Clause 3 sets the annual rates of income tax for the 2023–24 tax year.

Clause 4 provides that Part 2 amends the Income Tax Act 2007 (the ITA).

Clause 5 amends section BC 7(5) to ensure consistency with section HM 36B.

Clause 6 amends section BF 1 to fit multinational top-up tax into the current structure of the ITA.

Clause 7 amends section BH 1 to create an exclusion for multinational top-up tax from the general overriding effect given to double tax agreements.

Clause 8 amends section CB 6A, as a remedial matter, to update terminology.

Clause 9 amends section CB 16A, as it applied from 29 March 2018 to 26 March 2021, to ignore the period in which a main home is constructed when determining whether the main home exclusion from the 5-year bright-line test applies. This amendment applies to a property acquired on or after 29 March 2018 and disposed of before 27 March 2021. The amendment in clause 20 is related to this amendment and ensures that the construction period is also ignored for a main home that is disposed of on or after 27 March 2021.

Clause 10 amends section CD 44(7) by inserting new paragraph (dc), which includes an amount subject to new section HC 38(2) and received by the company in the list of capital gain amounts for the company.

Clause 11 amends section CE 1 to correct cross-references.

Clause 12 amends section CH 8 to correct a cross-reference.

Clause 13 amends section CW 10 by inserting new subsection (7), which provides that the section overrides new section HC 38.

Clause 14 amends section CW 16B to correct cross-references.

Clause 15 amends section CW 16C to correct cross-references.

Clause 16 amends section CW 57 to grant a 5-year extension of a tax exemption for non-resident companies involved in certain petroleum exploration and development activities.

Clause 17 inserts a new cross-heading and new section CX 58B, which provides that beneficiary income to which new section HC 38 applies for a close company is exempt income of the close company.

Clause 18 inserts new section CZ 25C to allow owners of revenue account property affected by the North Island flooding events to defer (or roll over) income tax liabilities arising from the receipt of insurance payments for irreparably damaged or abandoned buildings.

Clause 19 amends section CZ 29B, which provides tax relief for accommodation expenditure incurred for housing employees assisting with rebuilding areas affected by the North Island flooding events. The amendments are remedial and ensure that section CZ 29B operates as intended.

Clause 20 amends section CZ 40, which sets out the main home exclusion from the 5-year bright-line test. The amendment ensures that the period a main home is constructed is ignored when determining whether the main home exclusion applies.

Clause 21 amends section DB 1 to deny a deduction for taxes imposed in other jurisdictions that are substantially the same as multinational top-up tax.

Clause 22 inserts new section DZ 20B to allow a deduction for certain expenditure incurred while the taxpayer’s income-earning activity is interrupted because of a North Island flooding event.

Clause 23 amends section EW 37 to create a deemed acquisition of a New Zealand-sourced financial arrangement with an accrued obligation when a person becomes a transitional resident.

Clause 24 amends section EW 41 to create a deemed acquisition of a New Zealand-sourced financial arrangement with an accrued entitlement when a person becomes a transitional resident.

Clause 26 inserts new section EZ 23BE to allow depreciation rollover relief for depreciable property irreparably damaged by the North Island flooding events.

Clause 27 inserts a new cross-heading and new sections EZ 83 to EZ 87. New section EZ 83 provides for the deemed disposal and reacquisition of depreciable assets damaged by a North Island flooding event when they are uneconomic to repair, so they are also eligible for taxation rollover relief. New section EZ 84 applies to depreciable assets that have been damaged by a North Island flooding event but are repairable, and limits depreciation recovery income to the amount of depreciation deductions previously taken. New section EZ 85 treats an item as available for use for depreciation purposes if access to the item is affected by a restriction imposed due to the effects of a North Island flooding event. New section EZ 86 provides an optional timing rule for income and deductions when an asset has been irreparably damaged or is uneconomic to repair as a result of a North Island flooding event and the person is entitled to insurance compensation. New section EZ 87 provides an optional timing rule for income and deductions where a person has repaired an item damaged by a North Island flooding event and that person is entitled to insurance compensation.

Clause 28 amends section FC 2 to correct a cross-reference.

Clause 29 amends section FC 9B, as a remedial matter, to update terminology.

Clause 30 inserts a new cross-heading and new section FZ 7B. New section FZ 7B provides an optional adjustment to how group assets are measured for the purposes of the thin-capitalisation rules to mitigate a potential timing issue that could arise through assets being destroyed by a North Island flooding event.

Clause 31 replaces section HC 4(3). The replacement subsection clarifies the situation in which a property settlement on a trust by the trustee of another trust is excluded from the corpus of the trust receiving the property settlement. The exclusion applies if a beneficiary of the trust making the settlement is a New Zealand resident and received the settled property before the settlement was made, or could have done so.

Clause 32 amends section HC 7 by inserting new subsection (2B), which provides that beneficiary income to which new section HC 38 applies for a close company is treated as if it were trustee income so that the trustee is responsible for determining the applicable tax rate, paying the tax, and making the necessary returns of income.

Clause 33 inserts new section HC 8B, which allows the trustee of a deceased estate who receives trustee income within 12 months of the passing of the deceased to choose the income tax treatment provided in the section for the trustee income. The amount of trustee income is combined with the amount of income derived by the deceased in the same income year and the total income tax on the combined amount is calculated as it would have been for the deceased. The amount of income tax for which the deceased is liable for the period is allowed for and the trustee is responsible for the unpaid amount.

Clause 34 repeals section HC 13 as the definition of charitable trust has been replaced with tax charity.

Clause 35 inserts new section HC 17(3), which excludes beneficiary income subject to new section HC 38 for a close company from the usual treatment under the section. Cross-references are made to the effects of new section CX 58B, which treats the beneficiary income as excluded income of the company, and new section HC 38, which provides that it is treated as trustee income.

Clause 36 inserts new section HC 24(3B), which provides that beneficiary income subject to new section HC 38 for a close company is treated as trustee income for the purposes of trustee responsibilities under section HC 24.

Clause 37 makes consequential amendments to section HC 29 because of the repeal of the charitable trust definition.

Clause 38 makes consequential amendments to section HC 31 because of the repeal of the charitable trust definition.

Clause 39 inserts new sections HC 38 and HC 39. New section HC 38 applies when a close company, other than a Maori authority or tax charity, derives beneficiary income from a trust and a settlor of the trust has natural love and affection for a person who holds an interest in the close company. The beneficiary income is excluded income of the close company under new section CX 58B. It is treated as trustee income for the trust for the purposes of determining the applicable rate of tax, paying the tax, and providing the relevant returns of income. New section HC 39 applies when the trustee of a disabled beneficiary trust derives taxable income in an income year. Subsection (2) gives a formula for the applicable basic rate of income tax for the trustee on each dollar of trustee income derived in the income year. A definition of disabled beneficiary trust is provided in subsection (4) and a definition of disabled beneficiary is provided in subsection (5).

Clause 40 makes consequential amendments to section HD 12 because of the repeal of the charitable trust definition.

Clause 41 amends section HF 1 to correct a cross-reference.

Clause 42 amends section HG 4 to correct punctuation.

Clause 43 makes minor amendments to section HM 60 to reflect the relationship between sections CX 56 and HM 60.

Clause 44 inserts a new subpart HP, which relates to the taxation of members of certain multinational groups. New section HP 1 establishes the liability to pay multinational top-up tax. New section HP 2 specifies the payment date for multinational top-up tax. New section HP 3 provides for the application of the global anti-base erosion model rules (the model rules). Subsection (2) provides for the modification of the model rules in the ways specified by the items in new schedule 25B of the Act. Subsection (3) provides for the model rules to be applied (i) as modified by subsection (2), and (ii) in accordance with the most recently published commentary to, and guidance on, the model rules. New section HP 4 is an empowering provision, which enables various components of the applied global anti-base erosion model rules to be implemented in New Zealand on a date declared by Order in Council. New section HP 5 provides that, in the application of new subpart HP and the model rules, terms defined in the model rules and used in the Inland Revenue Acts have the meaning given by the model rules.

Clause 45 amends new section HP 5 to add references to new sections 78H to 78J and 92BA of the Tax Administration Act 1994.

Clause 46 amends section HR 12 to ensure that when a charity is deregistered and does not re-register within one year, certain net assets will be taxed if they are not disposed of or transferred to another registered charity.

Clause 47 inserts new section LE 4B, which applies when the trustee of a trust has a tax credit and distributes to a close company beneficiary income to which new section HC 38 applies. The trustee may apply the tax credit in satisfaction of a tax liability arising for the company from the beneficiary income.

Clause 48 replaces section LJ 3 to ensure that, for the purposes of Part L, the definition of foreign income tax does not include an amount of a tax of substantially the same nature as multinational top-up tax.

Clause 49 amends section MB 7 to replace an item in a formula with something that is not a defined term.

Clause 50 amends section MK 2 to remove a term that does not appear in that section from its list of defined terms.

Clause 51 inserts new section OB 7BB to give an imputation credit account company an imputation credit for an amount of multinational top-up tax paid to the extent to which it was payable under the domestic income inclusion rule.

Clause 52 amends table O1 to add a row for the imputation credit described in new section OB 7BB.

Clause 53 inserts new section OP 11BA to give a consolidated imputation group an imputation credit for an amount of multinational top-up tax paid to the extent to which it was payable under the domestic income inclusion rule.

Clause 54 amends table O19 to add a row for the imputation credit described in new section OP 11BA.

Clause 55 makes a minor technical change to section RC 6 to ensure it operates as intended.

Clause 56 amends section RD 17 to provide a new method to calculate the applicable tax rate for extra pays.

Clause 57 inserts new sections RD 20B and RD 20C. New section RD 20B provides for the taxation of a lump sum payment of accident compensation relating to more than 1 income year. The payment is taxed at the lesser of the recipient’s basic tax rate for the income year in which the lump sum is paid and the recipient’s average basic tax rate for the 4 preceding income years, with a minimum rate of 10.5%. Similarly, new section RD 20C provides for the taxation of a lump sum payment of a main benefit under the Social Security Act 2018 relating to more than 1 income year. The payment is taxed at a rate that depends on the amount withheld from the payment and remitted to the Commissioner of Inland Revenue (the Commissioner) and the amount of the payment received by the beneficiary.

Clause 58 makes minor technical changes to section RE 14C to ensure it operates correctly in the context of custodians.

Clause 59 amends section YA 1. Subclause (2) amends the definition of accommodation to update cross-references. Subclause (3) inserts a new definition of affected area, which is used for the amendments relating to the North Island flooding events. Subclause (4) amends the definition of ancillary tax to make multinational top-up tax an ancillary tax. Subclause (5) inserts a new definition of applied global anti-base erosion rules. Subclause (6) inserts a new definition of building to avoid doubt around unit titled buildings for depreciation. Subclause (7) repeals the definition of charitable trust. Subclause (8) amends the definition of council-controlled organisation to remove a redundant reference. Subclause (9) inserts a reference to the new definition of disabled beneficiary given in new section HC 39(5). Subclause (10) inserts a reference to the new definition of disabled beneficiary trust given in new section HC 39(4). Subclause (11) inserts a new definition of global anti-base erosion model rules. Subclause (12) inserts a new definition of multinational top-up tax. Subclause (13) amends the definition of North Island flooding events to include further affected areas and circumstances where damage is exacerbated by a subsequent event. Subclause (14) amends the definition of residential land to correct punctuation. Subclause (15) adds 2 new paragraphs to the definition of schedular income. New paragraph (l) includes income under new section RD 20B, which relates to lump sum payments of accident compensation, in schedular income. New paragraph (m) includes income under new section RD 20C, which relates to lump sum payments of main benefits, in schedular income. Subclause (16) amends the definition of trust rules. Paragraph (a) inserts in paragraph (ab) of the definition a cross-reference to new section CX 58B. Paragraph (b) amends paragraph (g) of the definition by correcting a cross-reference to include new section LE 4B.

Clause 60 makes consequential amendments to section YB 8 because of the repeal of the definition of charitable trust.

Clause 61 amends section YD 4, which deems certain types of income to have a source in New Zealand. The amendment ensures that technical services fees and royalties or interest payments connected to a permanent establishment outside New Zealand are not deemed to have a source in New Zealand.

Clause 62 amends schedule 1, part A. Subclause (1) amends clause 3 in the schedule by: (a) inserting cross-references to the new clauses 6B and 6C inserted by subclause (2); and (b) by changing the usual basic tax rate for a trustee from 0.33 to a new basic tax rate of 0.39. Subclause (2) inserts new clause 6B, which refers to the basic tax rate given by new section HC 39(2), and new clause 6C, which refers to the basic tax rate given by new section HC 8B. Subclause (3) adds new clause 13, which refers to the basic tax rate given by new section RD 20B for lump sum payments of accident compensation, and new clause 14, which refers to the basic tax rate given by new section RD 20C for lump sum payments of a main benefit.

Clause 63 inserts new schedule 25B, which sets out modifications to the global anti-base erosion model rules.

Clause 64 amends schedule 32, which lists overseas-based charities to which a donation entitles the donor to a deduction.

Clause 65 provides that Part 3 amends the Tax Administration Act 1994 (the TAA).

Clause 66 amends section 3(1). Subclauses (2) and (3) amend the definition of civil penalty to incorporate penalties under new sections 139AAB and 139ABB. Subclause (4) amends the definition of gift-exempt body to include all charities registered under the Charities Act 2005 and all persons eligible to apply for RWT-exempt status under section 32E(2)(k) or (l) of the TAA. Subclause (5) inserts a new definition of multinational top-up tax return.

Clause 67 amends section 32E to correct nomenclature.

Clause 68 amends section 78G, which imposes an obligation on large multinational groups to provide country-by-country reports to the Commissioner, to require those reports to be provided in the electronic format prescribed by the Commissioner.

Clause 69 inserts new sections 78H to 78J. New section 78H requires New Zealand-based members of multinational groups to which the global anti-base erosion model rules apply to register their multinational group with the Commissioner. New section 78I imposes an annual pre-assessment information reporting obligation on New Zealand-based members of multinational groups to which the global anti-base erosion model rules apply. New section 78J requires New Zealand-based members of multinational groups to which the global anti-base erosion model rules apply to provide an annual multinational top-up tax return to the Commissioner.

Clause 70 amends section 79, which requires the filing of annual returns prescribed by the Commissioner in addition to those required under another section of the Act. Subclause (1) adds a missing cross-reference. Subclause (2) adds a reference to the return required under new section 78J.

Clause 71 amends section 80, which imposes an obligation to file returns required by the Commissioner in addition to those required under another section of the Act. Subclause (1) adds a missing cross-reference. Subclause (2) adds a reference to the return required under new section 78J.

Clause 72 inserts new section 92BA, which requires taxpayers who are required to provide a multinational top-up tax return to self-assess their multinational top-up tax liability.

Clause 73 amends section 120KBB to remove an example that is no longer correct.

Clause 74 inserts new section 139AAB, which establishes a civil penalty for large multinational groups that fail to meet country-by-country reporting requirements.

Clause 75 inserts new section 139ABB, which provides for civil penalties for taxpayers who do not apply for registration as required under new section 78H or who do not comply with the requirements of new section 78I or 78J.

Clause 76 amends section 141B, which provides for a shortfall penalty for taxpayers who take an unacceptable tax position, to bring multinational top-up tax within the penalty’s scope.

Clause 77 inserts new section 226G, which empowers the making of regulations providing for the non-application of changes to commentary or guidance relating to the global anti-base erosion model rules.

Clause 78 sets out the clauses that amend the Goods and Services Tax Act 1985.

Clause 79 amends section 10 to remove an incorrect cross-reference.

Clause 80 amends section 11A to remove an incorrect cross-reference.

Clause 81 amends section 19N to include the correct cross-reference.

Clause 82 amends section 20 to correct a cross-reference.

Clause 83 amends section 25 to update nomenclature.

Clause 84 sets out the clauses that amend the KiwiSaver Act 2006.

Clause 85 amends the definition of salary or wages in section 4(1) to ensure that the Crown is an employer in respect of paid parental leave, and therefore liable for compulsory employer contributions.

Clause 86 amends section 220B to allow information sharing in relation to deceased KiwiSaver members.

Clause 87 sets out the clauses that amend the Child Support Act 1991.

Clause 88 amends section 87A, which sets a time bar of 4 years for amendment of certain assessments. It replaces subsection (2)(c) to provide an exception from the time bar of 4 years for an assessment for a period during which the liable person received a temporary exemption from paying child support, for example, because they were suffering from a long-term illness and unable to work.

Clause 89 amends Schedule 1, which contains application, transitional, and savings provisions, to insert a new Part 7 relating to the amendment made by this Bill.

Clause 90 amends section 227 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 to correct a cross-reference in an application provision.

Clause 91 amends section 152 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 to remove an incorrect cross-reference.

Clause 92 revokes 4 spent orders.