, which are taxed as bonus issues in lieu. Recommendation That the officials’ comments be That submission (i) from EY and the submission from FNZ relating to clarifying the gross amount of the dividend be accepted. Clause 120 Submission (Chartered Accountants Australia and New Zealand, Corporate Taxpayers Group, PwC) The submitters supported the proposal. One stated that the Commentary does not appear to correctly reflect the position the Income Tax Act 2004 or the proposed legislative amendment. (Chartered Accountants Australia and New Zealand) Another stated that the Commentary to the Bill misstates the operation of the rule and may cause confusion and this should be clarified in a Tax Information Bulletin following enactment of the Bill. The submitter also notes that the proposed legislation does not appear to limit the rules to the group debit balance. (Corporate Taxpayers Group) One stated that the Commentary is incorrect as the transfer of imputation credits from a group company to the group imputation credit account (ICA) is intended to be allowed when a debit