Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill

Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill

Government Bill

249—1

Explanatory note

General policy statement

This taxation omnibus Bill introduces amendments to the following enactments:

• Income Tax Act 2007

• Tax Administration Act 1994

• KiwiSaver Act 2006

• Student Loan Scheme Act 2011

• Goods and Services Tax Act 1985

• Child Support Act 1991

• Accident Compensation Act 2001

• Income Tax Act 2004

• Anti-Money Laundering and Countering Financing of Terrorism (Class Exemptions) Notice 2014

This Bill also revokes the Income Tax (Payroll Subsidy) Regulations 2006.

Broadly, the policy proposals in this Bill fall into 2 categories. The first of these categories is proposals aimed at modernising and improving the settings for the administration of the tax system as part of the Government’s programme of transforming the revenue system through business process and technology change (Inland Revenue’s business transformation programme). This includes measures relating to employment and investment income information, the electronic filing threshold for goods and services tax (GST), amendments to the pay as you earn (PAYE) rules, and amendments to penalty and interest rules.

The second category is proposals aimed at improving the current tax settings within a broad-base, low rate (BBLR) framework. Under this framework, the tax treatment of alternative forms of income and expenditure is intended to be as even as possible. This ensures that overall tax rates can be kept low, while also minimising the biases that taxation introduces into economic decisions. This framework underpins the Government’s Revenue Strategy and helps maintain confidence that the tax system is broadly fair, which is crucial to encouraging voluntary compliance.

Although New Zealand has relatively strong tax settings, it is important to maintain the tax system and ensure that it continues to be fit for purpose. Changes in the economic environment, business practice, or interpretation of the law can mean that the tax system becomes unfair, inefficient, complex, or uncertain. The tax system needs to be responsive to accommodate these concerns.

The main policy measures within this Bill have been developed in accordance with the Generic Tax Policy Process (GTPP). This is a very open and interactive process between the public and private sectors, which helps ensure that tax and social policy changes are well thought through. This process is designed to ensure better, more effective policy development through early consideration of all aspects, and likely impacts, of proposals, and increased opportunities for public consultation.

The GTPP means that major tax initiatives are subject to public scrutiny at all stages of their development. As a result, Inland Revenue and Treasury officials have the opportunity to develop more practical options for reform by drawing on information provided by the private sector and the people who will be affected.

The final stage is a post-implementation review of new legislation and identification of remedial issues that need correcting for the new legislation to have its intended effect. Further information on the GTPP can be found at http://taxpolicy.ird.govt.nz/how-we-develop-tax-policy.

The following is a brief summary of the policy measures contained in this Bill. A comprehensive explanation of all the policy items will be included in a Commentary on the Bill. The Commentary will be available shortly after this Bill is introduced, at http://taxpolicy.ird.govt.nz/publications/type/bill-commentary.

Employment income information

The Bill proposes to reform the administration of PAYE. The proposals are part of the Government’s plans to modernise the revenue system through business process and technology change. The proposed changes are intended to reduce compliance costs for employers by integrating the fulfilment of tax obligations into their normal business processes (for example, enabling employers to use their payroll software to meet their PAYE reporting obligations at the time they pay their employees), reduce administrative costs for Inland Revenue, enable more timely interventions by Inland Revenue to improve the accuracy of withholding and help prevent individuals getting into social policy debt, and create opportunities for Government to subsequently redesign social policies.

Requiring employers to provide PAYE information to Inland Revenue on a payday basis

The Bill proposes requiring employers to provide Inland Revenue with information about their employees’ income and deductions on a payday basis, rather than on the current monthly basis. The Bill proposes that employers over the threshold for mandatory electronic filing, employers using payroll software, and payroll intermediaries will have to provide this information within 2 working days of payday, with employers below the threshold for mandatory electronic filing not using payroll software having 7 working days from payday. The Bill proposes that reporting on a payday basis become mandatory from 1 April 2019, but permissible from 1 April 2018.

PAYE thresholds

The Bill proposes lowering the threshold for mandatory electronic filing of PAYE information from $100,000 of PAYE and employer’s superannuation contribution tax (ESCT) in the preceding tax year to $50,000 from 1 April 2019. The Bill proposes that those employers above the threshold who are unable to access digital services will be able to apply for an exemption from the requirement to file PAYE information electronically. The Bill proposes to allow future changes to this threshold, and the threshold above which employers are required to remit PAYE and other deductions twice-monthly, to be made by Order in Council following consultation.

Information about new and departing employees

The Bill proposes that employers be required to provide Inland Revenue with information about new and departing employees no later than the next return of payday information. Employers using payroll software will be able to provide the information about new and departing employees direct from their software at the time the employee is added or removed. This is intended to help ensure that new employees are set up correctly from the beginning of their employment. To help ensure that identity is correctly assigned, the Bill proposes requiring employers to obtain date of birth information from new employees and pass it on to Inland Revenue. The Bill also proposes requiring employers to pass on to Inland Revenue contact details for all new employees.

Error correction

The Bill contains an empowering provision that would allow regulations to be made by Order in Council, following consultation, relating to the correction of errors in employment income information, including the nature and type of errors that may be corrected, the manner in which corrections may be made, and the periods to which corrections may relate.

Consequential changes to reporting of employee share scheme benefit information

From 1 April 2017, employers will be required under the Income Tax Act 2007 and Tax Administration Act 1994 to disclose the value of share benefits employees receive under employee share schemes (and any tax they choose to withhold under the PAYE rules). This disclosure is to be captured on the employer monthly schedule as part of PAYE information reporting.

To ensure that employers are able to meet their employee share scheme benefit information reporting obligations in the proposed new PAYE reporting environment, the Bill proposes to defer the recognition of benefits derived by an employee under an employee share scheme by 20 days from when the employee receives the benefit, with effect from 1 April 2019, in order to provide all employers with sufficient time to compile information to support the required disclosures and deduction of tax, if to be withheld. The Bill also proposes to require early adopters of payday PAYE information reporting to apply the modified employee share scheme rules early.

Abolition of the payroll subsidy

The Bill proposes abolishing the existing payroll subsidy from 1 April 2018. This subsidy is paid to listed PAYE intermediaries that carry out PAYE and related payroll functions on behalf of employers who are only required to remit PAYE deductions monthly. It is paid for up to 5 employees per employer at $2 per pay day per employee to subsidise the voluntary use of PAYE intermediaries. The subsidy incentivises only 1 model of digital provision of employment income information, potentially distorting employers’ choice given that a range of payroll products and services exist in the market.

Investment income information

The Bill proposes a number of changes to the collection of investment income information. The proposals are part of the Government’s plans to modernise the revenue system through business process and technology change. The proposed changes are intended to reduce compliance costs for recipients of investment income by enabling Inland Revenue to pre-populate their tax returns with their investment income information, enable Inland Revenue to improve the accuracy of withholding and help prevent individuals getting into debt, and create opportunities for Government to subsequently redesign social policies. The investment income information changes will apply from 1 April 2020 unless otherwise stated.

More frequent and comprehensive collection of investment income information

The Bill proposes that payers of interest, dividends and taxable Māori authority distributions will be required to provide detailed recipient information to Inland Revenue on a monthly basis, or for the months in which payments are made, if the payment frequency is less than monthly. The Bill proposes that payers may choose to file monthly from 1 April 2019, with monthly filing to become mandatory from 1 April 2020. Currently, payers of interest subject to withholding tax provide detailed recipient information to Inland Revenue, but only after the end of the tax year. No detailed recipient information is currently required to be provided to Inland Revenue for other types of investment income, such as dividends and Māori authority distributions.

The Bill proposes that payers of investment income that is exempt from withholding be required to report detailed recipient information yearly, or monthly, at the payer’s preference. The Bill proposes that portfolio investment entities (PIEs) be required to provide detailed recipient information to Inland Revenue following the end of the tax year by 15 May instead of 31 May (applying from the tax year beginning 1 April 2018), and to report investors’ prescribed investor rates 6 monthly.

To help ensure that identity is correctly assigned, the Bill proposes requiring investment income payers to provide the recipient’s date of birth to Inland Revenue as part of the detailed recipient information reporting, if it is held.

To enable jointly earned income to be split between the joint owners, the Bill proposes requiring investment income payers to provide detailed recipient information regarding each of the owners of jointly owned investments, if it is held.

The Bill proposes requiring investment income payers to file their withholding tax returns, including the detailed recipient information, electronically unless they receive an exemption from Inland Revenue.

Increase in the non-declaration rate for interest income

The Bill proposes to increase the non-declaration tax rate for interest subject to resident withholding tax (RWT) from 33% to 45%, in order to encourage non-declared interest recipients to provide their IRD number to their interest payer.

Requiring new investors in PIEs to provide their IRD number

The Bill proposes requiring investors opening new investments in PIEs to provide their IRD number (unless they are non-resident, do not have an IRD number, and provide their foreign tax identification number) within 6 weeks of making the initial investment if they are to remain a member of the PIE. This requirement will apply from 1 April 2018.

RWT exempt status

Taxpayers holding a certificate of exemption from RWT are entitled to be paid interest and dividends without having any tax deducted by the payer. The existing certificate of exemption process involves compliance costs for payers as they need to receive exemption certificates from taxpayers, check the appropriate New Zealand Gazette to see if the taxpayer’s certificate has been cancelled, and assess whether the customer can appropriately claim to be exempt under non-tax legislation.

The Bill proposes requiring Inland Revenue to make a source of information available to investment income payers that would enable them to confirm whether or not recipients have RWT exempt status. To ensure that all exempt recipients are included in this information source, the Bill proposes that recipients that are tax exempt under Acts other than the Income Tax Act 2007 be required to have RWT exempt status, in order to be treated as exempt by investment income payers.

Removal of requirement to provide end of year withholding tax certificates

The Bill proposes removing the requirement for interest payers to provide end of year withholding tax certificates to recipients of interest income who have provided their IRD number to the interest payer. If Inland Revenue receives recipients’ investment income information throughout the year and pre-populates the information for the recipients in their tax records, this will make the end of year withholding tax certificate requirement unnecessary, and removing it is intended to reduce compliance costs for interest payers.

Error correction

In order to reduce compliance and administration costs, the Bill proposes that investment income payers will be allowed to correct errors in previous withholding tax returns in their next return without incurring penalties or interest, subject to restrictions for errors being corrected in the following income year.

Taxation of employee share schemes

The Bill proposes a number of changes to the taxation of employee share schemes (ESS), which are intended to modernise and improve the taxation of ESS so that it is simple, efficient, and fair. The general objective of the proposed reforms is to achieve neutral tax treatment of ESS benefits – that is, to the extent possible, the tax position of both the employer and the employee are the same whether remuneration for labour is paid in cash or shares. In other words, the policy intent underlying the proposed reforms is that ESS are not at a tax advantage or disadvantage compared to cash salary. This is consistent with New Zealand’s BBLR tax policy framework and is intended to ensure employees are remunerated in the most economically efficient (rather than the most tax efficient) form.

Value and timing of benefits under ESS

Broadly, the Bill proposes aligning the income tax treatment of employees receiving ESS benefits with the tax treatment of other forms of employment income. This means that employees would be taxable on the value of their shares when they have done everything they need to earn them and hold them like any other shareholder (for example, they are not protected from suffering a loss if there is any drop in share price). The proposed changes are intended to address the concern that, under current law, ESS can be used to give employees tax-free remuneration. In particular, an employee can be given what is economically a valuable share option without being taxed on that benefit, whereas the provision of an actual option is taxable (when the option is exercised).

Allowing deductions for employers’ costs

The Bill proposes allowing employers a tax deduction for the amount of the employee’s income, at the same time as the employee is taxable, in order to align the tax treatment of employers providing ESS benefits with the tax treatment of paying other types of employment income. There is currently no statutory deduction for the cost of providing ESS benefits, though employers have found various ways to structure so that a deduction is available.

Changes for tax-exempt widely offered schemes

To minimise compliance costs, it is proposed that the tax-exempt widely-offered ESS are retained; however, the Bill proposes some amendments to modernise the rules and to close certain loopholes that are currently being used to obtain unintended deductions.

The Bill proposes to remove the 10% deemed interest deduction (with some grandparenting), and remove the requirement for Inland Revenue to approve schemes, but require the schemes to be registered with Inland Revenue. The Bill also proposes that value of the shares when granted to the employee or trustee on their behalf must not exceed $5,000 per annum, and that the difference between the value of the shares at that time and their cost to the employee must not exceed $2,000 per annum.

Transitional rules

The Bill contains proposed transitional rules that would, generally speaking, allow businesses 6 months after the enactment of the reforms to amend their ESS, if necessary.

PAYE rules amendments

In addition to the proposed reforms to improve the timeliness and quality of employment income information received by Inland Revenue, the Bill proposes several changes to the rules relating to the calculation of PAYE and related deductions.

To strike a balance between the desire for more accurate withholding of PAYE and the impact on compliance costs, the Bill proposes to give employers the option to tax holiday pay paid in advance (and salary or wages paid in advance) as if the lump sum payment was paid over the pay periods to which it relates, or under the existing extra pay method.

To reduce complexity and confusion for employers, the Bill proposes to align the rules in the Inland Revenue Acts about how legislated rate or threshold changes are applied across the different types of PAYE income payments and social policy initiatives administered through the PAYE system. The rates and thresholds to be applied would be those in force on the date the payment is made.

The Bill also proposes to repeal a redundant de minimis provision in relation to the tax treatment of a retrospective increase in salary or wages.

Petroleum mining decommissioning

At the end of production, a petroleum miner must incur significant decommissioning costs. This includes expenditure on the plugging of wells, and the removal of installations, pipelines and equipment. In the absence of specific rules, this expenditure would result in a loss carried forward that may be of limited or no value to the petroleum miner unless they had income from another source. The tax rules for petroleum mining currently include a spread-back mechanism, which allows returns for prior income tax periods to be reopened to include losses arising from decommissioning expenditure incurred in the current year. As the existing spread-back mechanism requires amendments to assessments for previous periods, it involves significant compliance and administration costs. To reduce compliance and administration costs, the Bill proposes to replace the existing spread-back mechanism for petroleum mining decommissioning expenditure with a refundable tax credit. This will be similar to other refundable tax credits already included in the Income Tax Act 2007, most relevantly the refundable tax credit for mineral mining rehabilitation expenditure, which was introduced in 2014.

The current spread-back results in a refund of tax paid in previous years. It was never intended that these refunds should be eligible for credit use of money interest. However, there is no provision that confirms this. To ensure that no credit use of money interest is paid before the refundable tax credit applies, the Bill also contains an amendment confirming that use of money interest will not be paid on a petroleum mining spread-back in a return filed after the introduction of the Bill.

Demergers

Under current legislation, the full value of the shares in a demerged company is treated as a dividend for the shareholder. This is problematic because a demerger is, in substance, the division of a corporate group rather than a distribution of income. The problem is particularly acute for demergers by listed Australian companies. The Bill proposes an amendment to create an exclusion from the meaning of the term “transfer of value” under the dividend rules in relation to company demergers. The proposed exclusion is limited to demergers by listed Australian companies.

Bank account requirement for IRD numbers

Since 1 October 2015, tax legislation has required offshore persons to provide evidence of a functioning New Zealand bank account before Inland Revenue is able to issue them with an IRD number. Some offshore persons have encountered practical difficulties with the requirement. The compliance costs of obtaining a New Zealand bank account can be significant for offshore persons, and there can be delays. To address these problems, the Bill proposes an amendment that would provide Inland Revenue with a discretion to issue IRD numbers to offshore persons without a New Zealand bank account if satisfied with their identity and background. This is intended to give Inland Revenue sufficient flexibility to deal on a timely basis with a range of different cases.

Lloyd’s of London tax compliance simplification

Lloyd’s of London has regulatory approval to write term-life insurance business in New Zealand. Lloyd’s is an insurance market, not an insurance company. It is an institution where Members of the Society of Lloyd’s, both corporate and individual, join together in syndicates to insure risk. Members are required to be United Kingdom residents under Lloyd’s governance rules. Lloyd’s unique structure means that any amount of business in New Zealand would require its non-resident syndicate members to file tax returns in New Zealand, which would have material compliance and administrative implications. As a tax compliance simplification measure for Lloyd’s, the Bill proposes to create a special presumptive tax on premiums received by Lloyd’s in connection with sales of term-life insurance in New Zealand. Tax would be calculated and paid by Lloyd’s authorised New Zealand agents. The tax would work on the basis that 10% of premiums received by Lloyd’s on its New Zealand business would be taxable income. The company tax rate (28%) would apply to the deemed taxable income.

GST treatment of Pharmac rebates

Owing to the unique way pharmaceuticals are publicly purchased in New Zealand, associated rebates paid by suppliers to Pharmac under an agreement for listing on the Pharmaceutical Schedule can have different GST treatment depending on whether the pharmaceuticals are purchased in the community setting or the hospital setting. Currently, community rebates are not subject to GST, while hospital rebates are subject to GST. This gives rise to uncertainty and compliance costs for Pharmac and their suppliers in having to differentiate, for GST purposes, between community and hospital rebates. The Bill proposes to align the treatment of community and hospital rebates paid to Pharmac for products supplied under the Pharmaceutical Schedule by excluding these rebates from being an alteration of the previously agreed consideration under the Goods and Services Tax Act 1985.

Electronic filing threshold for GST returns

GST-registered persons can currently choose to file their GST returns on paper or in electronic form. Processing of paper returns is slower and more expensive, and paper returns are more prone to errors compared with electronically filed returns. To enable further encouragement of electronic uptake, if necessary in the future, the Bill contains an empowering provision that would allow for a threshold for mandatory electronic filing of GST returns to be set by Order in Council following consultation. The Bill proposes that GST-registered persons above the threshold who are unable to access digital services will be able to apply for an exemption from the requirement to file their GST returns electronically. In addition, the Bill proposes a $250 penalty for GST-registered persons who are required to file their GST returns electronically but fail to do so.

Penalties and interest amendments

The Bill proposes several amendments that would modify the current rules around penalties and interest for taxpayers. They deal with when tax credits arise, the date use of money interest starts and the due date for default assessments. The proposed amendments are intended to simplify the rules and encourage voluntary compliance.

A taxpayer who has paid excess tax may request to transfer the excess credit to another period or another tax type. The Bill proposes to alter the time that an excess credit arises for GST purposes, in order to address voluntary compliance issues that exist under current legislation. The amendment will more appropriately deal with a situation where a taxpayer who files their return early or late has access to the credit.

The date interest starts for a GST refund is determined by the latest of several dates, one of which can be the 15th working day after the taxpayer provides a tax return for the return period to which the GST refund relates. The Bill proposes to change the date interest starts for a GST refund by reducing the number of working days after a return is filed from 15 to 10, to reflect the shorter time period that will be required to process returns with the introduction of Inland Revenue’s new computer system, START.

Currently, electronic default assessments (EDAs) and non-electronic default assessment (NDAs) have different due dates for payment, and also different treatments for when any tax payable from a subsequent amendment is payable. For one type a new due date is set, while for the other the original due date applies until an amendment is made to that default assessment, in which case the taxpayer is given a new due date. In both cases a non-compliant taxpayer gets a benefit over a compliant one, which is not conducive to voluntary compliance. To address this, for taxes that have been migrated to the new START system and where incremental penalties have been removed from the particular tax type, the Bill proposes to align the treatment of default assessments so that they are due and payable at the original due date for the tax as under the current treatment for an EDA, and change the treatment for all default assessments that are reassessed so that any subsequent reassessment of the default assessment when the taxpayer files their tax return is also due at the original due date.

Trustee capacity amendments resulting from recent cases on corporate trustees

Two recent High Court decisions, Concepts 124 Ltd v Commissioner of Inland Revenue [2014] NZHC 2140 and Staithes Drive Development Ltd v Commissioner of Inland Revenue [2015] NZHC 2593, have changed how the voting interest test, which is used to measure the ownership of companies, including their association, is applied to corporate trustees. The Court decisions may result in overreach of the application of the associated person rules. This comes about because the Court held that the voting interests in the relevant companies were held by the legal owner of shares, and effectively ignored the capacity in which those shares were held. This means that the voting rights attached to shares owned by a corporate trustee are attributed to that corporate trustee’s natural person shareholders in their personal capacity. Applying this approach, if a solicitor holds shares in a trustee company, which in turn holds shares on trust in a number of unrelated client companies, the client companies would be associated for tax purposes, which would be contrary to the policy intent. The Bill proposes an amendment to align the legislation with the original policy intent, which is that a corporate trustee should not be looked through when testing association. The proposed amendments address this by introducing a general rule for trustee capacity and some consequential changes to defined terms and operative provisions.

Schedule 32 donee status

The Bill proposes to amend the Income Tax Act 2007 by adding 5 charities to the list of donee organisations in schedule 32. New Zealand charities that support activities overseas must be listed in schedule 32 in order for their donors to be eligible for tax benefits (in particular, the donations tax credit). The proposed new additions to schedule 32 are Byond Disaster Relief New Zealand, Flying for Life Charitable Trust, Médecins Sans Frontières New Zealand Charitable Trust, Tony McClean Nepal Trust, and Zimbabwe Rural Schools Library Trust.

Confirmation of annual rates of income tax for the 2017–18 tax year

The Bill sets the annual rates of income tax for the 2017–18 tax year at the same rates that apply for the 2016–17 tax year.

Remedial amendments

A number of remedial matters are addressed in the Bill. In addition to fixing minor faults of expression, readers’ aids, and incorrect cross-references, the following specific issues are dealt with by:

• clarifying the meaning of “employer’s workplace” for the purposes of the exemption from income tax for payments made to employees for certain work-related meals when the employee is required to work away from their employer’s workplace;

• clarifying that the PAYE rule that requires multiple payments of salary or wages made to an employee in a week to have the same total amount of tax withheld as if 1 combined payment had been made only applies to payments made by the same employer;

• ensuring that extra pays paid to non-resident seasonal workers and employees on non-notified tax codes have tax withheld at rates of 10.5% and 45% respectively, consistent with the policy intent for these classes of employees;

• clarifying that non-resident investment funds are exempt from tax on their gains made on the sale of New Zealand securities;

• providing taxpayers with a foreign tax credit in relation to attributable controlled foreign company (CFC) income when the foreign income tax is paid by the taxpayer’s parent or another member of the taxpayer’s group;

• allowing taxpayers to use part-year accounts in the year of acquisition or disposal to calculate a CFC’s ratio of passive income to total income under the accounting standards test, provided that other standard requirements for the accounting standards test are met;

• removing the 30 June 2009 ownership requirement from the Tax Administration Act 1994, allowing taxpayers with insurance company CFCs acquired after 30 June 2009 to apply to Inland Revenue for a determination that the insurance company CFC passes the active business test;

• ensuring that a non-cash dividend derived from a non-resident company by an intermediary on behalf of natural persons resident in New Zealand is not over-taxed when the dividend is on-paid to that shareholder;

• adding notification requirements to the Tax Administration Act 1994 for when a PIE elects a calculation methodology;

• requiring a provisional tax PIE that is carrying forward losses before electing to use the quarterly or exit calculation method to treat those losses as a formation loss;

• restricting PIEs from holding investments with a market value over 20% rather than just voting interests over 20%;

• removing the “trust that would be a unit trust” entrance criteria for collective schemes and foreign PIE equivalents;

• adding Animal Control Products Limited and Kordia Group Limited to the list of State enterprises in part A of schedule 36 of the Income Tax Act 2007;

• clarifying that donation tax credits for donations made to community housing entities can only be claimed for the period the entity qualifies for the income tax exemption for community housing entities;

• clarifying that the net assets tax relating to charities applies to the accumulated assets and income of non-registered entities with an income tax exemption that cease being charitable at law;

• clarifying that entities that cease to be charitable at law must transfer their accumulated income and assets for charitable purposes;

• correcting an inadvertent drafting error to reinstate the prohibition on local authorities from being eligible to form or join a consolidated group;

• repealing the largely spent rules relating to specified activity net losses (which arose prior to 1992), and incorporating residual specified activity net losses into the general loss use and carry-forward rules;

• ensuring that the memorandum account provisions work as intended for the carrying forward of the balance of a memorandum account from year to year;

• clarifying the relationship between dividends and gains relating to attributing interests in a foreign investment fund, which are disregarded in calculating assessable income, and the core provisions of the Income Tax Act 2007;

• ensuring that the provisions in the Income Tax Act 2007 that limit the use of pre-consolidation imputation credits, and that set out the eligibility requirements to form or join a consolidated group, or to continue to be part of a consolidated group, reflect the pre-rewrite law set out in the Income Tax Act 2004;

• correcting an unintended change to the reciprocal shipping exemption in the Income Tax Act 2007 that arose during the process of rewriting the Act;

• clarifying that incentive payments to prisoners who participate in prisoner employment activities are not treated as income for the purpose of granting the exemption for prisoners from payment of financial support under the Child Support Act 1991;

• denying a deduction for an excepted financial arrangement (EFA) acquired on revenue account by a company that forms a consolidated group with the issuer of the EFA and subsequently the EFA is cancelled.

Departmental disclosure statement

Inland Revenue is required to prepare a disclosure statement to assist with the scrutiny of this Bill. The disclosure statement provides access to information about the policy development of the Bill and identifies any significant or unusual legislative features of the Bill.

Regulatory impact statements

Inland Revenue produced regulatory impact statements on 2 and 22 June 2016, 17 October 2016, 8, 28, and 30 November 2016 to help inform the main policy decisions taken by the Government relating to the contents of this Bill.

Clause by clause analysis

Clause 1 gives the title of the Act.

Clause 2 gives the dates on which the clauses come into effect.

Part 1Annual rates of income tax

Clause 3 provides that income tax for the 2017–18 tax year is to be paid at the basic rates specified in schedule 1 of the Income Tax Act 2007.

Part 2Amendments to Income Tax Act 2007

Clause 4 sets out the clauses that affect the Income Tax Act 2007.

Clause 5 amends section BF 1 to correct the list of defined terms.

Clause 6 amends section CD 15 to clarify that the section applies to include in the amount of a dividend any RWT or NRWT paid or withheld for that dividend.

Clause 7 amends section CD 25 to ensure that in certain circumstances a company’s shares, if acquired by the company and allocated under an employee share scheme, are not subject to cancellation treatment under section CD 25(4) to (6).

Clause 8 inserts new section CD 29C. Under the new section, if an ASX-listed Australian company transfers the shares in a subsidiary to the shareholders of the ASX-listed Australian company, the transfer is not a dividend in the circumstances given by section ED 2B. The effect of the new section corresponds to the tax effect of such a transfer for Australian-resident shareholders.

Clause 9 amends section CD 36, which relates to foreign investment fund income, to provide an additional requirement for determining when an amount is not a dividend, namely when it is excluded income under new section CX 57B.

Clause 10 amends section CD 43 to ensure that available subscribed capital is adjusted when a deduction is allowed to or income is derived by a company in relation to an employee share scheme.

Clause 11 amends section CE 1 to provide for a cross-reference as part of the new employee share scheme rules.

Clause 12 replaces sections CE 2 to CE 4 to provide the new employee share scheme rules. New section CE 2 calculates the amount of income and deduction an employee may have under an employee share scheme. Apportionment for non-resident employees, and timing rules for reporting, are also proposed.

Clause 13 amends section CE 2, from 1 April 2019, in relation to the treatment of benefits under employee share schemes. The amendments insert a new defined term, ESS deferral date, for the date on which the employee is treated as deriving employment income in relation to the benefit, and otherwise updates cross-references and the list of defined terms.

Clause 14 replaces sections CE 6 and CE 7 to provide definitions for the new employee share scheme rules. New section CE 6 provides that trusts are nominees of employee share scheme companies. New section CE 7 provides a definition of employee share scheme. New section CE 7B provides a definition of share scheme taxing date, to provide the date on which the relevant tax calculations under the new employee share scheme rules are performed. New section CE 7C provides a definition of employee share scheme beneficiary. New section CE 7D provides a definition of replacement employee share scheme.

Clause 15 amends section CQ 5 consequentially to update the section title to a cross-referenced provision.

Clause 16 inserts new section CR 3B to provide that 10% of the gross premium of a life insurance policy derived by Lloyd’s of London is income.

Clause 17 amends section CT 5 to insert a reference to the definition of decommissioning in the tax rules for petroleum mining.

Clause 18 inserts new section CT 5B to provide that certain amounts are treated as income of a petroleum miner when commercial production is resumed after a deduction has been received for permanently ceasing petroleum mining operations.

Clause 19 amends section CT 6 to insert a reference to the definition of decommissioning in the tax rules for petroleum mining.

Clause 20 amends section CT 6B to remove, in the tax rules for petroleum mining, a reference to the definition of removal or restoration operations which is being repealed.

Clause 21 amends section CT 7 to replace, in the tax rules for petroleum mining, the reference to the definition of removal or restoration operations which is being repealed with a reference to the definition of decommissioning.

Clause 22 amends section CV 17, consequentially to amend the reference to the section title.

Clause 23 inserts a new section CV 20 consequentially to provide that a person has income under the new employee share scheme rules.

Clause 24 amends section CW 17CB, which relates to payments for work-related meals, to insert a definition of employer’s workplace which clarifies that, for the purposes of a meal allowance, the relevant workplace is the base at which the employee normally works.

Clause 25 inserts new sections CW 26B to CW 26G to provide a tax exemption for benefits provided under share purchase schemes. New section CW 26B provides that amounts derived from share purchase schemes are exempt income. New section CW 26C provides a definition of share purchase scheme. New section CW 26D provides a definition of employee for the share purchase scheme exemption. New section CW 26E provides a definition of normal retiring age for the share purchase scheme exemption. New section CW 26F provides a definition of share for the share purchase scheme exemption. New section CW 26G provides a definition of trustee for the share purchase scheme exemption.

Clause 26 inserts new section CX 55B to provide for the treatment of proceeds from the disposal of shares and financial arrangements by a foreign PIE equivalent. The amount derived is excluded income.

Clause 27 inserts a new cross-heading and new section CX 57B relating to amounts derived by a person from certain disposals during a period when the person uses a specified calculation method for FIF income or loss. The amount is excluded income.

Clause 28 replaces section CZ 1, as part of the new employee share scheme rules, to provide a grandparenting rule in relation to certain shares granted or acquired before 12 May 2016.

Clause 29 inserts new section DB 23B to deny a company a deduction in relation to the acquisition or value of an excepted financial arrangement, such as shares, held on revenue account when the shares are cancelled and, at the time of the cancellation, the issuer of the shares and the holder of the financial arrangement are part of the same consolidated group.

Clause 30 inserts new section DB 54C to deny a foreign PIE equivalent a deduction for expenditure or loss incurred in deriving excluded income under new section CX 55B.

Clause 31 repeals sections DC 12 to DC 15, as part of the new share purchase scheme exemption.

Clause 32 amends section DN 6 consequentially to update the section title to a cross-referenced provision.

Clause 33 amends section DT 7 to align the drafting of the provision, which appears in the tax rules for petroleum mining, with new section DT 7B.

Clause 34 inserts new section DT 7B to provide that amounts treated as income of a petroleum miner under new section CT 5B are also to be treated as petroleum development expenditure.

Clause 35 amends section DT 15 to insert a reference to the definition of decommissioning in the tax rules for petroleum mining.

Clause 36 amends section DT 16 to replace, in the tax rules for petroleum mining, the reference to the definition of removal or restoration operations, which is being repealed, with a reference to the definition of decommissioning.

Clause 37 amends section DT 17 to remove , in the tax rules for petroleum mining, a cross reference to section IS 5 which is being repealed.

Clause 38 amends section DT 20 to insert a reference to the definition of decommissioning in the tax rules for petroleum mining.

Clause 39 amends section DU 7 as a remedial matter, to clarify that the section does not apply to mining outgoing excess of a loss-attributing qualifying company.

Clause 40 amends section DV 2, as a remedial matter, to correct a defined term.

Clause 41 inserts a new cross-heading and new section DV 27, which provides for deductions and income a person may have under an employee share scheme.

Clause 42 inserts new section DV 28, which allows deductions in relation to a share purchase scheme for administrative or management services.

Clause 43 inserts new section DW 3B to prevent Lloyd’s of London claiming a deduction for expenditure incurred in deriving income under new section CR 3B.

Clause 44 amends section EA 2, which deals with revenue account property, to clarify in a particular case the nature of the property to which the section applies. The amendment also updates cross-references related to petroleum mining.

Clause 45 inserts new section ED 2B, which applies to situations in which an ASX-listed Australian company transfers the shares in a subsidiary to the shareholders of the ASX-listed Australian company. The new shareholdings in the subsidiary must be in the same proportions as the shareholdings in the parent company and the share transfer must not be a dividend under the Income Tax Assessment Act 1936 (Aust). The new section gives the costs and the available subscribed capital amounts for the shares in the parent and subsidiary after the transfer. The section also defines the term ASX-listed Australian company. Subclause (1), which inserts the new section, comes into force on 1 April 2016. Subclause (2) provides for an amendment to the definition and comes into force on 1 April 2017.

Clause 46 amends section EE 7, as a remedial matter, to remove a reference to assets to which section DU 6(4) applies, as that subsection no longer exists.

Clause 47 amends section EE 34, as a remedial matter, to correct a fault in expression.

Clause 48 amends section EJ 12 to remove, in the tax rules for petroleum mining, a cross reference to section IS 5 which is being repealed.

Clause 49 replaces section EJ 13 to allow for a deduction for petroleum development expenditure, which has not been allocated to an earlier income year, to be allocated to the income year in which petroleum mining operations permanently cease.

Clause 50 repeals section EJ 14, which allows for deductions for petroleum development expenditure to be spread to earlier tax years when a permit is relinquished. A refundable credit, which is provided in new subpart LT, will allow a deduction for this expenditure to be realised in the year in which petroleum mining operations permanently cease.

Clause 51 amends section EJ 18 to insert a reference to the definition of decommissioning in the tax rules for petroleum mining.

Clause 52 amends section EJ 20 to replace the reference to the definition of removal or restoration operations, which is being repealed, with a reference to the definition of decommissioning.

Clause 53 amends section EJ 22, as a remedial matter, to remove a cross-reference.

Clause 54 amends section EW 13, as a remedial matter, to correct a cross-reference.

Clause 55 amends section EW 15H, as a remedial matter, to correct cross-references.

Clause 56 amends section EW 31, which provides the calculation for a base price adjustment, by clarifying that non-integral fees are ignored when the modified fair value method is used.

Clause 57 amends section EX 21 to remove, in the tax rules for petroleum mining, a cross reference to section IS 5 which is being repealed.

Clause 58 amends section EX 21B consequentially to insert a reference to part-period calculations under new section EX 21F.

Clause 59 inserts new section EX 21F, which deals with part-period calculations when an interest holder holds an income interest for only part of an accounting period. It provides that the holder may determine that a CFC is a non-attributing CFC if certain requirements are met.

Clause 60 amends section EX 38 to update the FIF rules exemption for employee share schemes, as part of the new employee share scheme rules.

Clause 61 amends section EX 59 to clarify the relationship with new section CX 57B, which relates to certain amounts derived by a person during a period when they use a specified calculation method for FIF income or loss.

Clause 62 amends section EY 10 to clarify that, apart from the reference to life insurer in section EY 8, Lloyd’s of London is treated as not being a life insurer for its life insurance business that is taxed under new section CR 3B.

Clause 63 amends section FC 2 to include new section ED 2B in the list of provisions that override the general rule for transfers at market value.

Clause 64 amends section FM 31, which contains the eligibility rules for membership of consolidated groups. The amendment clarifies that a company is not eligible if it is a local authority.

Clauses 65 to 68 amend sections FM 36, FM 37, FM 38, and FM 40 to replace outdated terminology. Section FM 40 is also amended to clarify that local authorities are not eligible to be members of a consolidated group.

Clause 69 amends section FN 4, as a remedial matter, to correct a fault in expression.

Clause 70 inserts a new cross-heading and new section GB 49B to provide a specific anti-avoidance provision for the new employee share scheme rules.

Clause 71 amends section GB 52, as a remedial matter, to correct a fault in expression.

Clause 72 amends section HA 19 to update a cross-reference.

Clause 73 amends section HC 2 consequentially to replace a cross-reference.

Clause 74 amends section HC 27 as part of the new employee share scheme rules.

Clause 75 amends section HC 33, as a remedial matter, to remove redundant words.

Clause 76 amends section HD 3 to clarify the obligations of agents for Lloyd’s of London in relation to life insurance.

Clause 77 amends section HD 15 to provide a definition of company that includes a company that is acting in the capacity of trustee for the purposes of the section, including the voting interest and market value interest tests, as the tests apply for the definitions of controlling shareholder and interested shareholder.

Clause 78 inserts new section HD 17B, which describes the liability of agents for Lloyd’s of London in relation to life insurance.

Clause 79 amends section HF 1 consequentially to update cross-references.

Clause 80 amends section HM 3, which relates to foreign PIE equivalents, to repeal subsection (1)(b)(iii), relating to trusts that would be unit trusts if they had more than 1 beneficiary.

Clause 81 amends section HM 4 by inserting a new subsection setting out the consequences when an investor does not provide a tax file number to the PIE.

Clause 82 amends section HM 9 by repealing paragraph (c), which relates to trusts that would be unit trusts if they had more than 1 beneficiary.

Clause 83 amends section HM 13 relating to maximum shareholdings in investments. It clarifies that the investment must not carry voting interests or market value interests of more than 20%.

Clause 84 amends section HM 30, as a remedial matter, to correct a cross-reference.

Clause 85 amends section HM 62, which deals with exit levels for investors, to set out the consequences when an investor does not provide a tax file number to the PIE.

Clauses 86 to 88 amend sections HM 67, HM 68, and HM 69, which relate to the treatment of formation losses, to include multi-rate PIEs that calculate their tax liability under the provisional tax calculation option or change from that option to the exit calculation or quarterly calculation option.

Clause 89 amends section HR 10, as a remedial matter, to correct a fault in expression.

Clause 90 replaces section HR 12, which relates to non-exempt charities and the treatment of tax-exempt accumulations. The section applies to charities that become deregistered after deriving exempt income and also to persons who derive exempt income under section CW 42. It sets out how to determine the amount of taxable income derived and provides for the assets that are not counted in determining that income.

Clause 91 inserts a new cross-heading and new section HR 13 to provide that, in relation to the life insurance business of Lloyd’s of London, all underwriters of Lloyd’s of London who derive premium income in an income year are jointly and severally liable for each other’s tax obligations for the income year.

Clause 92 amends section IA 2 to allow a person to include an unused specified activity net loss in their tax loss for the tax year, to the extent to which the amount has not been subtracted under section IA 4.

Clause 93 amends section IA 4 to provide that an unused specified activity net loss must first be subtracted from net income for a tax year before the remaining portion of the unused specified activity net loss can be included under section IA 2 in a tax loss for the tax year.

Clause 94 repeals amendments, which relate to unused specified activity net losses, made to section IA 4 by clause 92, with application for the 2019–20 and later income years.

Clause 95 amends section IA 7 to repeal consequentially subsection (8) when sections IS 5, IZ 2, and IZ 3, which deal with a petroleum mining company’s net losses, are repealed.

Clause 96 amends section IA 8, as a remedial matter, to correct the list of defined terms.

Clause 97 amends section IA 9 to provide an order for the tax loss component that relates to an unused specified activity net loss under section IA 2(4)(g), for the purposes of the continuity and commonality rules.

Clause 98 amends section IC 3, which provides the test for common ownership, by replacing subsection (3) to update the cross-references to voting interests in subpart YC.

Clause 99 amends section IS 5 to correct a cross reference in the tax rules for petroleum mining, from 1 April 2008.

Clause 100 repeals section IS 5, which allows for certain deductions of petroleum miners to be spread to earlier tax years. A refundable credit, which is provided in new subpart LT and new section LA 6(1)(ib), will allow these deductions to be realised.

Clause 101 repeals section IZ 1, which provides rules for the use of specified activity net losses.

Clause 102 repeals section IZ 2, which is a redundant provision concerning petroleum mining companies.

Clause 103 repeals section IZ 3, which is a redundant provision concerning petroleum mining companies.

Clause 104 amends section LA 6 to allow a tax credit under new subpart LT, which provides for tax credits for petroleum miners, to be a refundable credit.

Clause 105 amends section LB 1 as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 106 amends section LB 3 to clarify that the amount of tax includes a payment of RWT for a non-cash dividend.

Clause 107 amends section LB 7 to update a cross-reference related to the new investment income information provisions.

Clause 108 amends section LB 8 to update a cross-reference related to the replacement of certain provisions related to tax codes and tax rates.

Clause 109 amends section LD 3 to clarify that donation tax credits are available only for donations made to community housing entities during the period in which they qualify for the income tax exemption in section CW 42B.

Clause 110 amends section LD 4 as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 111 amends section LD 5 as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 112 amends section LK 1 to clarify the treatment of tax credits related to attributed CFC income for parent companies and group companies.

Clause 113 inserts new subpart LT to allow a tax credit for petroleum miners or farm-in parties relating to certain expenditure for decommissioning or certain expenditure that has not been allocated to an income year when petroleum mining operations permanently cease.

Clauses 114 and 115 amend sections MX 1 and MX 4, as a remedial matter, to correct formatting faults.

Clause 116 amends section OA 2, which relates to memorandum accounts, to clarify that the section applies for a tax year and for each subsequent tax year.

Clause 117 amends section OA 7, which relates to opening balances of memorandum accounts. The amendment clarifies the treatment of an amount of a credit or debit that forms part of an opening balance. It also clarifies the treatment of existing credits when companies form an imputation group, or consolidated imputation group, or become associated with imputation groups.

Clauses 118 and 119 amend sections OP 3 and OP 4 to clarify how an opening balance of an imputation credit account is determined.

Clause 120 amends section OP 22, which relates to a consolidated ICA group company’s credit, to clarify the limit of an amount of a credit for a group company.

Clause 121 provides a table setting out the tables of credits and debits from which rows are repealed following the amendments proposed related to opening balances of memorandum accounts.

Clause 122 amends section RA 11, which relates to adjustments to correct underpayment errors, to provide a threshold for underpayments of RWT and NRWT in relation to which a person may make an adjustment in the tax year after the year in which the error was made. The adjustment is treated as made on the due date for the amount of tax and a requirement to notify the Commissioner of an adjustment that falls within the threshold amount is added.

Clause 123 amends section RA 12, which relates to adjustments to correct overpayment errors, to replace references to repealed provisions, include the new investment income information requirements, and to add a requirement for notification to the Commissioner and the payee.

Clause 124 amends section RA 15, which provides payment dates for interim and other tax payments, to clarify the treatment of discrepancies in investment income information.

Clauses 125 and 126 amend sections RA 16 and RA 17, which relate to payment dates, to remove references to the repealed RWT exemption certificate.

Clause 127 amends section RC 3 to delete a reference to a certificate as a consequence of the introduction of the new employment income information provisions.

Clause 128 amends section RC 19, as a remedial matter, to correct a fault in expression.

Clause 129 amends section RD 2, which lists the PAYE rules, to update cross-references related to the repeal of the provisions for listed PAYE intermediaries and to the new employment income information and tax code provisions.

Clause 130 replaces section RD 4, which relates to the payment of amounts of tax to the Commissioner, to include all the provisions relating to the payment of amounts of tax for PAYE income payments, separating the payment requirements from the new information requirements in replaced section RD 22.

Clause 131 amends section RD 6 as a consequence of the introduction of the new employee share scheme rules.

Clause 132 amends section RD 6, from 1 April 2019, to provide for the new reporting requirements for benefits under employee share schemes.

Clause 133 amends section RD 7 as a consequence of the introduction of the new employee share scheme rules.

Clause 134 amends section RD 7, from 1 April 2018, to remove a redundant threshold relating to the tax treatment of a retrospective increase in salary or wages.

Clause 135 amends section RD 7B as a consequence of the introduction of the new employee share scheme rules.

Clause 136 amends section RD 7B, from 1 April 2019, to provide for the new reporting requirements for benefits under employee share schemes.

Clause 137 amends section RD 8 to update a cross-reference related to the replacement of certain provisions for tax codes and tax rates.

Clause 138 amends section RD 10 to clarify the rate at which an extra pay for a non-resident seasonal worker is taxed and the rate of tax for an extra pay when an employee has not notified their employer of their tax code.

Clause 139 amends section RD 10B consequentially to take account of the replacement provisions for the rates of tax on schedular payments and the requirements for persons who make schedular payments.

Clause 140 inserts new section RD 10C to provide for the calculation of amounts of tax for PAYE income payments following changes to tax rates or thresholds in the Income Tax Act 2007 or the Tax Administration Act 1994.

Clause 141 replaces section RD 12, which provides the tax treatment of multiple payments of salary or wages, to provide that the payments are treated as 1 payment made by the employer for the week.

Clause 142 replaces section RD 13 to provide a new option for the tax treatment of advance payments of salary or wages, or holiday pay. The employer may choose to treat the payment either as a lump sum spread over pay periods or as an extra pay.

Clause 143 amends section RD 13B as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 144 repeals section RD 14, which provides how to determine the amount of tax for a payment of salary or wages when there is a change to tax rates. The section is replaced by new section RD 10C.

Clause 145 amends section RD 17 to exclude non-resident seasonal workers and employees who have not notified their employer of their tax code from the ambit of the section.

Clause 146 amends section RD 18 to update a cross-reference related to the reorganised tax code and tax rate provisions.

Clause 147 amends section RD 21 to update cross-references as a consequence of the introduction of the new rules for employment income information.

Clause 148 replaces section RD 22 in relation to the reporting of employment income information and to separate the payment requirements from the reporting requirements.

Clauses 149 and 150 amend sections RD 23 and RD 24 to update the terminology and cross-references as a consequence of the introduction of the new rules for employment income information.

Clause 151 amends section RD 64 to update cross-references for the repeal of the provisions related to listed PAYE intermediaries.

Clause 152 inserts new section RD 67B to provide for the calculation of amounts of tax for employers’ superannuation cash contributions following changes to tax rates or thresholds in the Income Tax Act 2007 or the Tax Administration Act 1994.

Clauses 153 to 158 amend sections RE 2, RE 4, RE 5, RE 7, RE 8, and RE 10 to remove references to the repealed RWT exemption certificate. In section RE 5, a remedial requirement is inserted to provide that no obligation arises under the section in relation to non-cash dividends. In section RE 10, an adjustment is also made to correct a numerical lapse.

Clause 159 amends section RE 14 to include a reference to a dividend under new section RE 14B for non-cash dividends distributed through intermediaries.

Clause 160 inserts new section RE 14B to clarify the treatment of non-cash dividends that are distributed through intermediaries in the same income year in which the dividend is derived.

Clause 161 amends a cross-heading and section RE 27 to update the section in relation to the repeal of the RWT exemption certificate, and to add a notification requirement for persons with RWT-exempt status.

Clause 162 amends section RE 28 to remove references to the repealed RWT exemption certificate.

Clause 163 replaces section RE 29 to provide that a person may establish that another person has RWT-exempt status by a search of a database provided by the Commissioner.

Clause 164 amends section RE 30 to remove references to the repealed RWT exemption certificate.

Clause 165 amends section RL 4 to update a reference to a licensed non-bank deposit taker, which is defined in section YA 1.

Clause 166 amends section RM 8 to update the terminology and cross-references as a consequence of the introduction of the new rules for investment income information.

Clause 167 amends section RP 2 to update the terminology for the repeal of the provisions related to listed PAYE intermediaries.

Clause 168 repeals sections RP 3, RP 4, and RP 5 as part of the repeal of the provisions related to listed PAYE intermediaries.

Clause 169 replaces section RP 8 to remove references to record-keeping which have been reorganised with the new rules for employment income information, and to retain the requirement that an employer must provide the information sought by a PAYE intermediary in the time agreed by them.

Clause 170 amends section RP 14 to update the terminology and cross-references as a consequence of the introduction of the new rules for employment income information.

Clause 171 inserts new section RZ 13 to provide a transitional provision for the repeal of the provisions related to listed PAYE intermediaries.

Clause 172 amends section YA 1.

Subclause (2) amends the definition of asset for a new definition in section HR 12, which relates to the treatment of tax exempt accumulations by non-exempt charities.

Subclause (3) inserts a new definition of ASX-listed Australian company by cross-reference to new section ED 2B.

Subclause (4) amends the definition of charitable purpose, as a remedial matter, to clarify the language.

Subclause (5) amends the definition of company to clarify that, in most cases, the term does not include a company that is acting in the capacity of trustee. A slight change to the wording of paragraph (c) of the definition, which concerns group investment funds, is made and a reference to the definition of company for the purposes of section HD 15 is also inserted.

Subclause (6) amends the definition of company dividend statement to update a cross-reference to the new investment income information provisions.

Subclause (7) repeals the reference to conduct, a redundant term which is defined in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (8) inserts a definition of decommissioning, which replaces the repealed definition of removal or restoration operations, as a result of changes to the tax rules for petroleum mining.

Subclause (9) amends the definition of dispose as a consequence of the introduction of the new employee share scheme rules.

Subclause (10) amends the definition of distinctive work clothing to remove an incorrect cross-reference.

Subclause (11) amends the definition of dwelling, as a remedial matter, to correct the punctuation.

Subclause (12) amends the definition of employee as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (13) inserts definitions of employee share scheme and employee share scheme beneficiary as a consequence of the introduction of the new employee share scheme rules.

Subclause (14) repeals the definition of employer monthly schedule as a consequence of the introduction of the new rules for employment income information.

Subclause (15) inserts a reference to the new definition of employer’s workplace in relation to the provision for payments for certain work-related meals.

Subclause (16) repeals the definition of employing company as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (17) inserts a reference to the new definition of employment income information as a consequence of the introduction of the new rules for employment income information.

Subclause (18) replaces the definition of end date to take account of a reference to a new definition in section HR 12, which relates to the treatment of tax-exempt accumulations by non-exempt charities.

Subclause (19) inserts a reference to the new definition of ESS deferral date which relates to the reporting of benefits under employee share schemes.

Subclause (20) repeals the reference to established activity, a redundant term which is defined in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (21) amends the definition of exempt interest as a consequence of the introduction of the new rules for investment income information, and the creation of a database of persons with RWT-exempt status.

Subclause (22) repeals the definition of exemption certificate as a consequence of the introduction of the new rules for employment income information.

Subclause (23) repeals the reference to existing farmer, a redundant term which is defined in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (24) inserts a new definition of farm-in party, which is used in the tax rules for petroleum mining.

Subclause (25) replaces the definition of formation loss as part of the remedial amendments relating to PIEs.

Subclause (26) amends the definition of goods, as a remedial matter, for grammatical accuracy.

Subclause (27) amends the definition of high-priced livestock, as a remedial matter, for grammatical accuracy.

Subclause (28) repeals the reference to income from personal exertion, a redundant term which is defined in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (29) repeals paragraph (e) of the definition of land, a redundant provision which refers to a definition in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (30) replaces the definition of liabilities for a new definition in section HR 12, which relates to the treatment of tax exempt accumulations by non-exempt charities.

Subclause (31) inserts a new definition of licensed non-bank deposit taker, a term defined by reference to the Non-Bank Deposit Takers Act 2013, which is used in section RL 4 and new section HD 17B.

Subclause (32) repeals the definition of listed PAYE intermediary as part of the repeal of the provisions related to listed PAYE intermediaries.

Subclause (33) inserts a new definition of Lloyd’s of London, which is used in new sections CR 3B, DW 3B, HD 17B, HR 13, and YD 8B, schedule 1, part A, clause 11, and other tax rules relating to the life insurance business of Lloyd’s of London.

Subclause (34) amends the definition of member to remove references to the repealed RWT exemption certificate.

Subclause (35) replaces the definition of natural person to clarify that the term, in most cases, does not include a natural person who is acting in the capacity of trustee.

Subclause (36) amends the definition of net assets consequentially to update a section reference.

Subclause (37) replaces the definition of normal retiring age as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (38) amends the definition of offered or was offered or entered into to insert a reference to new sections CR 3B and YD 8B where the defined term is used. The amendment is a result of the introduction of new tax rules relating to the life insurance business of Lloyd’s of London.

Subclause (39) amends the definition of pay consequentially to update a cross-reference.

Subclause (40) inserts a reference to the new definition of payday as a consequence of the introduction of the new rules for employment income information.

Subclause (41) repeals the definitions of PAYE income payment form and PAYE income payment form period as a consequence of the introduction of the new rules for employment income information.

Subclause (42) amends the definition of PAYE intermediary consequentially to remove a cross-reference.

Subclause (43) repeals the definition of period of restriction as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (44) amends the definition of petroleum development expenditure to exclude from the definition expenditure that relates to an amount for which a deduction is allowed under new section DT 7B.

Subclause (45) repeals the definition of petroleum mining company, which is referred to in sections IA 7(8), IS 5, IZ 2, and IZ 3 that are to be repealed.

Subclause (46) amends the definition of profit distribution plan as a consequence of the introduction of the new employee share scheme rules.

Subclause (47) replaces the definition of refundable tax credit to include within the definition a tax credit under new subpart LT. The amendment is a result of changes to the tax rules for petroleum mining.

Subclause (48) repeals the reference to related activity, a redundant term which is defined in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (49) repeals the definition of removal or restoration operations, which has been replaced by the new definition of decommissioning. The repeal is a result of changes to the tax rules for petroleum mining.

Subclause (50) inserts a new definition of replacement employee share scheme as a consequence of the introduction of the new employee share scheme rules.

Subclause (51) inserts a new definition of RWT-exempt status as a consequence of the removal of the RWT exemption certificate.

Subclause (52) repeals the definition of RWT exemption certificate as a consequence of the changes to the provisions relating to investment income information.

Subclause (53) amends the definition of RWT withholding certificate consequentially to update a cross-reference.

Subclause (54) amends the definition of savings product policy, as a remedial matter, for grammatical accuracy.

Subclause (55) amends the definition of schedular income to include within the definition income of Lloyd’s of London under new section CR 3B.

Subclause (56) amends the definition of settlement of relationship property, as a remedial matter, to improve readability.

Subclause (57) amends the definition of share by repealing paragraph (f), as a consequence of the introduction of the new employee share scheme rules.

Subclause (58) amends the definition of share by replacing paragraph (g), as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (59) repeals the definition of share purchase agreement as a consequence of the introduction of the new employee share scheme rules.

Subclause (60) replaces the definition of share purchase scheme as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (61) inserts a new definition of share scheme taxing date as a consequence of the introduction of the new employee share scheme rules.

Subclause (62) replaces the definition of shareholder-employee as a consequence of the introduction of the new employee share scheme rules.

Subclause (63) repeals the definitions of specified activity, specified activity net income, and specified activity net loss, redundant terms defined in section IZ 1, a provision concerning specified activity net losses, that is being repealed.

Subclause (64) repeals the definition of subsidy claim form as part of the repeal of the provisions related to listed PAYE intermediaries.

Subclause (65) amends the definition of tax file number as a consequence of the removal of the RWT exemption certificate.

Subclause (66) amends the definition of time bar, as a remedial matter, to update cross-references.

Subclause (67) amends the definition of trustee as a consequence of the introduction of the new share purchase scheme exemption.

Subclause (68) inserts a new definition of unused specified activity net loss, which is used in the amendments to sections IA 2, IA 4, and IA 9.

Clause 173 inserts new section YA 5 to clarify that a person who is acting as a trustee of a trust is acting in capacity that is separate from their other capacities.

Clause 174 amends section YC 4, as a remedial matter, for grammatical accuracy.

Clause 175 amends section YD 1 to clarify that the test for residence in the section applies to trustees who are natural persons, a change that is consequential to the amendments to the definition of natural person, which now does not include a natural person who is acting as a trustee.

Clause 176 amends section YD 2 to clarify that the test for residence in the section which applies to companies also applies to trustees that are companies, a change that is consequential to the amendments to the definition of company, which now does not include a company that is acting as a trustee.

Clause 177 amends the compare note to section YD 4, as a remedial matter, for accuracy.

Clause 178 amends section YD 6 to insert a requirement for a reduction by the Commissioner that the amount is exempt from, or not liable to, income tax in the other country. The omission of the phrase “or not liable to” was made during the rewriting of the legislation in 2007.

Clause 179 inserts new section YD 8B, which provides that 10% of the gross premium from the life insurance policies of Lloyd’s of London has a source in New Zealand.

Clause 180 amends schedule 1 to provide the basic rate of income tax for Lloyd’s of London for income under new section CR 3B, and to provide for rates for non-notification of tax file numbers and tax codes, and to update cross-references.

Clause 181 amends schedule 2 to provide tax rates for non-resident seasonal workers, and for employees who have not notified their employers of their tax code, and consequentially to update cross-references.

Clause 182 amends schedule 25 by inserting a cross-reference to new section ED 2B in the list of empowering provisions.

Clause 183 amends schedule 32 to insert entities into the list of recipients of charitable and other public benefit gifts.

Clause 184 amends schedule 36 to insert entities into the list of government enterprises.

Clause 185 enacts a schedule of consequential amendments to the Income Tax Act 2007 relating to changes to the definitions of natural person and company, which now do not include a person who is acting as a trustee.

Part 3Amendments to Tax Administration Act 1994

Clause 186 sets out the clauses that affect the Tax Administration Act 1994.

Clause 187 amends section 3.

Subclause (2) repeals the definition of dividend treated as interest to avoid duplication.

Subclause (3) amends the definition of employee consequentially to update a cross-reference.

Subclause (4) inserts a definition of employment income information as a consequence of the introduction of the new rules for employment income information.

Subclause (5) inserts a new definition of ESS deferral date as a consequence of the introduction of the new rules for employment income information relating to benefits under employee share schemes.

Subclause (6) amends the definition of exempt person, as a remedial matter, to correct a cross-reference.

Subclause (7) repeals the definition of exempt person as a consequence of the introduction of the new rules for investment income information.

Subclause (8) amends the definition of gift-exempt body as a consequence of the removal of the RWT exemption certificate.

Subclause (9) inserts new definitions of investment income and investment income information as a consequence of the introduction of the new rules for investment income information.

Subclause (10) inserts a new definition of natural person, which aligns with the new definition of natural person in the Income Tax Act 2007, which now does not include a natural person who is acting as a trustee. However, the term natural person is defined to include a natural person who is acting in the capacity of trustee for the purposes of the definition of qualifying resident foreign resident trustee and in sections 177 and 177A.

Subclause (11) repeals the definition of non-exempt person as a consequence of the introduction of the new rules for investment income information.

Subclause (12) inserts a new definition of payday as a consequence of the introduction of the new rules for employment income information.

Subclause (13) amends the definition of payment as a consequence of the introduction of the new rules for employment income information.

Subclause (14) inserts a new definition of payroll software as a consequence of the introduction of the new rules for employment income information.

Subclause (15) repeals the definition of reconciliation statement as a consequence of the introduction of the new rules for investment income information.

Subclause (16) amends the definition of record consequentially to update a cross-reference.

Subclause (17) amends the definition of record holder consequentially to remove a cross-reference to a repealed section.

Subclause (18) replaces the definition of registered person to ensure the general application of the definition for the purposes of the Act.

Subclause (19) amends the definition of responsible department consequentially to update a cross-reference.

Subclause (20) repeals the definition of RWT exemption certificate as a consequence of the introduction of the new rules for investment income information.

Subclause (21) repeals the definitions of special tax code certificate and special tax code notification as a consequence of the introduction of the new rules for employment income information.

Subclause (22) amends the definition of tax to repeal a paragraph relating to subsidies payable to listed PAYE intermediaries as part of the repeal of the provisions related to listed PAYE intermediaries.

Subclause (23) inserts a new definition of tax code as a consequence of the introduction of the new rules for employment income information.

Subclause (24) repeals the definitions of tax code certificate and tax code notification as a consequence of the introduction of the new rules for employment income information.

Subclause (25) amends the definition of tax position to repeal a paragraph relating to subsidies payable to listed PAYE intermediaries as part of the repeal of the provisions related to listed PAYE intermediaries.

Subclause (26) replaces the definition of tax shortfall, to provide that an employer has a penalty for failing to correctly report employee share scheme amounts, calculated by reference to the shortfall that they failed to report.

Clause 188 amends section 15C to remove a reference to listed PAYE intermediaries in the heading and to repeal subsection (2) as part of the repeal of the provisions related to listed PAYE intermediaries.

Clause 189 amends section 15F, as a remedial matter, for grammatical accuracy.

Clause 190 repeals sections 15G, 15H, and 15I as part of the repeal of the provisions related to listed PAYE intermediaries.

Clause 191 amends section 15J, repealing subsection (4), as part of the repeal of the provisions related to listed PAYE intermediaries.

Clause 192 amends section 15L to update the terminology as a consequence of the introduction of new rules for employment income information.

Clause 193 repeals section 15M as part of the repeal of the provisions related to listed PAYE intermediaries.

Clauses 194 and 195 insert new subpart headings to bring some order to the list of provisions in Part 3.

Clause 196 amends section 22 consequentially to update a cross-reference.

Clause 197 inserts new section 22AA, which provides record-keeping requirements for employment income and replaces existing section 24.

Clause 198 inserts new section 22AAB, which provides record-keeping requirements for investment income that is resident passive income and replaces existing section 26.

Clause 199 amends section 23 to clarify the records that the section does not require to be kept for employment income purposes.

Clause 200 inserts new subpart 3C, which contains the requirements for employment income information. The provisions establish what is meant by employment income information for reporting purposes, when and how it must be provided to the Commissioner, and the information that must be provided for new and departing employees. The subpart also provides for the correction of errors, the setting of electronic and non-electronic filing requirements, and payroll software.

Clause 201 repeals a cross-heading and section 24. Clause 196 inserts an amended version of that provision in a more appropriate location in the Act as new section 22AA. The amendment is made as a consequence of the introduction of the new rules for employment income information.

Clause 202 repeals a cross-heading and section 24BA. Clause 243 inserts an amended version of that provision in a more appropriate location in the Act as new section 55B.

Clause 203 amends section 24B by removing a cross-reference to repealed section 24BA and inserting new subsection (3C), which corresponds to former section 24BA(1D).

Clause 204 inserts new subpart 3D replacing sections 24B to 24IB. The subpart contains the rules for tax codes and schedular tax rates. The provisions define what is meant by tax code, and provide for notified codes, codes provided by the Commissioner for certain income, and for non-notified codes. The rates of tax for schedular payments are set out as standard rates, elected rates, and rates set by the Commissioner, and special tax rates.

Clause 205 repeals a cross-heading and section 24J as a consequence of the introduction of new rules for employment income information.

Clause 206 amends section 24K by renumbering the section, placing it in a more appropriate location. It also updates a cross-reference as a consequence of the changes brought about by the new investment income information provisions.

Clause 207 repeals sections 24L, 24M, 24N, and 24P as a consequence of the changes brought about by the new employment income information provisions.

Clause 208 amends a cross-heading and section 24Q by renumbering the section, placing it in a more appropriate location.

Clause 209 inserts a new subpart heading to bring some order to the list of provisions in Part 3.

Clause 210 amends section 25A by renumbering the section, placing it in a more appropriate location.

Clause 211 amends section 25 by renumbering the section, placing it in a more appropriate location. It also amends the section to take account of the new rules for investment income information, the replacement of the RWT exemption certificate, and the requirement to provide tax file numbers.

Clause 212 inserts new subpart 3E containing new sections 25B to 25S for investment income information. The provisions establish what is meant for reporting purposes by investment income and investment income information, who is required to provide the information and how it must be provided. The amendments detail what information is required in relation to income types and by certain persons. Provisions are also inserted for the correction of errors and what information may be filed in non-electronic form.

Clause 213 repeals section 26, whose content related to the records to be kept for RWT purposes has been moved to new section 22AAB. The amendment is made as a consequence of the introduction of the new rules for investment income information.

Clause 214 amends section 27 as a consequence of the introduction of the new rules for investment income information and the replacement of the RWT exemption certificate.

Clause 215 replaces section 28B. The amendment excludes non-residents from the requirement to notify a PIE of their tax file number.

Clause 216 inserts new subpart heading to bring some order to the list of provisions in Part 3.

Clause 217 amends section 31B to extend the notification requirements for certain multi-rate PIEs.

Clause 218 amends section 32E to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The amendments include a remedial amendment to include a reference to section CW 64 related to exemptions under other Acts.

Clause 219 amends section 32G to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The provision requires a person with RWT-exempt status to provide evidence to the Commissioner annually to confirm their eligibility for that status.

Clause 220 replaces section 32H to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The new provision requires the Commissioner to add the name of a person with RWT exempt status to an electronic register.

Clause 221 amends section 32I to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The provision concerns persons who have RWT-exempt status despite not meeting the requirements.

Clause 222 replaces section 32J to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The provision concerns unincorporated bodes that have RWT-exempt status.

Clause 223 amends section 32K to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The provision concerns the failure to meet the requirements for RWT-exempt status.

Clause 224 replaces section 32L to take account of the new rules for investment income information and the replacement of the RWT exemption certificate. The provision concerns revocation of RWT-exempt status.

Clause 225 inserts a new subpart heading to bring some order to the list of provisions in Part 3. It also amends section 33 for returns of income made by trustees to whom section HC 2 of the Income Tax Act 2007 applies to clarify the position for trusts.

Clause 226 amends section 33AA to update cross-references to take account of the new rules for investment income information and the replacement of the RWT exemption certificate.

Clause 227 amends section 36 to repeal the reference to registered persons. An amendment is also proposed to insert a general definition of registered person for the purposes of the Act, see clause 186(18).

Clause 228 repeals section 36A relating to the electronic format of the employer monthly schedule and the PAYE income payment form. The amendment is made as a consequence of the introduction of the new rules for employment income information.

Clause 229 repeals section 36AB relating to the electronic return requirements for multi-rate PIEs. The content of this section has been moved to section 57B.

Clause 230 repeals section 36B relating to the electronic format of the employer monthly schedule and the PAYE income payment form. The amendment is made as a consequence of the introduction of the new rules for employment income information.

Clause 231 inserts new section 36BD to provide the electronic filing requirements for registered persons, with a threshold to be set by Order in Council.

Clause 232 amends section 36C consequentially to include a cross-reference to new section 36BD.

Clause 233 repeals sections 36CA, 36D, and 36E, from 1 April 2019. The content is now included in the employment income information provisions in new subpart 3C.

Clause 234 inserts a new cross-heading to provide some order to the list of provisions in Part 3.

Clause 235 amends section 46 as a consequence of the introduction of the new employee share scheme rules.

Clause 236 repeals section 46, from 1 April 2019. The section provides for employer’s returns in relation to their employees. The rules are contained in the employment income information provisions in new subpart 3C.

Clause 237 amends section 47 to take account of the new rules for employment income information in new subpart 3C. The section provides for ESCT statements provided by employers.

Clause 238 repeals section 48, which contains special arrangements for the supply of information by an employer. The rules are moved to the employment income information provisions in new subpart 3C.

Clause 239 amends section 49 to replace certain filing dates for NRWT withholding certificates and annual reconciliations from 1 April 2018. The date changes from 30 May to 15 May, and is made as part of the new rules for investment income information.

Clause 240 repeals sections 49 and 50, from 1 April 2020 when the new rules for investment income information in new subpart 3E take effect.

Clause 241 amends section 51, which relates to RWT withholding reconciliation statements, to provide a date by which the person must provide the information. The amendment which is related to the new rules for investment income information, applies from 1 April 2018.

Clause 242 repeals sections 51 to 54, from 1 April 2020, as the content is included in the new investment income information provisions in new subpart 3E.

Clause 243 amends section 55 consequentially to update cross-references to the new investment income information provisions in new subpart 3E.

Clause 244 inserts new section 55B, which is an amended version of repealed section 24BA. Subsection (1)(b) provides the Commissioner with a discretion to issue a tax file number to an offshore person who does not provide a current bank account number. The Commissioner must be satisfied that the information available provides equivalent assurance concerning the offshore person’s identity and background. The new section does not include former section 24BA(1D), which is inserted as section 24B(3C) by clause 203.

Clause 245 amends section 57 to provide a signpost to the new investment income provisions under which a Maori authority must deliver information to the Commissioner.

Clause 246 amends section 57B by removing the information requirements that are contained in the new investment income information in new subpart 3E. The provision relates to the requirements place on PIEs to provide returns and to pay their tax liability for investors. An amendment also provides for the Commissioner to prescribe the forms in which a return must be filed.

Clause 247 amends section 61 to update cross-references as a consequence of the introduction of the new rules for investment income information.

Clause 248 inserts new section 63B, to provide appropriate disclosure requirements for the new share purchase scheme exemption.

Clause 249 repeals section 67 relating to company dividend statements when ICA companies declare dividends. The content is now included in the new rules for investment income information in new subpart 3E.

Clause 250 amends section 68 to update a cross-reference as a consequence of the introduction of the new investment income information provisions.

Clause 251 repeals section 68B, which relates to the distribution statements required for Maori authority distributions. The content is now included in the new rules for investment income information in new subpart 3E.

Clause 252 amends section 70, as a remedial matter, to correct a defined term.

Clause 253 amends section 74, as a remedial matter, to improve grammatical accuracy.

Clause 254 amends section 80A, as a remedial matter, to correct a cross-reference.

Clause 255 amends section 80D as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 256 amends section 80F consequentially to update a cross-reference.

Clause 257 amends section 80KT as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 258 amends section 85, as a remedial matter, to improve grammatical accuracy.

Clause 259 amends section 85H, as a remedial matter, to correct a defined term.

Clause 260 amends section 91AAQ to delete references to 30 June 2009 relating to the ability of an active insurance business CFC to qualify for an active income exemption determination. The amendment provides that the determination facility is no longer a transitional measure by removing the requirement that the CFC must have been controlled by a New Zealand resident and had the insurance business in the country before and after that date.

Clause 261 amends section 91FD, as a remedial matter, to improve grammatical accuracy.

Clause 262 amends section 110 consequentially to update a cross-references.

Clause 263 amends section 120C in relation to the definition of date interest starts, as a consequence of the amendment to section 173L to alter the time that a credit arises for GST purposes. The number of working days after the return is filed is reduced from 15 to 10.

Clause 264 amends section 120KE. Subclause (1) amends section 120KE(1)(a), as a consequence of changes to the definition of natural person, which now does not include a person who is acting as a trustee. Subclause (2) replaces section 120KE(1)(e), as a consequence of the introduction of the new rules for investment income information and the repeal of the RWT exemption certificate.

Clause 265 inserts new section 120X to provide that, for the purposes of calculating use of money interest, an amount allocated under section EJ 14 to an earlier tax year does not reduce the taxpayer’s tax payable for that year.

Clause 266 repeals section 120X to reflect the repeal of section EJ 14.

Clause 267 amends section 125 to update cross-references as a consequence of the introduction of the new employment income information provisions.

Clause 268 amends section 139A, from 1 April 2019, as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule. The section provides a late filing penalty for certain returns.

Clause 269 amends section 139AA, which relates to the non-electronic filing penalty. The amendments relate to the new rules for employment income information and investment income information, and the changes made for registered persons.

Clause 270 amends section 141AA as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule in relation to shortfall penalties for non-resident contractors.

Clause 271 amends section 141ED, which relates to the penalty for not paying an employer monthly schedule amount. The penalty is renamed the employers’ withholding payment penalty and other changes are made as a consequence of the new rules for employment income information.

Clause 272 amends section 142, which sets the due dates for the payment of late filing penalties. The amendments are a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 273 amends section 142A, which sets a new due date for a payment of tax that is not a penalty. Different due dates apply for an electronic default assessment and a non-electronic default assessment and the amendment limits the application of the current rule to a period that ends on a date set by Order in Council for the last tax type to which the section applies. New section 142AB aligns the treatment.

Clause 274 inserts new section 142AB to set a new due date for new and increased assessments. The treatment of all default assessments is changed so that subsequent reassessment resulting in an increase when the return is filed is treated as due at the original due date. Because this is the correct outcome once a tax type has been migrated to the new software system, the application of the section to particular tax types is to be brought in by Order in Council.

Clause 275 replaces section 142G, which provides the due date for payment of non-electronic filing penalties as a consequence of the introduction of the new rules for employment income information in new subpart 3C, investment income information in new subpart 3E, and for GST purposes.

Clause 276 amends section 173L. The section provides for the transfer of excess tax within a taxpayer’s accounts and the amendment proposes to take account of taxpayers who file GST returns early or late, setting out the date on which the credit arises.

Clause 277 amends section 183A as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule. The section relates to remission of certain penalties.

Clause 278 amends section 183D as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule. The section relates to remission consistent with collection of highest net revenue over time.

Clause 279 amends section 183F as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule. The section relates to small amounts of penalties and interest.

Clause 280 amends section 185 consequentially by removing a reference to repealed section RP 4 of the Income Tax Act 2007, see clause 168.

Clause 281 repeals sections 185C and 185D as a consequence of the repeal of the provisions related to listed PAYE intermediaries.

Clause 282 inserts new sections 227C and 227D as transitional measures for the application of the new employment income information provisions. The provisions allow employers to use the new provisions for the delivery of the information for the year before the commencement date subject to certain restrictions. The provisions also extend the transitional year for obligations arising in the last month, with an exception for information on benefits under employee share schemes.

Clause 283 inserts new section 227E as a transitional measure for the application of the new investment income information provisions. The section allows persons who pay investment income to use the new provisions for the delivery of information in the year before commencement date.

Clause 284 inserts a schedule containing 4 new schedules related to record-keeping requirements, reporting of employment income information, codes and rates, and reporting of investment income information.

Part 4Amendments to other enactments

KiwiSaver Act 2006

Clause 285 sets out the clauses that amend the KiwiSaver Act 2006.

Clause 286 amends section 4 to repeal the definitions of employer monthly schedule, KiwiSaver deduction notice, and remittance certificate and to insert a definition of employment income information.

Clause 287 amends section 17 as a consequence of the introduction of the new rules for employment income information.

Clause 288 amends section 22 as a consequence of the removal of the KiwiSaver deduction notice. The section relates to employees giving information to their employer.

Clause 289 amends section 23 as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 290 amends section 34 as a consequence of the introduction of the new rules for employment income information, the replacement of the employer monthly schedule and the removal of the KiwiSaver deduction notice. The section provides for certain persons to opt in to KiwiSaver.

Clause 291 amends section 42 as a consequence of the removal of the KiwiSaver deduction notice. The section relates to employer’s information packs.

Clause 292 amends section 60 concerning the application of the subpart as a consequence of the removal of the KiwiSaver deduction notice.

Clause 293 amends section 64 to take into account a change to a tax rate or threshold that affects the calculation of employee KiwiSaver contributions.

Clause 294 amends section 67 consequentially to update cross-references.

Clause 295 amends section 73 as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule. The section provides for deductions to be entered in and paid out of holding accounts..

Clause 296 amends section 93 as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule and PAYE income payment form. The section provides for employers’ contributions paid via the Commissioner.

Clause 297 replaces section 97, which provides that the Commissioner must give notice if employer contributions are not remitted. The amendments are made as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule.

Clause 298 amends section 98, which relates to short payments by employers, as a consequence of the introduction of the new rules for employment income information, the replacement of the employer monthly schedule, and the removal of the remittance certificate.

Clause 299 amends section 98A, which relates to the quantifying of short payments, as a consequence of the introduction of the new rules for employment income information and the replacement of the employer monthly schedule and PAYE income payment form.

Clause 300 amends section 99, which relates to short payments if insufficient employer contributions are remitted, as a consequence of the introduction of the new rules for employment income information, the replacement of the employer monthly schedule, and the removal of the remittance certificate.

Clause 301 amends section 101D, which provides the general rule for compulsory employer contributions to amend the CEC rate.

Student Loan Scheme Act 2011

Clause 302 sets out the clauses that amend the Student Loan Scheme Act 2011.

Clause 303 amends section 34 to update a cross-reference.

Clause 304 amends section 37 relating to deduction rates to take into account a change to a rate that affects the amount of a deduction from employment earnings.

Clause 305 amends section 202 to update a cross-reference.

Clause 306 amends schedule 2 to update a cross-reference.

Goods and Services Tax Act 1985

Clause 307 sets out the clauses that amend the Goods and Services Tax Act 1985.

Clause 308 amends section 2 by inserting references to the new definitions of Pharmac, Pharmac agreement, and pharmaceutical, which are used in new section 25(1B).

Clause 309 amends section 2A, which defines which persons are associated, to provide that a trustee and a person with the power to appoint or remove that trustee are associated.

Clause 310 amends section 25 to ensure that certain rebates to Pharmac do not require credit notes to be issued.

Clause 311 amends section 53, as a remedial matter, to correct a cross-reference.

Child Support Act 1991

Clause 312 sets out the clauses that amend the Child Support Act 1991.

Clause 313 amends section 89D, by replacing subsection (1)(a), so that income earned from employment under section 66 of the Corrections Act 2004 does not affect a person’s eligibility for exemption from the payment of financial support.

Clause 314 amends section 89F, consistently with the amendment to section 89D.

Accident Compensation Act 2001

Clause 315 amends schedule 4, clause 9 of the Accident Compensation Act 2001 to update cross-references.

Income Tax Act 2004

Clause 316 amends section EA 2 of the Income Tax Act 2004 to insert cross-references and, as a remedial matter, replaces section EA 2(1)(f) for consistency.

Regulations and notices

Clause 317 revokes the Income Tax (Payroll Subsidy) Regulations 2006 as a consequence of the repeal of the provisions related to listed PAYE intermediaries.

Clause 318 amends the Anti-Money Laundering and Countering Financing of Terrorism (Class Exemptions) Notice 2014 as a consequence of the repeal of the provisions related to listed PAYE intermediaries.