CONTENTS

1 ISSN 0114 7161 (Print)ISSN 1177 620X (Online)Vol 23 No 1 February 2011 CONTENTS1In summary4 Binding rulingsPublic rulings BR Pub 10/01 10/05: Australian Limited PartnershipsPublic ruling BR Pub 10/21: Interest repayments required as a result of the early repayment of a financial arrangement deductibility27 New legislationTaxation (GST and Remedial Matters) Act 2010 Orders in Council Use-of-money interest rates change Minimum family tax credit income amount increased101 Standard practice statementsIndustry-specific balance date for kiwifruit orchardists102 Legislation and determinationsSpecial Determination S17: Utilisation of a profit emerging basis for purchased debt ledgers by a certain New Zealand Company LimitedDetermination DEP 76: Tax depreciation rates general determination number 76107 Legal decisions case notesWho is liable for GST, the receiver or the partnership?

2 Supreme Court denies leave to appealTaxpayer entitled to discontinue a test caseAs a general rule, insolvent companies should be liquidated113 Questions we ve been askedQB 10/06: Elections for qualifying company status116 Items of interestReview of Public Information Bulletins Inland Revenue DepartmentYOur OppOrTuNiTY TO COmmENTI nland Revenue regularly produces a number of statements and rulings aimed at explaining how taxation law affects taxpayers and their agents. Because we are keen to produce items that accurately and fairly reflect taxation legislation and are useful in practical situations, your input into the process, as a user of that legislation, is highly list of the items we are currently inviting submissions on can be found at On the homepage, click on Public consultation in the right-hand navigation.

3 Here you will find drafts we are currently consulting on as well as a list of expired items. You can email your submissions to us at or post them to:Public Consultation Office of the Chief Tax Counsel Inland Revenue PO Box 2198 Wellington 6140 You can also subscribe to receive regular email updates when we publish new draft items for : The first paragraph on page 48 is incorrect. A correction has been published at (keywords: TIB corrections).1 Tax Information Bulletin Vol 23 No 1 February 2011iN SummArYBinding rulingspublic rulings Br pub 10/01 10/05: Australian Limited partnershipsThese five public rulings deal with the ability of a New Zealand resident partner of an Australian limited partnership to claim foreign tax credits in respect of two forms of Australian tax, including Australian company tax, paid on income earned by an Australian limited partnership.

4 They do not consider any other situations involving foreign income foreign tax paid. The rulings were signed and released to the public and published on the Inland Revenue website in March 2010. However, due to an oversight, they were not published in the Tax Information Bulletin at that time. Inland Revenue apologises for any inconvenience this may have ruling Br pub 10/21: interest repayments required as a result of the early repayment of a financial arrangement deductibilityThis item considers the situation when a term deposit arrangement is broken early and a reduced rate of interest is applied from the date of deposit as a consequence of the break. This results in the overpayment of interest to the depositor under the term deposit. The depositor is required to repay the overpaid interest.

5 This item considers the deductibility of the interest repaid and the treatment of the interest repaid under the financial arrangements SUMMARY4 New legislationTaxation (GST and remedial matters) Act 2010 Changes to the GST rulesChanges to the qualifying company rules and introduction of look-through company rulesWorking for Families tax credits: definition of family scheme income Clarifying that certain building fit-out is depreciable propertyDepreciation loading grandparentingremedial itemsKiwiSaverOverseas donee statusCap on shortfall penaltiesJoint bank accountsIndependent earner tax credit and residual income taxAmendments to the GST transitional rulesNon-resident seasonal workersFBT on premises exemptionSection DB 2 reverse charge rulesSection 17 special returnsApproved issuer levy.

6 Technical changesConsequential R&D amendmentsPIE credit impairment provisionsOther amendments to the PIE rulesEmissions trading scheme amendments income taxEmissions trading scheme amendments GSTA uckland Council restructuring amendment2715732 Inland Revenue DepartmentTreatment of superannuation schemes administered by the National Provident FundExtending the redundancy tax creditFurther remedial changes to the taxation rules for life businessTaxation of general insurance businessConsequential changes to the M ori authority tax rateRewrite remedial itemsOrders in Counciluse-of-money interest rates changeThe use-of-money interest rates on underpayments and overpayments of taxes and duties have been changed in line with current market interest family tax credit income amount increasedThe Income Tax (Minimum Family Tax Credit) Order 2010, made on 15 November 2010, increases the net income level guaranteed by the minimum family tax credit.

7 The net income level will rise from $21,008 to $22,204 a year from 1 April practice statementsindustry-specific balance date for kiwifruit orchardistsThe Commissioner has agreed to a change of the recognised industry-specific non-standard balance date from 31 January to 31 March for kiwifruit and determinationsSpecial Determination S17: utilisation of a profit emerging basis for purchased debt ledgers by a certain New Zealand Company LimitedThis determination relates to the ability of a certain New Zealand company to utilise a profit emerging basis for returning income and expenditure arising from the acquisition and collection of a portfolio of distressed debts acquired at a deep DEp 76: Tax depreciation rates general determination number 76 This determination introduces Motorhomes as a new asset class description.

8 The Commissioner considers that Motorhomes have previously been included within the Campervan asset class description. 102105 Legal decisions case notesWho is liable for GST: the receiver or the partnership? The sale of a forest by a partnership (each party of which was in receivership) created a goods and services tax (GST) liability of $127 million. The receivers paid the GST to the Commissioner and sought a Court order to return the funds. The Commissioner was unsuccessful in having the claim struck Court denies leave to appealNo significant error by the Court of Appeal, nor substantial principle sufficient to meet the requirements for leave was Information Bulletin Vol 23 No 1 February 2011 Taxpayer entitled to discontinue a test caseThe taxpayer s challenge in respect of its 2003 05 tax years was designated as a test case by the Commissioner.

9 Shortly before trial the taxpayer discontinued its challenge, and then commenced new challenge proceedings in respect of later tax years (albeit in respect of the same alleged tax avoidance arrangement). The Commissioner applied to have the discontinuance of the first challenge set aside on the grounds that it was an abuse of process. The Court dismissed the Commissioner s application, holding that the taxpayer was entitled to take the steps they a general rule, insolvent companies should be liquidatedNotwithstanding certain steps taken to satisfy outstanding debts, the Court was satisfied that the companies were insolvent and should be we ve been askedQB 10/06: Elections for qualifying company status This question we ve been asked clarifies the Commissioner s position on who should sign shareholders elections for qualifying company status where nominees or bare trustees are involved.

10 The question also briefly considers elections for look-through company status where nominees or bare trustees are of interestreview of public information Bulletins Inland Revenue has commenced a review of Public Information Bulletins and Tax Information Bulletins published prior to 31 December 1995. Until these are reviewed these items should be referenced with some care, and they should not necessarily be taken as the Commissioner s current view of the law or operational Revenue DepartmentSTUDENT LOAN SCHEME (EXEMPTIONS AND MISCELLANEOUS PROVISIONS) AMENDMENT ACT 2010 BiNDiNG ruLiNGSThis section of the TIB contains binding rulings that the Commissioner of Inland Revenue has issued Commissioner can issue binding rulings in certain situations. Inland Revenue is bound to follow such a ruling if a taxpayer to whom the ruling applies calculates their tax liability based on full details of how binding rulings work, see our information booklet Adjudication & Rulings: A guide to binding rulings (IR 715) or the article on page 1 of Tax Information Bulletin, Vol 6, No 12 (May 1995) or Vol 7, No 2 (August 1995).