Revenue Minister Michael Woodhouse today released proposals to simplify and modernise the Tax Administration Act (TAA), as part of the Government’s major transformation of the revenue system.
“The Government is committed to ensuring our tax administration is fit for purpose and meets the needs of modern New Zealand,” Mr Woodhouse says.
“Today’s release of the discussion document, Making tax simpler – proposals for modernising the Tax Administration Act, includes detailed proposals developed following the first round of consultation in November last year.
“A key feature of this consultation is a focus on moving Inland Revenue resources to help taxpayers get it right from the start by providing more advice.”
Submissions received in November 2015 showed support for greater flexibility in how Inland Revenue works with taxpayers and intermediaries. They also recognised a desire to balance taxpayers’ confidentiality with the need for broader information sharing within government.
“A lot has changed in the way individuals and businesses engage with the tax system since the last comprehensive review of our tax administration settings in the early 90s,” Mr Woodhouse says.
“That is why we are undertaking extensive consultation to ensure the TAA is simple and workable for all New Zealanders.”
Submissions close on 24 February 2017. More information is available at www.makingtaxsimpler.ird.govt.nz.
Immigration Minister Michael Woodhouse says changes to the migrant investor policy will encourage investments that provide greater economic benefits for New Zealand.
“There’s no doubt the Migrant Investor categories are performing well with $2.9 billion invested since they were launched in July 2009 and a further $2.1 billion in funds committed,” Mr Woodhouse says.
“However, around two thirds of investment is currently placed in bonds and the government believes there is an opportunity to rebalance this towards growth-oriented investments.
“That is why we are making changes to increase the amount and performance of investment while better recognising the non-financial contribution of migrant investors.”
The changes include:Doubling the funds Investor 2 migrants must invest to $3 million Removing the need for Investor 2 migrants to hold $1 million in settlement funds Recognising higher levels of business experience and English language skills through changes in the points system Increasing the annual cap of approved Investor 2 migrants from 300 to 400. Rewarding investment in growth-oriented investment with incentives such as bonus points, priority processing, and a financial discount.
“Many investors tend to move into growth focused investments as they become more familiar with the New Zealand environment. These changes will encourage them to do so earlier in the process while incentivising investments that deliver greater economic benefits for New Zealand,” Mr Woodhouse says.
The changes will come into effect in May 2017.
Revenue Minister Michael Woodhouse today welcomed the release of the OECD’s new multilateral instrument – the latest step in the global fight against base erosion and profit shifting (BEPS).
“Many BEPS techniques rely on abuse of tax treaties, and the OECD/G20 BEPS Project has recommended a number of changes to further strengthen tax treaties multilaterally,” Mr Woodhouse says.
“The OECD have proposed a multilateral instrument that will rapidly amend a worldwide network of several thousand bilateral tax treaties, rather than countries having to implement these amendments on a treaty-by-treaty basis.”
The instrument text is the result of work undertaken by the OECD and around 100 countries over the past year.
“New Zealand officials have been working with other countries and the OECD to develop this unique instrument, which will enable New Zealand to quickly and efficiently strengthen our tax treaties against BEPS techniques.
“BEPS is a global problem that this government is committed to addressing. The best way to do that is through a co-ordinated global response, which is why we are fully committed to the multilateral instrument.”
Officials will now begin consultation on the implementation of the multilateral instrument, with the signing expected to take place in June 2017.
The text of the multilateral instrument can be found at www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-beps.htm
Revenue Minister Michael Woodhouse today announced tax measures to help those affected by the Kaikoura earthquakes.
“This is a difficult time for many in the Kaikoura region and those affected by the earthquakes should be looking after themselves and their families first and foremost, rather than worrying about not meeting their tax obligations,” Mr Woodhouse says.
“Following an Order in Council this morning, Inland Revenue will waive use of money interest when a person is prevented from paying on time as a result of the recent earthquakes.
“This applies to all late tax payments and at this stage, is scheduled to expire on 31 January.”
Mr Woodhouse also welcomed Inland Revenue’s decision to cancel late filing and late payment penalties for all affected taxpayers.
“Yesterday was a PAYE filing date, but while people are trying to put their lives back in order, they shouldn’t be worrying about missing filing dates if the quakes have prevented them from filing,” Mr Woodhouse says.
“I’m also very pleased that IRD has announced discretions on income equalisation for farmers and fishers who are significantly affected by the earthquakes.
“Normal tax rules do not take into consideration extraordinary events like last week’s earthquakes. For Kaikoura and surrounding areas, it is important we provide some more flexibility to reflect the reality of the situation they face.”
For more information, see www.ird.govt.nz.
Anyone requiring information and support should call the Government Helpline on 0800 779 997.
Thank you for inviting me to give the opening address today.
Your organisation plays an influential role on New Zealand’s tax policy settings through your input into the work programme and through your submissions to public consultation so I value the opportunity to come and speak to you all.
Today I would like to share with you some of the main points contained in the recently updated tax policy work programme.
The work programme has been agreed to by Cabinet as the Government’s tax focus to the end of 2017.
What I am going to discuss today is not a completely new work programme, but an update to take into account recent developments and to ensure that tax policy officials are working on the highest priority items for the remaining period of the programme to the end of 2017.
As always, this iteration of the policy work programme has not been developed in isolation.
Various items originated with the private sector.
I appreciate the input that CA ANZ has provided to Inland Revenue, including advice on the work programme on items of highest concern to you and those you represent.
While it is not possible to include all of the issues you have raised on the work programme, we are listening and some of those issues are planned to be addressed in the busy period ahead.
I appreciate the commitment that your organisation has demonstrated towards maintaining and improving New Zealand’s tax policies.
It is this commitment that has contributed to New Zealand having an effective and well regarded tax system.
However, I am aware that the number of different measures that are being consulted on as well as limited times to respond creates real pressures.
In the busy upcoming months I will be asking Inland Revenue officials to, as much as is reasonably possible, communicate and sequence consultation to spread this workload.
To help you plan, the tax policy website will show details of the work programme and will include a calendar of 2017 indicating general timings.
Of course sometimes it is simply not feasible to conduct full consultation.
For instance, it would not be possible to move quickly to close a recently identified loophole and, at the same time engage in wide consultation to address that loophole.
But the Government remains completely committed to GTPP because it is very important and strive as much as possible to maintain open dialogue for our mutual benefit.
Good consultation involves officials and the tax community being prepared to listen to each other.
It involves officials explaining reasons for possible changes and listening to concerns and suggestions for improvement.
At the end of the day, even the best consultation will not necessarily lead to agreement on everything.
It will however, expose reasons for disagreement and make sure that final decisions are well informed.
And GTPP is a vital part of developing good tax policy by allowing frank dialogue between government and the private sector.
That dialogue is essential in running our tax system which collects the revenue needed while minimising the effect on business.
In part, this is a function of the GTPP consultation process. But another key reason is our clear and coherent broad-base, low-rate tax settings.
New Zealand taxes a very broad definition of consumption under its GST and a very broad definition of income under its company and personal income taxes.
It helps in ensuring that people are not discouraged from making sensible decisions working longer or harder or about upskilling or taking on higher pay but more demanding jobs.
A broad base also helps the tax system to be as fair as possible and minimise the chance that the well advised can step around the tax system and obtain a tax break that is not intended.
And keeping taxes broad, also allows tax rates to be kept as low as possible, promoting fairness, efficiency and economic growth.
It is important that we maintain our BBLR framework to minimise pressure for increasing tax rates or the introduction of new but inefficient taxes.
In recent times there have been some significant pieces of work in this area.
On 1 October new rules for applying GST to cross border services including e-books, music, videos and software purchased from overseas websites came into effect.
I understand that so far there have been over 80 offshore suppliers of remote services register for GST.
This is the latest evolution of our broad-based tax and is an example of the government working with the private sector to produce sound tax policy which is fair for all.
Similarly, changes are before Parliament that will assist closely held companies. These include simplifying the look through company rules and a number of changes to the dividend rules.
Generally, some matters in the work programme are raised by the private sector.
A number of taxpayers for instance, have raised concerns about how the current dividend rules can apply to demergers by Australian-listed companies.
The Government tends to agree with that view.
I’m sure you are all familiar with the issue, but in brief, demergers involve the division of a corporate group rather than a distribution of income – a shareholder’s economic ownership does not change.
Demergers, which do not involve the distribution of income to shareholders, should not in principle give rise to a dividend for tax purposes.
Although the current dividend tax treatment raises issues for all demergers, in practice problems mainly arise with demergers by Australian-listed companies.
That is why we will be introducing an exclusion from the dividend taxation rules for certain demergers by Australian listed companies.
The main benefit of the proposal is to prevent the inappropriate taxation of New Zealand shareholders in Australian listed companies that are involved in a demerger.
I have asked that this item be fast-tracked and officials will consult with stakeholders on the detail of the proposed amendment before its introduction in the tax bill scheduled for introduction early next year.
Also in that bill will be something else raised by the private sector.
Two recent High Court cases on the application of the voting interest test for corporate trustees could result in overreach when it comes to measuring the ownership of companies including their association.
This overreach is a particular problem for professional firms including accountants who are acting as independent trustees for their clients’ companies.
We are proposing to reinstate the previous policy position to ensure these companies are not associated.
Officials are planning to consult with stakeholders shortly on these proposals.
Moving onto the second major theme of work, international taxation issues have also been a recurring feature in tax policy work programmes over the years and we have already made considerable progress.
I think that it places us ahead of the game in some key areas.
We’ve progressively tightened our thin capitalisation rules and non-resident withholding tax rules and introduced minimum bank equity rules.
New Zealand has signed an agreement for increased sharing of information between revenue authorities — the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports.
It’s one of the OECD’s BEPS Action Plan recommendations.
So countering BEPS strategies is not a new-found enthusiasm for the Government.
It’s something we’ve been working away at steadily to strengthen.
While we are starting from a very strong position in comparison with a number of other countries, we still have work to do in this area and I will just run you through some of those.
New Zealand’s transfer pricing legislation was first introduced 21 years ago and at the time was fit for purpose. It was needed to protect our tax base and ensure any payments between associated entities are at an arm’s length rate.
While I believe our transfer pricing rules are robust, there’s no denying that the ground has shifted somewhat with practices having evolved since then. That is why it’s important to take another look and see whether our rules can be made even stronger.
The OECD’s new transfer pricing guidelines are now considered to be the benchmark and will prevent companies reducing their tax by using artificial transactions between associated parties which would not normally occur between third parties.
Transfer prices and conditions that don’t align with the actual substance of the multinational’s economic activities will be modified by the rules.
Another area of work relates to the question of permanent establishments.
For cross-border transactions, our basis for taxing activity occurring here, like those of tax jurisdictions around the world, depends on whether the company has a physical presence here.
We are aware of some multinationals that try to structure their affairs so they do not have taxable presence in New Zealand, despite being involved in significant economic activity here.
Engaging in disputes with multinationals can be a long and protracted affair – not a good use of taxpayer dollars.
Instead we are considering measures that will make it harder for multinationals to avoid having a taxable presence in New Zealand if they are involved in significant economic activity here.
We are also looking at measures to make it easier to assess and collect tax from multinationals that do not cooperate with Inland Revenue.
We are also closely watching what Australia and the UK are doing in regards to Diverted Profits Tax. Officials have provided some advice to the Government and we will look to say more on this in the near future.
One of the simplest ways of shifting taxable profits from one jurisdiction to another is by loading a foreign-owned firm with excessive debt.
New Zealand has thin capitalisation rules that limit the amount of debt foreign-owned firms can have in New Zealand.
Overall, I consider that our rules are serving us well. However, a small number of foreign-owned firms appear able to take excessively high interest deductions.
For example, the interest rates on some related-party loans appear to be unreasonably high.
We are therefore considering measures that would bolster our rules, to ensure that foreign-owned firms cannot shift excessive profits out of New Zealand using debt.
I expect to release proposals on these matters early in the new year. I acknowledge the extra effort it will place on you, but I am intending to release these as a single package so that the various aspects can be viewed together as a cohesive whole.
Another part of the OECD/G20 project on base erosion and profit shifting (BEPS) involves a series of recommendations made in relation to hybrid mismatch arrangements.
The Government believes that the problem of hybrid mismatches requires a globally co-ordinated response.
For this reason, the Government released its discussion document on hybrids in September proposing that New Zealand adopt the OECD BEPS recommendations on hybrid mismatches.
We are closely monitoring the progress of the UK and Australia in this area, as well as the developing EU approach to hybrid mismatches.
Officials will consider carefully the submissions that have come in and we expect to take further steps in this area next year.
The last thing I want to mention with regard to international tax issues is the fact that many BEPS techniques rely on abuse of tax treaties, so the BEPS Action Plan recommended a number of changes to strengthen them.
It would be very time consuming for individual countries to implement these amendments on a treaty-by-treaty basis, so the OECD has developed a multilateral tax treaty that will amend a worldwide network of several thousand bilateral tax treaties all at once.
Ninety-six countries (including New Zealand) have been involved in the development of the multilateral instrument and we expect to be able to sign it next year.
The final major strand of work in the work programme is of course the Government’s modernisation programme of tax administration.
In the business transformation work, the Government is continuing to progress the business tax package announced in Budget 2016.
One of the Government’s objectives is for businesses to spend more of their time focusing on growing their businesses rather than fulfilling tax requirements.
Inland Revenue’s business transformation programme is vital in achieving this goal and the key is the smarter use of software – integrating the tax process into normal day to day business operations.
We know from a recent survey that the median time SMEs spent within their business on tax compliance was 25% less than in 2013, while the cost of doing the work had reduced by 24%.
This follows similar reductions in the 2013 survey, when compared with the 2009 survey and is a great validation of the work IR continues to do to make tax obligations easier for businesses.
That same survey also tells us that people who use accounting software to prepare and send their GST returns to Inland Revenue are experiencing significant a compliance cost reduction. The Government is proposing a similar approach for employers and PAYE proposals will be developed for inclusion in a tax bill expected to be introduced early in 2017.
The Bill will also contain investment income information proposals.
Meanwhile, a discussion document on changes to the Tax Administration Act is due to be released next month. It will address a range of issues that I think may be of particular interest to you. Those include the care and management provision to allow the Commissioner some greater administrative flexibility in limited circumstances, significantly reducing the fees for obtaining a binding ruling at least for SMEs, allowing post-assessment binding rulings, and extending the scope of the rulings regime.
And proposals for changes to the administration of social policy and the administration of individuals’ taxation are likely to be released later in 2017.
I’ll wind up my speech now by saying that New Zealand’s tax system is up there with the best, but it cannot be static and must keep up with societal and economic changes.
This work programme has been updated to focus on the priority projects. I know there is a lot to get through, but I hope you will take the opportunity to review the full details of the policy work programme on IR’s policy website and that you will continue to engage in the consultation process in a productive way.
I hope you have an enjoyable conference. Thank you.
Revenue Minister Michael Woodhouse and Small Business Minister Craig Foss today welcomed a survey showing small businesses are continuing to spend less time on tax compliance.
“Inland Revenue’s emphasis on providing customer-centric services that enable businesses to spend less time on compliance and more on growth is paying dividends,” Mr Woodhouse says.
A recent Inland Revenue (IR) survey shows the median time SMEs spent within their business on tax compliance was 27 hours, 25% less than in 2013, while the cost of doing the work had reduced from $2076 three years ago to $1573, down by 24%.
“This follows similar reductions in the 2013 survey, when compared with the 2009 survey and is a great validation of the work IR continues to do to make tax obligations easier for businesses,” Mr Woodhouse says.
The survey also found the most time consuming part of tax compliance work for SMEs was recording information, which accounted for just under half the amount of time. The most time-consuming tax type was GST, which required a median of 14 hours’ work (down from 24 hours in 2013).
“While we have seen a decrease in the median number of hours businesses spend on GST, further improvements in the area are expected once a range of digital enhancements to GST filing are introduced early next year,” Mr Woodhouse says.
“The Government also recently announced changes which will streamline how businesses and payroll providers file PAYE information and I am confident these changes will see an even greater decrease in the time and cost being spent on tax compliance.”
Mr Foss says the Government is committed to delivering services and systems that make compliance easier and less costly for businesses.
“The tax system is a key issue for New Zealand’s small businesses — it’s consistently raised with me by business owners, local chambers and business associations up and down the country,” Mr Foss says.
“The Government continuously works to improve the economic and regulatory environment so business owners spend less time on things like tax and more time focussed on the business of being in business.
“This survey shows we’re heading in the right direction.”
For the full survey, visit http://www.ird.govt.nz/aboutir/reports/research/
The strong and growing New Zealand job market provides great opportunities to get more Kiwis into life-long careers, say Tertiary Education, Skills and Employment Minister Steven Joyce and Workplace Relations and Safety Minister Michael Woodhouse.
The Ministers announced the release today of the 2016 update of the ‘Building Skilled and Safe Workplaces’ chapter of the Business Growth Agenda, which contains 55 current and 12 new initiatives to build sustainable careers and grow productivity in New Zealand.
“The New Zealand economy has added 35,000 more jobs in the last quarter alone,” says Mr Joyce. “We now have the second highest employment rate in the entire OECD. This gives us a great platform to work with employers and other stakeholders to lift employment for people of all ages to levels we haven’t seen before.”
“The Building Skilled and Safe Workplaces work programme is vital to the modern New Zealand economy. By strengthening our employment and workplace health and safety regulatory systems, we will increase the productivity of New Zealand and our labour force participation,” says Mr Woodhouse.
Some of the 12 new initiatives include working with university business schools to introduce entrepreneurship courses, and driver licensing initiatives to ensure employers have access to the labour force they need, and to increase the work-readiness of young people.
“One of the initiatives is the new Sector Workforce Engagement Programme – which is designed to improve employers’ access to skilled local workers. The programme works with employers in particular sectors and regions where there are skill shortages, and brings more young people and those on benefits into not just a job but a long-term career,” says Mr Joyce.
The updated ‘Building Skilled and Safe Workplaces’ chapter builds on the 33 projects that the government has already completed over the past two years in the skills section of the BGA.
“There have been some notable successes, including a 33 per cent increase in students enrolled in IT qualifications between 2008 and 2015, and the Māori and Pasifika Trades Training scheme growing to 2,400 places in 2016, up from 1,900 in 2015. The annual NEET rate is also at its lowest since September 2008,” says Mr Joyce.
“Building modern and safe work environments remains a priority for the Government in our target to reduce workplace fatalities and serious injuries by at least 25 per cent by 2020,” says Mr Woodhouse.
“Equipping people with the skills to succeed in the 21st century economy, will help us achieve this target, as well as boost productivity and improve outcomes for all New Zealanders.”
Good morning. Thank you for inviting me to speak to you today. This is my first address to you as Revenue Minister and it’s a great opportunity to meet some of the people who help implement government policies.
As the people who ensure that wages are paid correctly and on time, you are a very important group for the government and for the economy. A lot rides on you being able to do your jobs accurately and efficiently.
So I’d like to spend a bit of time today telling you about how the Government aims to help you in your important work.
I’d like to build on what my predecessor, Todd McClay said to you last year about the Government’s major modernisation of tax administration called Business Transformation.
At that time he outlined some of the main points of proposals in a consultation document released for public feedback aimed at making tax a less onerous part of the payroll process.
The proposals focussed not on what you do for PAYE, but how you do it – process improvements. Tax is just one component of your role, but we can make that part as simple as possible by taking advantage of technological advances. Technological advances that many, if not most businesses are already using every day in their normal day to day business operations.
The Government’s objective is for businesses to spend more of their time focusing on growing their business rather than fulfilling tax requirements.
The key to this is smarter use of software — integrating the tax process into your normal day-to-day business operations.
What we are aiming to do is to further integrate the tax process into your normal operations. We’re already well down the track with GST.
We know from a recent survey that people who use accounting software to prepare and send their GST returns to Inland Revenue are experiencing a significant compliance cost reduction. This is a pretty strong indication to me that integrating tax processes into normal business processes is the way to go and the Government wants to achieve those benefits for employers.
It was on this basis that the Government issued those proposals last year for public feedback. I’d like to thank all those who provided feedback on the proposals. There were over 1000 online comments received as well as 87 written submissions.
That feedback has helped shape the Government’s decisions and it gives me great pleasure to announce those decisions to you here today.
The thinking behind the main proposals I’m announcing today can be explained pretty simply:Employers currently pay their employees on a timetable that suits their business, so let’s make the PAYE information part of that rather than making it a separate process to suit IRD’s timetable. Employers are already using software for their payroll, so let’s give the employer more value out of their system by enabling the software to do more
I’ll give you some of the highlights of the finalised recommendations that will go into a tax bill to be introduced next year, as well as update you on some of the proposals that didn’t make the final cut because of public feedback.
Of course this remains subject to the parliamentary process, so at this stage, they remain as proposals, but my intention today is to provide employers and their software developers with a good indication of the shape of upcoming changes.
Firstly, we’re proposing that from 1 April 2019 businesses will begin payday reporting of PAYE information.
You’re already in the system at that point managing the payroll so why not integrate the next step, the provision of PAYE information to Inland Revenue, and do it all at once?
Making the filing of PAYE information part of the sequence will help to make providing PAYE information less time consuming and therefore less costly for employers. It also has wider benefits for the community. Providing that information at that time will help provide the IRD with better information which they can use to improve how they administer things such as Working for Families, child support and student loans.
This will help get employees on the right deduction to ensure that people get the benefits they should and their liabilities are calculated correctly.
The intention is that PAYE information from employers who are over the electronic filing threshold, payroll intermediaries and small employers using payroll software would be required as close as possible to payday.
Details as to precisely when payday information will be required are still being worked through but it is likely to be to be around two working days.
Although the proposal is that payday reporting of PAYE information will be required from 1 April 2019, Inland Revenue is working on providing payday reporting for early adopters who are keen to use the system sooner.
The changes from Inland Revenue’s Business Transformation will open up a fully digital system for those who want to eliminate paper interactions with Inland Revenue.
You will also have better access to your already filed information and better processes for error correction and adjustments.
Another proposal we asked you for feedback on was paying PAYE at the same time you pay your staff.
While some commented that paying PAYE as well as filing PAYE information at the one time would reduce compliance costs, a number of businesses were concerned about cash flow.
Following this feedback, the Government has decided not to require employers to pay their PAYE and other deductions to Inland Revenue on payday. If employers want to take advantage of doing everything at the same time including paying Inland Revenue on payday they will be able to do so.
However the current payment obligations, either twice monthly for the largest employers and payroll intermediaries or monthly for the rest, will remain the same.
A number of small businesses voiced their concern about all employers being required to use payroll software. We agree with those concerns.
The objective is to help businesses and if a business is not currently using payroll software, then we’re not going to require them to invest in such technology.
But we do believe that we can offer an improvement on traditional paper filing, so employers who don’t want to use software will be able to file their PAYE information through the Inland Revenue website, using an improved version of myIR.
And of course the smallest organisations will still be able to file their PAYE information on paper if they prefer.
Payday information from small employers not using payroll software will have a due date of 7 working days after payday.
All of what I have outlined for you is representative of how business practices have changed. Less than twenty years ago, electronic filing was largely the domain of large employers. That’s no longer true.
In 1999, a threshold of $100,000 a year of PAYE and ESCT was set for electronic filing. That hasn’t changed since, but business practices certainly have.
Today, most organisations are connected to the internet and do their banking or find a phone number or a multitude of other normal business activities online.
So in keeping with current business practice, we are proposing to reduce that threshold to $50,000 a year of PAYE and ESCT from 1 April 2019.
The new thresholds exempt the smallest organisations but will require an employer with four full time employees at the average wage or ten at the minimum wage to file through Inland Revenue’s website or through payroll software.
There will be an exemption from electronic filing for any employers who cannot access digital services.
And in line with the more widespread use of electronic services, the Government has also decided to end the current payroll subsidy from 1 April 2018.
In the early days of electronic filing, the subsidy helped improve the quality of PAYE information transmitted to the IRD, by encouraging employers to use listed payroll intermediaries. But time and technological advances have overtaken the subsidy and we believe there is no longer a case to subsidise one type of payroll service over others.
The Government has also decided to make some minor changes affecting the calculation of PAYE and related deductions and contributions, with effect from 1 April 2018.
For the purposes of calculating PAYE deductions, employers will be given the option to treat holiday pay paid in advance as if the lump sum payment was paid over the pay periods to which the leave relates, rather than treating the payment as an extra pay.
Several submitters wanted employers to be able to use this more accurate withholding method. While the Government has agreed to allow employers to use this method, we are not making it mandatory due to concerns that it may increase compliance costs for employers without payroll software.
To reduce complexity and confusion for employers, the rules in tax legislation about how legislated rates or threshold changes are applied will be aligned across the different types of PAYE income payments and PAYE-related initiatives such as KiwiSaver contributions and student loan deductions.
The rates and thresholds to be applied will be those in force on the date the payment is made. This alignment of the rules will simplify the transitional process for employers when a legislated rate or threshold change occurs.
So, these are the main PAYE proposals arising from last year’s public consultation which will be included in a Bill that I intend on introducing in the House early next year.
What I’ve outlined today is intended to help make the PAYE component of your jobs a little easier and a little smoother.
In doing that it also helps businesses by making their processes a little less costly and helps individuals by helping to make their tax affairs more accurate as well as any child support, KiwiSaver and student loans deductions.
The finalised proposals were shaped thanks to the many people, including many of you here today, who took the time to consider the proposals and provide expert advice on how to make the proposals work better.
Thank you again for that, and for inviting me to speak to you today. Keep up the great work.
An information exchange agreement with the Australian Tax Office (ATO) has carried out its first match, locating 10,400 student loan borrowers living across the Tasman.
Inland Revenue last week sent an initial list of 104,000 names of New Zealand borrowers who are living overseas to the ATO. Those names matched with the contact details of 10,400 people living in Australia.
Tertiary Education, Skills and Employment Minister Steven Joyce says the information sharing agreement is another important tool to help Inland Revenue trace borrowers in default living overseas, and ultimately to get them back on track.
“Inland Revenue has achieved some great results over the past year, including a 32 per cent increase in compliance from defaulting borrowers. I expect this agreement will see a significant improvement in that figure over the next year.”
Inland Revenue will now analyse the information, identify those who are in default and start contacting them to resume repaying their loans. Inland Revenue will continue to work with the ATO to make further matches of the names already provided and will carry out frequent matches throughout the year and ad-hoc matches as required.
“This new information exchange agreement will be a huge boost in enabling Inland Revenue to get in touch with those borrowers who have been hard to track down and those who have been deliberately avoiding their obligations for a number of years.
“My advice to these borrowers is to do the right thing and get in touch with Inland Revenue so they can work out a suitable repayment plan. If they don’t, it’s likely someone will be knocking on their door in the next few months.”
Mr Joyce says Inland Revenue had some tough enforcement measures at its disposal, including legal action and potential arrest at the border if the borrower returned to New Zealand, but those options were only pursued as a last resort. Since January six warrants for arrest have been issued and three people have been arrested and appeared before the court.
At the end of June, the amount in default was $1,074 million. More than 90 per cent was owed by borrowers living overseas, even though they only make up 15 per cent of the total borrower population. A significant majority of overseas-based borrowers are believed to be living in Australia.
Revenue Minister Michael Woodhouse says Inland Revenue’s efforts in reducing student loan debt among overseas borrowers had made some impressive gains year on year.
“The campaign specifically aimed at problematic borrowers netted more than $100 million in the past year, and has passed the $300 million mark since its inception,” Mr Woodhouse says. “Overall, $216 million was paid by borrowers overseas last year.
“That’s a fantastic achievement but what’s even more pleasing is that Inland Revenue is reporting a turn-around in attitudes among many student loan borrowers who’ve previously been reluctant to engage with the department.
“It seems the message is getting through that if you leave the country for a few years, you can’t leave your student loan behind and hope it just goes away. Now really is the opportunity for defaulting borrowers to sort out their loans. They shouldn’t wait for Inland Revenue to contact them.”
Workplace Relations and Safety Minister Michael Woodhouse today announced the appointment of Len Cook as a new member of the Remuneration Authority (the Authority).
The Authority is responsible for setting the rates of pay and allowances for Members of Parliament, the Judiciary and local authority members.
Len Cook replaces Angela Foulkes who has performed her duties admirably as a member of the Authority for eleven years.
“Len comes highly qualified for the role as an internationally respected professional statistician, with over 40 years of statistical, research and public policy knowledge,” Mr Woodhouse says.
“Len has also served on a range of public and academic boards and his broad experience will be invaluable to the Authority’s work.
“The Authority is a small but important team and we are fortunate to have such a high calibre individual joining the team. I wish Len well in his new role.”
Background information on appointee:
Len Cook was the National Statistician of the United Kingdom from 2000 to 2005 and the Government Statistician of New Zealand from 1992 to 2000. Prior to this, he worked in various roles at Statistics New Zealand from 1971, becoming Deputy Government Statistician in 1986. He was a member of the Royal Commission on Social Policy in 1987-88.
Mr Cook was appointed Families Commissioner in 2015 and Chair of the board of Superu. He is Past-President of the Institute of Public Administration. He is a member of the Winston Churchill Memorial Trust Board, and has served on a wide variety of boards.