Explanatory note
This Supplementary Order Paper amends the Bill to insert new clauses that amend the Land Transfer Act 2017 and to amend existing clauses that amend the Goods and Services Tax Act 1985 and the Income Tax Act 2007.
Amendments to Land Transfer Act 2017
Before a transfer of land can be registered, the seller and purchaser must lodge a tax statement (except in some limited circumstances that are not affected by these amendments).
Generally, the tax statement must include the seller’s or purchaser’s IRD number and information relevant for overseas tax purposes. However, if it is a non-notifiable transfer, that information does not have to be included. Currently, the most common kind of non-notifiable transfer is the transfer of an individual’s main home.
Other categories of non-notifiable transfers are prescribed by regulations. However, they are not affected by these amendments except to a very minor extent in relation to offshore persons as explained below.
Originally, the reason for not collecting IRD numbers on the transfer of a main home was that, in most cases, a home owner did not incur tax obligations in relation to the transfer. However, not collecting IRD numbers for those transfer limits the Inland Revenue Department’s ability to enforce compliance with property-related tax laws.
The department shares information with other countries for the purpose of preventing tax evasion. Requiring the provision of information relevant for overseas tax purposes on the transfer of a home will help ensure that data provided to treaty partners is easily able to be matched to the correct person.
Sections 77 and 79 of the Land Transfer Act 2017 are amended so that the transfer of a person’s main home will no longer be a non-notifiable transfer. As a result, individuals who buy or sell their main home will also be required to provide their IRD number and information relevant for overseas tax purposes.
Currently, a tax statement must state whether the land has a home on it. After these amendments take effect, the seller or purchaser of a home will be required to state whether the transfer is a main home transfer as defined in new section 79(5). This information is collected to identify land transfers that might be relevant for the purposes of the bright-line test and other land-related tax obligations.
These changes do not change when a property transfer is subject to tax — they relate solely to the information people will need to include on their land transfer tax statements.
Currently, a transfer is not a non-notifiable transfer in relation to a seller or purchaser who is an offshore person (regardless of whether it would otherwise qualify as a non-notifiable transfer). This exclusion was directed at the main home category of non-notifiable transfers, which is now being removed. It has negligible relevance to the other categories of non-notifiable transfers, prescribed under the Land Transfer (Land Information and Offshore Persons Information) Exemption Regulations 2015, which exist for different policy reasons. Removing this exclusion will have negligible policy effect and will simplify the law. It is therefore removed from the new definition of non-notifiable transfer.
These amendments to the Land Transfer Act 2017 will come into force on 1 January 2020. A 6-month transitional period is provided by new clause 14 of Schedule 1AA. If an agreement to transfer land is entered into before 1 January 2020, the tax statement does not need to comply with the new requirements if the transfer is registered on or before 1 July 2020.
Amendments to Goods and Services Act 1985
Clause 18 is amended so that an extended first taxable period is available to persons who become registered persons during the first month to which the new regime applies.
Clause 23 is amended by repealing subclause (5B) and inserting new subclause (6B). The new subclause inserts new section 24(5BB), which provides that the issue of a tax invoice by an affected registered person is required, rather than being optional. Clauses 19 and 27 are amended so that they insert cross-references to new section 24(5BB) into sections 20 and 25AA.
Clause 37 is amended so that it inserts in section 60G(1) an express requirement that a person who relies on information provided by another must act in good faith and on reasonable grounds to be excused from liability for a resulting deficiency in output tax.
New clause 39(2) inserts new section 77(4), which provides a rule for use by suppliers of distantly taxable goods when converting values expressed in foreign currency to New Zealand currency.
Income Tax Act 2007
Clauses 41B and 63 are repealed because they are made unnecessary by a recent Act.
Clauses 46C and 64B(2) are each amended by inserting a missing word.
Clause 51C is amended by inserting a missing cross-reference.
Clause 61 is amended to correct the heading of the section being replaced.
Clause 71B is amended to correct nomenclature.
Departmental disclosure statement
The Inland Revenue Department is required to prepare a disclosure statement to assist with the scrutiny of this Supplementary Order Paper. The disclosure statement provides access to information about any material policy changes to the Bill and identifies any new significant or unusual legislative features of the Bill as amended.
Regulatory impact assessment
The Inland Revenue Department produced a regulatory impact assessment on 17 May 2019 to help inform the new policy decisions taken by the Government relating to the contents of this SOP.
A copy of this regulatory impact assessment can be found at—