Hon Todd McClay
Minister of Revenue

30 June 2015

Paving the way for a simpler tax system

A tax bill to be introduced today will help prepare the ground for simplification of the tax administration system, says Revenue Minister Todd McClay.

Mr McClay says changes proposed in the Taxation (Transformation: First Phase Simplification and Other Measures) Bill will remove some of the legislative obstacles to making the tax administration system simpler and more certain for New Zealand.

“For example, the bill proposes an amendment to allow earlier tax refunds based on personal tax summaries that meet the automatic refund threshold, reducing the wait time from 30 days to 15 days, and increasing the threshold for automatic refunds from $200 to $600. This means approximately another 400,000 people will benefit from these changes.

“Other measures focus on reforming the way Inland Revenue is able to communicate with its customers. Much of our current tax law was written before the explosion of digital devices and it doesn’t reflect the way information between Inland Revenue and its customers can be sent,” Mr McClay says.

“Under the current tax rules, certain communications must be “in writing” or delivered “by post”, even though providing information electronically would be better and more efficient for customers and for Inland Revenue.

“This bill begins our simplification of tax legislation by proposing to remove references to outdated modes of communication and provide modern and relevant rules that will support electronic communication to be used in the same way as paper communications,” Mr McClay says.

Measures in the bill, such as simplifying the current tax rules for employee share schemes would also be welcomed, following feedback received earlier this year on proposals to make the rules less onerous for employees participating in these schemes by allowing employers to withhold tax on an employee’s behalf.

“Other proposals in the bill will allow Inland Revenue to share certain information where it makes customers’ lives easier,” he says.

“They include allowing Inland Revenue to supply a KiwiSaver scheme provider with the names and details of members who have transferred out of their schemes and the name of the members’ new providers, providing special tax codes directly to the Ministry of Social Development to help those receiving New Zealand Superannuation or a veteran’s pension to meet their income tax obligations, and sharing information collected and held for tax purposes with the Ministry of Business, Innovation and Employment, and with WorkSafe, to help identify those responsible for breaches of workplace safety.

“These, and other measures proposed in this bill represent a small but important step in Inland Revenue’s longer term Business Transformation to modernise the way the tax system is administered, and make it easier for people to get their tax right,” says Mr McClay.

“While the bill is focussed on tax simplification, the Government is committed to reducing compliance costs for taxpayers more generally throughout the Business Transformation programme.

For example, from 1 July this year, taxpayers using the pooling method of depreciation will be able to include assets valued up to $5,000. The pooling method allows taxpayers to group low-value assets together and depreciate them as a single item; thereby reducing the number of calculations needed each tax year. The previous asset threshold was $2,000, and the new threshold applies for the 2015 –16 tax year.

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