What will 2014 bring from a tax perspective? A reasonable answer is that because it is election year there will be no new taxes and relatively little in new tax policy.
OPINION: That answer makes for a very short article. Instead I will focus on what I believe will be the major tax issues for this calendar year.
There will be continued calls for the imposition of GST on all imported goods to replace the current treatment of only imposing GST on goods totalling more than $400. I doubt that those calls will result in any change in policy.
There are different possible approaches to imposing GST on such imports, such as asking suppliers or banks to account for the GST on behalf of the New Zealand customer or have Customs impose GST on a wider range of imported goods. None of these approaches is likely to work very well and would cost more than the additional revenue raised.
It is pertinent to note that the equivalent threshold in Australia is A$1000.
Inland Revenue will continue to focus on the allocation of income derived by businesses from the personal exertion of shareholder- employees, partners or beneficiary-employees. Hopefully Inland Revenue will issue more detailed policy dealing with situations where a business has many employees other than the shareholder-employees.
The issue of continued tax residency for Kiwis heading overseas will receive greater attention from Inland Revenue. I will discuss this in greater detail in my next article. However, in a recent case a Kiwi who had been abroad for many years was held to still be a New Zealand tax resident, for the 2004 to 2007 income years, by virtue of having a permanent place of abode (close ties) here. This is despite the fact that he worked overseas from 2003 to 2012 before settling in Australia.
Similarly, the issue of whether foreigners who spend time here and have strong ties with this country have become New Zealand tax residents will also receive greater attention from Inland Revenue.
Some who trigger tax residency will be subject to Double Tax Agreements (DTAs) that work to reduce tax paid in New Zealand. There will be many others, however, who either will not benefit from the "tiebreaker tests" in DTAs or come from countries with which New Zealand has no DTA.
There will be increased pressure from Inland Revenue to collect outstanding tax and student loan debt.
I'll discuss each of these issues in more depth over the next few months. Until then stay merry and safe.
» Murray McClennan is director of Tax Central Limited, a specialist tax consulting firm. He can be contacted by emailing email@example.com. The above comments are of a general nature only and are not a substitute for specific advice..
- The Southland Times