This Act may be cited as the Land and Income Tax Amendment Act, 1939, and shall be read together with and deemed part of the Land and Income Tax Act, 1923 (hereinafter referred to as the principal Act).

This Act shall apply with respect to the tax for the year of assessment commencing on the first day of April, nineteen hundred and forty, and for every subsequent year.

In the case of persons engaged outside New Zealand in any of His Majesty’s Naval, Military, or Air Forces in connection with the present war, the pay and allowances earned by them outside New Zealand as members of such forces shall not be assessable for income-tax.

In the case of persons engaged in any of His Majesty’s special Naval, Military, or Air Forces raised in New Zealand in connection with the present war (not being persons who receive annual or permanent salaries as members of any of His Majesty’s Forces) the pay and allowances earned by them as members of such special forces shall not be assessable for income-tax.

If any question arises under this section as to whether any person is engaged in any special force within the meaning of the last preceding subsection it shall be determined by the Minister of Finance, and his decision shall be final.

In calculating the assessable income of any employer, the Commissioner may allow as a deduction any sums paid by that employer by way of wages, salary, or allowance to any employee in respect of any period after that employee has been called up for service in any of His Majesty’s Naval, Military, or Air Forces, whether within New Zealand or elsewhere:

Provided that no deduction shall be allowed under this section in excess of the rates of the wages, salary, or allowance payable to the employee at the time when he was so called up, or in excess of the rate of four pounds a week, whichever is the less.

For the purposes of this section, the term “employee” means, in respect of any employer, a person who, when he was called up as aforesaid, was employed under such circumstances that the wages, salary, or allowance paid to him by his employer is allowable as a deduction in calculating that employer’s assessable income; and the term “employer” has a corresponding meaning.

Section sixteen of the principal Act is hereby amended by adding the words “or (in any case where the returns so made are fraudulent or wilfully misleading or, in the case of returns of income, omit all mention of income which is of a particular nature or was derived from a particular source, and in respect of which a return is required to be made) after the expiration of seven years from the end of the year in which the assessment was made”.

For the purposes of this section,—

The Commissioner may in any year of assessment (whether before or after the passing of the annual taxing Act for that year) assess the income-tax of any taxpayer at the basic rates. No such assessment shall be deemed to be invalid on the ground that it is made before the passing of the annual taxing Act.

If the annual rates for any year of assessment are higher or lower than the basic rates the amount of every assessment of income-tax made under this section in respect of that year shall be deemed to be increased or reduced accordingly, and every such assessment shall have the same effect as if the amount thereof as so increased or reduced had been specified therein.

Section seventy-four of the principal Act is hereby amended as follows:—

1939, No. 3

Paragraph (b) of subsection one of section six of the Land and Income Tax Amendment Act, 1936, and paragraph (b) of section thirteen of the Finance Act, 1939, are hereby consequentially repealed.

The said section seventy-four of the principal Act is hereby further amended by adding the following subsections:—

Section four of the Land and Income Tax Amendment Act, 1932–33, is hereby amended by omitting from subsection one the words “being a married man (other than an absentee)”, and substituting the words “(other than an absentee) who at any time during the income year is a married man”.

Section two of the Land and Income Tax Amendment Act, 1933, is hereby amended by omitting from subsection one the words “being a married woman (other than an absentee)”, and substituting the words “(other than an absentee) who at any time during the income year is a married woman”.

A taxpayer whose marriage is terminated during any income year, whether by death or otherwise, shall not be entitled in respect of that income year to a special exemption in respect of a housekeeper under section three of the Land and Income Tax Amendment Act, 1933, if the taxpayer is entitled in respect of that year to a special exemption under section four of the Land and Income Tax Amendment Act, 1932–33, or section two of the Land and Income Tax Amendment Act, 1933, as the case may be, or to a special exemption allowed instead thereof under section thirteen of this Act.

Subsection three of section four of the Land and Income Tax Amendment Act, 1932–33, and subsection three of section two of the Land and Income Tax Amendment Act, 1933, are hereby repealed.

Section three of the Land and Income Tax Amendment Act, 1933, is hereby amended as follows:—

The special exemption provided for by section seventy-five of the principal Act shall be allowed in the case of a child or grandchild who dies during the income year and in respect of whom a special exemption under that section would have been allowable if the child had not died.

Paragraphs (b) and (c) of subsection one of section fourteen of the Land and Income Tax Amendment Act, 1929, and subsection two of that section are hereby repealed.

Every person, other than an absentee, shall be entitled to a deduction by way of special exemption from his assessable income of the amount (not exceeding in the aggregate fifty pounds in respect of any one relative) contributed by him during the income year towards the support of any relative.

For the purposes of this section the term “relative” means a person proved to the satisfaction of the Commissioner to be a relation of the taxpayer by blood, marriage, or adoption (not being the wife, husband, child, stepchild, or grandchild of the taxpayer); and includes a former wife of the taxpayer; but does not include any person to whom or on whose behalf a monetary benefit is payable out of the Social Security Fund.

Where claims are made under this section by two or more taxpayers for deductions by way of special exemption exceeding fifty pounds in the aggregate in respect of contributions towards the support of the same person the Commissioner shall not allow a greater exemption in the aggregate than fifty pounds, to be apportioned among the several taxpayers in such manner as the Commissioner thinks fit.

Section seventy-six of the principal Act and section four of the Land and Income Tax Amendment Act, 1935, are hereby repealed.

Section seventy-seven of the principal Act is hereby amended by repealing subsection three, and substituting the following subsection:—

Section five of the Land and Income Tax Amendment Act, 1924, is hereby repealed.

In this section,—

For the purposes of this section a married woman shall be deemed to be living with her husband unless the Commissioner is satisfied that she is in fact separated and living separate and apart from him, whether pursuant to a decree, order, or judgment of any Court, or pursuant to an agreement for separation, or by reason of the desertion of one of the parties by the other of them, or otherwise.

This section applies with respect to the assessment of income-tax—

but does not apply in any other case.

Subject to the provisions of this section, the aggregable income derived by a married woman in any income year shall, for the purpose of assessing income-tax thereon, be deemed to be income derived by her husband on his own behalf during that year, and the husband shall be assessable and liable for income-tax accordingly.

In computing for the purposes of an assessment under the last preceding subsection (hereinafter referred to as an aggregate assessment) the taxable income of any taxpayer (being a married man) other than an absentee, the Commissioner shall allow, instead of the special exemptions provided for by section seventy-four of the principal Act, section four of the Land and Income Tax Amendment Act, 1932–33, and section two of the Land and Income Tax Amendment Act, 1933, a special exemption of an amount equal to the sum of the assessable income derived by the taxpayer or two hundred pounds (whichever is the less) and the aggregable assessable income derived by his wife or two hundred pounds (whichever is the less). In computing for the purposes of an aggregate assessment the taxable income of an absentee, the Commissioner shall allow, instead of the special exemption provided for by section seventy-four of the principal Act (as amended by section seven of this Act), a special exemption of one hundred pounds. Subject to the foregoing provisions of this subsection, the Commissioner, in computing the taxable income of any taxpayer for the purposes of an aggregate assessment, shall allow all other special exemptions and all deductions under section eighty-one of the principal Act to which the taxpayer and his wife, or either of them, would have been entitled if they had been assessed for income-tax otherwise than in accordance with this section.

Notwithstanding anything to the contrary in the foregoing provisions of this section, the Commissioner may make separate assessments of the assessable income derived by a married man during any income year and of the aggregable assessable income derived by his wife during that year, and shall make such separate assessments if required so to do by notice in writing signed by or on behalf of the married man or his wife and delivered to the Commissioner before the making of an aggregate assessment. In respect of such separate assessments the following provisions shall apply:—

At any time before payment in full of the tax payable under any aggregate assessment the Commissioner may, if he thinks fit, cancel the assessment and make separate assessments in its place.

The tax payable by a married man in any year under an aggregate assessment, or by a married man and his wife under separate assessments, shall not in any case be less than the total income-tax that would have been payable by the married man and his wife in that year if this section had not been passed:

Provided that this subsection shall not apply in any case where, in making an aggregate assessment or separate assessments, the Commissioner has allowed a deduction under section eighty-one of the principal Act in respect of a loss incurred by the married man or his wife.

Every married woman who derives aggregable income exceeding two hundred pounds in any income year during which her husband derives income (whether assessable or non-assessable) exceeding two hundred pounds shall in the next succeeding year furnish to the Commissioner (in addition to all other returns that she is required to make) a return of that aggregable income, in such form and at such time as the Commissioner may require.

Every married man who derives income (whether assessable or non-assessable) exceeding two hundred pounds in any income year during which his wife derives aggregable income exceeding two hundred pounds shall in the next succeeding year furnish to the Commissioner (in addition to all other returns that he is required to make) a return of the income so derived by him, in such form and at such time as the Commissioner may require.

Nothing in the foregoing provisions of this section shall preclude the assessment for income-tax otherwise than in accordance with this section of any income derived by a married woman and not assessable under this section, but in making any such assessment no regard shall be had to any aggregable income that is assessable under this section.

The assessable income of any person shall, for the purposes of the principal Act, be deemed to include —

For the purposes of paragraph (b) of the last preceding subsection the term “timber” shall be deemed to include standing timber, and the term “sale” shall be deemed to include any disposition by way of a license or easement, or the grant of any right of taking any profits or produce from land.

This section is in substitution for section four of the Land and Income Tax Amendment Act, 1930, and that section and section four of the Land and Income Tax Amendment Act, 1931, are hereby accordingly repealed.

Section one hundred and twenty-seven of the Social Security Act, 1938, is hereby consequentially amended as from the first day of April, nineteen hundred and forty, by omitting from subsection one the words “and in subsection two of section four of the Land and Income Tax Amendment Act, 1930”.

Notwithstanding anything to the contrary in section eighty of the principal Act, the Commissioner may, in calculating the assessable income of any taxpayer, allow such deduction as he thinks fit in respect of expenditure incurred by the taxpayer during the income year for the preparation, stamping, and registration of any lease of property used in the production of his assessable income, or of any renewal of any such lease, or in the borrowing of money employed by the taxpayer as capital in the production of assessable income.

For the purposes of this section the term “trading stock” includes anything produced or manufactured, and anything acquired or purchased for purposes of manufacture, sale, or exchange; and also includes live-stock; but does not include land.

Where any taxpayer carries on any business the value of his trading stock at the beginning and at the end of every income year shall be taken into account in ascertaining whether or not he has derived assessable income during that year.

The value of the trading stock of any taxpayer to be taken into account at the beginning of any income year shall be its value as at the end of the last preceding income year:

Provided that where the taxpayer’s business is commenced and his trading stock is acquired during the income year the value of the trading stock as at the beginning of the income year shall be deemed to be an amount equal to its cost price:

Provided also that the value of any trading stock at the beginning of the income year commencing on the first day of April, nineteen hundred and thirty-nine, shall be the sum accepted by the Commissioner for the purpose of computing the taxpayer’s assessable income for the income year ended on the thirty-first day of March, nineteen hundred and thirty-nine, as being the value thereof at the end of that income year, whether or not that value is the same as the value thereof determined in accordance with the next succeeding subsection.

Subject to the provisions of subsection nine of this section, the value of the trading stock of any taxpayer to be taken into account at the end of any income year shall be, at the option of the taxpayer, its cost price, its market selling value, or the price at which it can be replaced.

Where the value of the trading stock of any taxpayer at the end of the income year exceeds the value of his trading stock at the beginning of that year the amount of the excess shall be included in his assessable income for that year.

Where the value of the trading stock of any taxpayer at the beginning of any income year exceeds the value of his trading stock at the end of that year the amount of the excess shall be allowed as a deduction in computing the assessable income of the taxpayer for that year.

Where in any income year the whole or any part of the assets of a business carried on by any taxpayer is sold or otherwise disposed of (whether by way of exchange, or gift, or distribution in terms of a will, or on an intestacy, or otherwise howsoever, and whether or not in the ordinary course of the business of the taxpayer or for the purpose of putting an end to that business or any part thereof), and the assets sold or otherwise disposed of consist of or include any trading stock, the consideration received or receivable for the trading stock or (in any case where section five of the Land and Income Tax Amendment Act, 1926, applies) the price which under that section the trading stock is deemed to have realized shall be taken into account in computing the taxpayer’s assessable income for that year, and the person acquiring the trading stock shall, for the purpose of computing his assessable income for that year or for any subsequent income year, be deemed to have purchased it at the amount of that consideration or price.

Subject to the provisions of section five of the Land and Income Tax Amendment Act, 1926, the price specified in any contract of sale or arrangement as the price at which any trading stock is sold or otherwise disposed of as aforesaid shall be deemed for the purposes of this section to be the consideration received or receivable for the trading stock.

Notwithstanding anything to the contrary in subsection four of this section, any taxpayer who derives income from five-stock may with the concurrence of the Commissioner adopt and fix a standard value in respect of that five-stock or in respect of any class of such livestock. In any case where a standard value has been so fixed the taxpayer may adopt or the Commissioner may require the adoption of the true value instead of the standard value, or the taxpayer may, with the concurrence of the Commissioner, adopt another standard value instead of the standard value fixed as aforesaid:

Provided that the adoption of a standard value, or the adoption of the true value instead of a standard value, or any alteration in the standard value as herein provided shall first take effect at the end and for the purposes of the income year or other period to which any return of assessable income relates.

Section thirteen of the Land and Income Tax Amendment Act, 1929, is hereby repealed.

Where the amount of any expenditure or loss incurred by a taxpayer has been taken into account in calculating his assessable income for any income year, and subsequently the liability of the taxpayer in respect of that amount is remitted in whole or in part, the assessable income derived by the taxpayer during that year shall be deemed to be increased by the amount so remitted, and the taxpayer shall be assessable and liable for income-tax accordingly.

Where the amount of any expenditure or loss incurred by a taxpayer has been taken into account in calculating for the purposes of section eighty-one of the principal Act the amount of any loss incurred by him in any income year, and subsequently (whether before or after the passing of this Act) the liability of the taxpayer in respect of that amount has been remitted in whole or in part, the amount of the loss that may be carried forward under the said section eighty-one shall be deemed to be reduced by the amount so remitted.

For the purposes of this section a liability in respect of any expenditure or loss shall be deemed to have been remitted to the extent to which the taxpayer has been discharged from that liability without fully adequate consideration in money or money’s worth.

Section seventeen of the Finance Act, 1939, is hereby repealed.

Section six of the Land and Income Tax Amendment Act, 1931, is hereby amended by adding to subsection two the following paragraph:—

This section is in substitution for section thirteen of the Finance Act, 1932 (No. 2), and that section is hereby accordingly repealed.

Section eighty-one of the principal Act is hereby amended by adding to subsection four (as set out in section nine of the Land and Income Tax Amendment Act, 1936) the words “and shares held by or on behalf of the trustee of the estate of a deceased shareholder, or by or on behalf of the persons entitled to those shares as beneficiaries under the will or intestacy of a deceased shareholder, shall be deemed to be held by that deceased shareholder”.

Section ninety-eight of the principal Act is hereby amended by omitting from subsection one the words “of those companies is not bona fide for the purpose of more effectively carrying out their objects, but is”, and substituting the words “or the separate continuance of those companies is not exclusively for the purpose of more effectively carrying out their objects, but is wholly or partly”.

For the purposes of the principal Act a company shall be deemed to be under the control of the persons by whom or by whose nominees more than one-half of the shares or more than one-half of the voting-power is held, or who have by any other means whatsoever control of the company.

In this section the term “nominee”, in relation to any person, means any other person who may be required to exercise his voting-power in relation to any company in accordance with the direction of that person, or who holds shares or debentures directly or indirectly on behalf of that person; and includes the husband or wife of that person and any relative of that person by blood, marriage, or adoption.

For the purposes of the principal Act the expression “dividends”, in relation to any company, shall be deemed to include—

and, subject to the taxpayer’s right of objection to the Commissioner’s assessment in accordance with the provisions of Part III of the principal Act, shall also include any moneys advanced by the company to or for the benefit of any of its shareholders if, in the opinion of the Commissioner, the making of the advance was not a bona fide investment by the company but was virtually a distribution of profits, but shall not in any case include any payment or other transaction which, in the opinion of the Commissioner, is or is equivalent to a return of share capital:

Provided that where any moneys advanced by a company to or for the benefit of any shareholder and deemed by virtue of this section to constitute a dividend are subsequently repaid to the company, the Commissioner may amend in such manner as may be thereby rendered necessary the assessment made in respect of income derived by that shareholder during the income year in which the advance was made, and may at any time refund any tax found to have been paid in excess of the amount properly payable, notwithstanding anything to the contrary in section one hundred and sixty-eight of the principal Act.

This section is in substitution for section five of the Land and Income Tax Amendment Act, 1935, and that section is hereby accordingly repealed.

The following provisions shall apply for the purposes of this section, namely:—

The proprietary income derived by any shareholder in any income year shall be included in his assessable or (as the case may require) his non-assessable income for that year, and he shall be assessable and liable for income-tax accordingly.

The following provisions shall apply with respect to every assessment made under this section in respect of income derived by any shareholder during any income year:—

Nothing in the foregoing provisions of this section shall be construed to affect the assessment or liability for income-tax of any proprietary company.

For the purposes of this section,—

Where any sum paid or credited by a proprietary company, being or purporting to be remuneration for services rendered by any person who is a shareholder or director of the company or a relative of any such shareholder or director, exceeds such amount as in the opinion of the Commissioner is reasonable, the amount of the excess shall not be an allowable deduction in computing the assessable income of the company, and shall, for the purposes of the principal Act, be deemed to be a dividend paid by the company to that person and received by him as a shareholder of the company.

Where any business carried on in New Zealand—

and it appears from the returns made to the Commissioner that the business produces no taxable income or less than the amount of taxable income which in the opinion of the Commissioner might be expected to arise from that business, the person carrying on the business in New Zealand shall, notwithstanding anything to the contrary in the principal Act, be assessable for and liable to pay income-tax on a taxable income of such amount as the Commissioner determines, being at the option of the Commissioner either such proportion as he determines of the total receipts (whether cash or credit) of the business or such proportion as he determines of the total purchase-moneys paid or payable (whether in cash or by the granting of credit) in the conduct of the business.

For the purposes of this section the place of residence of any person other than a company, and the place of residence of any company, shall be determined in accordance with the provisions of section eighty-six of the principal Act.

There is hereby established a special committee to consider and make recommendations in accordance with this section in respect of any objection that may be received by the Commissioner on the ground that an assessment of taxable income made in respect of any taxpayer pursuant to the provisions of the last preceding section or any other provisions requiring or empowering the Commissioner to assess the taxpayer for income-tax upon a taxable income not being or purporting to be income in fact derived by that taxpayer, but being an income deemed for the purposes of the principal Act to have been derived by him, is in excess of the taxable income which was in fact derived by him during the income year to which the assessment relates.

The aforesaid special committee shall consist of—

In the absence from any meeting of the committee of any of the aforesaid members, any officer of the Department controlled by him may, with his authority, attend the meeting in his stead, and for the purposes of that meeting shall be deemed to be a member of the committee.

The committee shall consider all objections made in accordance with subsection one of this section, and if in any case it is of opinion that the assessment is in respect of a taxable income in excess of the taxable income in fact derived by the taxpayer during the income year to which the assessment relates, it may recommend to the Minister of Finance that the assessment be reduced by an amount specified in the recommendation.

For the purpose of considering any objection under this section, the committee shall have free access to all records under the control of the Commissioner relating to the taxpayer.

On receipt by the Minister of the recommendations of the committee he may refer the matter back to the committee for further consideration and recommendation, or he may authorize the Commissioner to reduce the assessment by such amount as he thinks fit, not exceeding the amount of the reduction recommended by the committee.

For the purposes of the foregoing provisions of this section any recommendation made by not less than two members of the committee shall be deemed to be a recommendation of the committee.

Nothing in this section shall affect the powers of the Commissioner under section seven of the Finance Act (No. 2), 1937.

Section one hundred and two of the principal Act is hereby amended as follows:—

It is hereby declared that any amount received in any income year by the trustee of the estate of a deceased person shall be deemed to be assessable or (as the case may require) non-assessable income derived by the trustee in that year if it does not represent assessable or non-assessable income derived by the deceased person during his lifetime, but would have been included in his assessable or non-assessable income if he had been alive when it was received.

Where in any income year a Native authority derives income (whether as trustee, agent, or otherwise) in trust for or on behalf of or for the benefit of any Native or Natives, that income shall, for the purpose of assessing income-tax thereon, be deemed to be income derived by the Native authority as trustee for the Native or Natives, and the Native authority shall be assessable and liable for income-tax accordingly; and notwithstanding anything to the contrary in section five hundred and fifty of the Native Land Act, 1931, or in any other enactment, the Native authority may pay the tax out of any income derived by it in trust for or on behalf of or for the benefit of the Native or Natives.

Where in any income year a Native authority, pursuant to any order or direction of the Native Land Court or of any Maori Land Board, or pursuant to any settlement or trust created by any Act, or otherwise howsoever receives or retains any income to the receipt of which any Native or Natives would otherwise be entitled, or holds or deals with any such income on behalf of or for the benefit of any such Native or Natives, that income shall be deemed to be income derived by the Native or Natives during that income year, and the Native authority shall in respect thereof be deemed to be the agent of the Native or Natives, and shall be assessable and liable for income-tax in accordance with the provisions of paragraph (a) of section one hundred and two of the principal Act.

Notwithstanding anything to the contrary in the Cook Islands Act, 1915, the provisions of the principal Act, in so far as they relate to income-tax, shall apply to the Cook Islands in the same manner in all respects as if the Cook Islands were for all purposes part of New Zealand, and for the purposes of this section the term “New Zealand” as used in the principal Act shall, both in New Zealand and in the Cook Islands, be construed as including the Cook Islands accordingly.

Section one hundred and thirty-six of the principal Act is hereby amended by omitting therefrom the words “in any Court of competent jurisdiction”, and also by adding the following words: “Notwithstanding anything to the contrary in the Magistrates’ Courts Act, 1928, any Court constituted under that Act shall have jurisdiction to hear and determine proceedings by the Commissioner for the recovery of tax, whatever the amount involved”.

Section eighty of the principal Act is hereby amended by repealing paragraph (g) of subsection one (as amended by section seven of the Land and Income Tax Amendment Act, 1936), and substituting the following paragraph:—

The said section seven of the Land and Income Tax Amendment Act, 1936, is hereby repealed.