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Tax Bill passes third reading

19 June 2014

Tax Bill passes third reading

Revenue Minister Todd McClay welcomed the passage of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Bill through Parliament today, saying it would “help support business growth and innovation”.

“As part of the Government’s work to ensure that tax law remains fit for purpose, the new legislation introduces a range of practical measures to clarify the tax rules for businesses, remove distortions in the existing rules and make sure everyone pays their fair share of tax,” Mr McClay says.

The Bill clarifies the tax treatment of employer-provided accommodation, accommodation allowances and other payments provided to employees as reimbursement for expenses.

“These new rules will help both employers and employees determine where to draw the line between what is taxable and what is not when payments are linked to business travel, secondments and projects.”

“This added certainty will be welcome news to those involved in the rebuild of Christchurch.”

“When an employee is expected to work away from their normal place of work on a capital project that is part of the earthquake recovery, employer-provided accommodation and payments to cover accommodation expenses will be tax-exempt for up to five years.”

A special rule is included for ministers of religion that caps the taxable value of accommodation at 10 per cent of their remuneration, reflecting longstanding practice. Defence force personnel also have the unique nature of their accommodation arrangements recognised.

Most of the changes to the employee allowances rules will apply from 1 April 2015, and in some cases sooner, including those specific to the Canterbury earthquake recovery work, which will apply from 4 September 2010, the date of the first earthquake.

“The Bill also provides deregistered charities with greater certainty around the tax consequences of deregistration and ensures that donors who have claimed tax relief on donations to charities which are later deregistered will not generally see this tax relief reversed.”

“Other measures help support business growth and innovation, such as clarifying the rules and dealing with distortions arising from the current ‘black hole’ tax treatment of certain types of expenditure.”

A suite of technical changes also make the tax rules easier to understand and apply, while there are measures to ensure everyone pays their fair share of tax including changes to thin capitalisation rules.

“Finally, this legislation provides our financial institutions with the appropriate legal framework to comply with the United States FATCA legislation and the intergovernmental agreement signed between New Zealand and the US last week.”

“This legislation is another important step in the Government’s ongoing programme to ensure that the tax system operates efficiently, and is flexible enough to fairly deal with issues such as the ongoing Christchurch rebuild,” Mr McClay says.

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