Tax Information Bulletin - Inland Revenue

1 ISSN 1177-620X (Online)Vol 29 No 5 June 2017 CONTENTS1In summary3 Binding rulingsBR Prd 17/01: Kiwibank LimitedBR Pub 17/04 and 17/05: Income tax treatment of alteration to rights attached to shares under section CB 4BR Pub 17/06: Fringe benefit tax charitable and other donee organisations and fringe benefit taxNotice of withdrawal of a Public Ruling BR Pub 09/0330 New legislationTaxation (Annual Rates for 2016 17, Closely Held Companies, and Remedial Matters) Act 2017173 Interpretation statementsIS 17/04: Income tax computer software acquired for use in a taxpayer s business196 Questions we ve been askedQB 17/03: Tax Administration Act 1994 the period for which a private or product ruling applies199 Legislation and determinationsCPI Adjustment 17/01 for Determination DET 09/02 - Standard-cost household service for childcare providersCPI Adjustment 17/02 for Determination DET 05/03 Standard-cost household service for boarding service providers2017 review of the Commissioner s mileage rate for expenditure incurred for the business use of a motor vehicleNational average market values of specified livestock determination 2017203 Legal decisions - case notesChatfield & Co Limited v Commissioner of Inland Revenue .

2 Discovery in the Context of Judicial ReviewTRA upholds Commissioner's reassessments for undisclosed incomeYOUR 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 can find a list of the items we are currently inviting submissions on as well as a list of expired items at 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 at to receive regular email updates when we publish new draft items for is a list of recent items out for consultation.

3 You can get copies from or by emailing typeTitleComment deadlinePUB00261 Interpretation statementTaxation of trusts income tax27 June 2017ED0195 General determinationDepreciation rate for potato cool stores23 June 2017ED0196 Standard practice statementIncome equalisation deposits and refunds14 July 2017 Tax Information Bulletin Vol 29 No 5 June 2017 Inland Revenue DepartmentIN SUMMARYIN SUMMARYB inding rulingsBR Prd 17/01: Kiwibank LimitedKiwibank offers its customers the Kiwibank Offset Mortgage (the Product). The Product allows a customer to elect that interest payable by them on a loan made by Kiwibank be calculated by offsetting the balance of the loan against the aggregate credit balances of certain nominated transaction and savings and investments bank accounts held either by that customer or by certain other eligible person(s).

4 Interest is payable on the net notional balance of these combined accounts. The Product was previously only available only to individual customers. It will now be made available to business customers, including companies and Pub 17/04 and 17/05: Income tax treatment of alteration to rights attached to shares under section CB 4 These public rulings consider whether s CB 4 of the Income Tax Act 2007 could apply when rights attached to shares are altered, and when shares with altered rights are disposed of. They conclude that the alteration of share rights does not result in a disposal of any shares for the purposes of s CB 4. The shares continue in existence with altered rights.

5 They also conclude that, when a shareholder acquired the shares for the purpose of disposal before the alteration, s CB 4 will apply to the disposal of the shares. This is because the shares with altered rights are the same property as the shares before the Pub 17/06: Fringe benefit tax charitable and other donee organisations and fringe benefit taxThis public ruling and commentary explain how benefits provided by charitable and other donee organisations to their employees may be excluded from fringe benefit tax under s CX 25 of the Income Tax Act 2007. It will apply to any new arrangements entered into on or after 1 July 2017 . The ruling clarifies some aspects of BR Pub 09/03, which is being withdrawn on 30 June 2017 .

6 The Commissioner will continue to be bound by BR Pub 09/03 for arrangements entered into on or before 30 June 2017 for a further three years. Organisations qualifying for the FBT exclusion may choose whether to apply the new ruling to their existing arrangements, but after 30 June 2020 the new ruling will apply to all arrangements providing fringe benefits, regardless of when they were entered of withdrawal of a Public Ruling BR Pub 09/03BR Pub 09/03 is being withdrawn on 30 June 2017 because the Commissioner's view on aspects of that ruling has changed. On withdrawal, the Commissioner will continue to be bound by it for arrangements entered into on or before the withdrawal date for a further three years.

7 A replacement public ruling, BR Pub 17/06 "Charitable and Other Donee Organisations and Fringe Benefit Tax" is published with effect from 1 July 2017 and will apply to any new arrangements entered into on or after 1 July 2017 . Organisations qualifying for the FBT exclusion may choose whether to apply the new ruling to their existing arrangements, but after 30 June 2020 the new ruling will apply to all arrangements providing fringe benefits, regardless of when they were entered legislationThe Taxation (Annual Rates for 2016 17, Closely Held Companies, and Remedial Matters) Act 2017 The new Act sets the annual rates for income tax for the 2016 17 tax year and makes changes to improve, strengthen and update the rules for closely held companies, non-resident withholding tax and the approved issuer levy, and the goods and services tax rules.

8 It also contains a large number of technical changes to ensure the tax rules work as statementsIS 17/04: Income tax computer software acquired for use in a taxpayer s businessThis interpretation statement considers the income tax treatment of software for taxpayers who purchase, lease, licence, develop, or commission software for use in their business. It updates IS 16/01: Income tax computer software acquired for use in a taxpayer s business , (published in May 2016) to take account of changes to the Commissioner s position on the deductibility of feasibility expenditure following the Supreme Court decision in Trustpower Ltd v CIR [2016] NZSC Information Bulletin Vol 29 No 5 June 2017 Inland Revenue Department1 Questions we ve been askedQB 17/03: Tax Administration Act 1994 the period for which a private or product ruling appliesThis item sets out the Commissioner s current practice on the period of the ruling, in the interests of informing ruling applicants and their agents.

9 The item advises that the Commissioner will generally rule for a period of three years from the date of issue of the final ruling, and for five years where a ruling is re-issued. The item also advises that there are exceptions to this general practice and provides examples of SUMMARYIN SUMMARYL egislation and determinationsCPI Adjustment 17/01 for Determination DET 09/02 Standard-cost household service for childcare providersThe standard-cost amounts for home-based childcare providers have been adjusted to reflect the annual movement of the Consumers Price Index for the twelve months to March 2017 , which showed an increase of Adjustment 17/02 for Determination DET 05/03 Standard-cost household service for boarding service providersThe standard-cost amounts for home-based boarding service providers have been adjusted to reflect the annual movement of the Consumers Price Index for the twelve months to March 2017 , which showed an increase of review of the Commissioner s mileage rate for expenditure incurred for the business use of a motor vehicleA review of the Commissioner s mileage rate results in an increased rate of 73 cents per kilometre for both petrol and diesel fuel vehicles for the 2017 income year.

10 This year we are also able to set mileage rates for hybrid and electric cars which are 73 cents per km and 81 cents per km average market values of specified livestock determination 2017 This determination sets the national average market values to apply to specified livestock on hand at the end of the 2016- 2017 income decisions - case notesChatfield & Co Limited v Commissioner of Inland Revenue : Discovery in the Context of Judicial ReviewThe Commissioner of Inland Revenue issued a number of Notices under s 17 of the Tax Administration Act 1994 to the appellant. The appellant sought to judicially review this, and as part of that sought discovery of certain material. The High Court refused this request, and that was upheld on appeal by the Court of Appeal.