Each year, the government introduces legislation to set the tax rates for the upcoming year, and this time they’ve included several changes with a stated aim of simplifying the system and enhancing its role in driving productivity. The Taxation (Annual Rates for 2024-25, Emergency Response, and Remedial Measures) Bill passed its first reading in late August.
From our initial look, from the perspective of our client base, these changes are technical but at the same time some are helpful. Over time and with further reading more details may become relevant.
For the type of clients that we regularly deal with, the ability to backdate the Approved Issuer Levy (AIL) registration is probably the most helpful thing – more on that below.
Investors or traders in crypto currency will be interested to hear about changes to reporting requirements for crypto asset service providers that will make it easier for the IRD to audit owners of crypto assets and for the IRD to co-operate with tax authorities in other countries to ensure compliance with tax regulations relating to crypto assets like bitcoin.
Tax relief for emergencies
Central to the Bill is the introduction of a streamlined process for applying tax relief during future emergency events, such as earthquakes or floods. Instead of relying on primary legislation, these relief measures will be activated through an Order in Council, speeding up the government’s response.
Simon Watts noted, “A more rapid response means a more rapid recovery, and we want to ensure the system is prepared before an emergency event occurs.”
This is likely to be positive but at the same time care will need to be taken that any tax relief response is appropriate and proportional. Time will tell if this ends up being the case.
Other key measures
From the perspective of our clients, proposals with more day to day impact in the Bill include:
- Enabling young people under 16 to enrol in KiwiSaver with the consent of just one guardian, simplifying the process for families where parents may be separated. Note that from an employer’s perspective it is not mandatory to make contributions until the person turns 18. The government will not contribute until the person is 18 either, so it’s probably not worth rushing out and signing up your kids!
- Making it easier to transfer pension funds from countries like the UK to New Zealand schemes, including enabling the scheme to pay the tax on the taxpayer’s behalf and, for migrants from the UK, changes to make the transfer more tax effective from a UK perspective. This is good as in some situations at the moment UK citizens moving here are required to pay tax on a portion of amount of the transfer, even though the money will not be able to be accessed for years. Paying from the scheme will help that cashflow problem.
- Allowing eligible people and businesses to retrospectively register for the approved issuer levy. From our initial read this is one of the most helpful proposals for the types of clients that we often work with as the non-resident withholding tax (NRWT) rules are not well understood for people with loans overseas and can result in harsh outcomes most commonly for overseas rental property owners. This will only be available from 1 April 2025 if the bill is passed as it is currently written.
- Increasing thresholds for exempt employee share schemes. “Exempt” share schemes are those that meet value and discount thresholds and are offered to more than 90% of employees in a company.
Updated tax rates
The Bill also sets the annual income tax rates for the 2024–25 tax year, alongside other technical adjustments to improve the tax system’s efficiency.
Watch this space
As we have more time to read and digest the proposals there may be more to say on this legislation. Changes may be made as a result of the submissions process.
For those interested, public submissions are open until 11:59 pm on Wednesday 9 October 2024. You can make a submission here.
Please get in touch if you have any questions about how you may be affected by these changes.
