TAX TIDBITS
Issue Thirteen, October 2006

In this months issue:

Offshore Investment Tax Changes
Partnership Changes
Correcting GST Returns

 

REVIEW OF TAX PENALTIES

In an attempt to encourage voluntary taxpayer compliance by making fairer rules, the Government is proposing changes relating to tax penalties. Current rules have been criticised for being too strict and discouraging taxpayers from voluntarily disclosing errors or omissions in tax returns. If implemented, the most significant changes proposed by the Government are as follows:

  • The IRD will not be able to impose a shortfall penalty for lack of reasonable care or an unacceptable tax position when a taxpayer voluntarily discloses a tax shortfall before the IRD notifies the taxpayer of an audit or investigation;
  • The IRD will be required to give a taxpayer who pays tax late a first chance to pay by a new date before it imposes a late payment penalty; and
  • The unacceptable tax position shortfall penalty will remain but the threshold for its application will be raised significantly;
  • A $250 late filing penalty will be imposed when a taxpayer files a GST return late.

Unfortunately the Government has failed to address the exorbitant rate of interest imposed on underpaid or overdue tax. The current rate of interest charged by the IRD is 13.08% (considerably higher than a commercial interest rate) and acts as a penalty in itself. The deadline for submissions on the proposed changes is 30 November 2006 with the final proposals being included in a tax bill that is likely to be introduced next year.

TAX BENEFITS FOR CHARITABLE ASSISTANCE

The Government has released a discussion document as part of its pre-election agreement with United Future covering possible tax incentives for assistance to charities and non-profit organisations. Possible initiatives to promote charitable giving include: -

  • Volunteers contributing their time to charities entitled to a tax rebate.
  • Raising the threshold at which individuals can claim donation rebates (currently a maximum tax rebate of $630 is possible for donations up to $1,890).
  • Increasing the tax deduction limit for company donations and allowing all companies (not just publicly listed ones) a deduction.
  • Reducing compliance costs relating to payments of honoraria and reimbursement payments to volunteers.

The Government has also reviewed the current situation in both Australia and the United Kingdom in regards to other longer term tax incentives for charitable giving. Submissions on this document close 28 November 2006 with legislative changes likely in 2007, however, any changes are not likely to take effect until the beginning of the 2007/2008 year.

 

KIWISAVER WEBSITE

With the passing of the Kiwisaver legislation on 30 August 2006, the Government opened a website on 16 October which acts as an information portal regarding the scheme due to be enacted on 1 July 2007.

Upcoming events at HWI:

FREE Seminar: Where to Invest in 2007.  Property or Shares? New Zealand or Overseas? Wednesday 15th November 2006 at 9am (2 hours), email Mark at maldridge@hwi.co.nz for details or book online.

Disclaimer Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or reply on it without first seeking professional advice.





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