Cheque Duty Repeal Act 2014

Sections 1 to 5 of the Cheque Duty Repeal Act 2014, sections 2, 76 to 86 and 86F of the Stamp and Cheque Duties Act 1971, sections 144 and 184A(5)(d) of the Tax Administration Act 1994

The Cheque Duty Repeal Act 2014 has abolished cheque duty, with effect from 1 July 2014. Cheque duty is no longer payable on cheques printed or supplied by a bank to its customers. Cheque duty is also no longer payable on bills of exchange for which cheque duty has not been prepaid.

Background

Cheque duty applied to bills of exchange (most commonly cheques) at a rate of 5 cents per bill of exchange. The Government recently announced, as part of Budget 2014, that cheque duty would be abolished, as:

• the duty no longer raised substantial revenue and the revenue raised was in decline; and
• cheque duty was easy to avoid, since closely substitutable transaction types (such as cash, EFTPOS, internet banking and credit card transactions) are not subject to duty. Cheque duty was therefore inefficient and had a small distortionary effect.

The application date of 1 July 2014 was chosen for the repeal because it tied into the return cycle for cheque duty purposes.

Key features

• Cheque duty is not payable on a bill of exchange drawn or made on or after 1 July 2014.
• Cheque duty is not payable by banks on cheques supplied to their customers on or after 1 July 2014.
• Cheque duty is not payable on cheques printed on or after 1 July 2014.
• Banks and printers of cheques, which were licensed under the Stamp and Cheque Duties Act 1971 for the quarter or month ended 30 June 2014, are required to file a final cheque duty return and make a final payment of cheque duty for that period by 21 July 2014.
• Cheque duty may be refunded to those that paid cheque duty as a licensed printer of cheques or as a temporary licensee, who apply in writing to Inland Revenue by 21 July 2014 for a refund of cheque duty they have paid (within the last eight years) in relation to cheques that have not been printed, or unused cheques that were destroyed before 1 July 2014.
• Banks that were licensed under section 81 of the Stamp and Cheque Duties Act 1971 during the quarter ended 30 June 2014 can claim, as a deduction from their final payment of cheque duty, an effective refund of cheque duty they have paid (within the last eight years) in relation to cheques that have not been used and were destroyed by the bank during the quarter ended 30 June 2014. This includes any cheques they sent to their customers that were defaced or spoiled before the customer used them.

Application dates

The repeal of cheque duty applies from 1 July 2014.

Despite the repeal taking effect on 1 July 2014, provisions necessary to:

• ensure that banks and printers of cheques file a final cheque duty return, together with payment, for the period ended 30 June 2014; and
• enable applications for refunds of cheque duty to be made,

remain in force until the 21 July 2014 due date for final cheque duty returns, payments and refund applications has passed. Section 5 of the Cheque Duty Repeal Act 2014 repeals these remaining compliance and refund provisions on 22 July 2014.

Detailed analysis

Removal of liability to pay cheque duty

Three groups paid cheque duty to Inland Revenue:

• licensed banks;
• licensed printers of cheques; and
• temporary licensees.

The effect of the Cheque Duty Repeal Act 2014 on each of these groups is explained below.

Licensed banks

Section 3(2) of the Cheque Duty Repeal Act 2014 cancelled the licences of banks licensed under section 81 of the Stamp and Cheque Duties Act 1971 from 1 July 2014. As a result of section 3(1) of the Cheque Duty Repeal Act 2014 repealing most of Part 6 of the Stamp and Cheque Duties Act 1971 from 1 July 2014, cheque duty is not payable on cheques a bank supplies to its customers or procures on its own behalf on or after 1 July 2014.

A bank that had its licence cancelled under section 3(2) of the Cheque Duty Repeal Act 2014 is required by section 3(4) of the Cheque Duty Repeal Act 2014 to file a final cheque duty return (IR 193) and make a final payment of cheque duty for the quarter ended 30 June 2014 by 21 July 2014.

Licensed printers of cheques

Section 3(2) of the Cheque Duty Repeal Act 2014 cancelled the licences of printers licensed under section 82 of the Stamp and Cheque Duties Act 1971 from 1 July 2014. As a result of section 3(1) of the Cheque Duty Repeal Act 2014 repealing most of Part 6 of the Stamp and Cheque Duties Act 1971 from 1 July 2014, cheque duty is not payable on cheques a printer prints for the use of its customers or on its own behalf on or after 1 July 2014.

A printer that had its licence cancelled under section 3(2) of the Cheque Duty Repeal Act 2014 is required by section 3(5) of the Cheque Duty Repeal Act 2014 to file a final cheque duty return (IR 191) and make a final payment of cheque duty (if any is payable) for the month ended 30 June 2014 by 21 July 2014.

Temporary licensees

Section 3(2) of the Cheque Duty Repeal Act 2014 cancelled all temporary licences granted under section 83 of the Stamp and Cheque Duties Act 1971 authorising the printing and use of cheques prepaid with cheque duty on 1 July 2014. A printer that held an authority to print the prepaid cheques to which such a licence related also had its authority cancelled on 1 July 2014 under section 3(2) of the Cheque Duty Repeal Act 2014.

Removal of liability when cheque duty has not been prepaid

Previously, if cheque duty had not been prepaid on a bill of exchange, the bill of exchange was required to be duly stamped (by affixing a postage stamp or stamps for the amount of cheque duty payable on the bill, cancelling each stamp, and stating on the bill the true date of cancellation) by:

• the drawer or maker of the bill, if the bill of exchange was drawn or made in New Zealand; or
• the first holder of the bill in New Zealand, for a bill of exchange drawn or made outside New Zealand.

As a result of section 3(1) of the Cheque Duty Repeal Act 2014 repealing most of Part 6 of the Stamp and Cheque Duties Act 1971 on 1 July 2014, cheque duty is not payable on a bill of exchange drawn or made in New Zealand from 1 July 2014. Also, from 1 July 2014, for a bill of exchange drawn or made outside New Zealand, cheque duty is not payable by the first holder of the bill in New Zealand before the holder further acts on the bill.

Termination of agreements for exemption from cheque duty

Previously, Inland Revenue had the power, under section 80 of the Stamp and Cheque Duties Act 1971, to enter into a written agreement with specified bodies exempting them from paying cheque duty. Instead, a sum equivalent to the cheque duty that otherwise would have been payable was required to be paid to Inland Revenue on the dates specified in the agreement.

All agreements under section 80 of the Stamp and Cheque Duties Act 1971 were terminated on 1 July 2014 by section 3(3) of the Cheque Duty Repeal Act 2014. Any sum accrued (but not yet paid) under such an agreement as at the date of termination remains payable by the date specified in the agreement.

Refunds of cheque duty

Under section 85 of the Stamp and Cheque Duties Act 1971, cheque duty may be refunded to those that paid cheque duty as a licensed printer of cheques or temporary licensee, upon application in writing to Inland Revenue's Duties Unit by 21 July 2014 for a refund of cheque duty they have paid (within the last eight years) in relation to cheques that have not been printed, or unused cheques that were destroyed before 1 July 2014. The minimum refund is $1.

Licensed banks are not able to make an application to Inland Revenue for a refund of cheque duty. Instead, when banks that were licensed during the quarter ended 30 June 2014 file their final cheque duty return (due by 21 July 2014), they will be able to deduct (from the amount of cheque duty payable for the quarter) cheque duty they have paid (within the last eight years) in relation to cheques that have not been used and were destroyed by the bank during the quarter ended 30 June 2014. This includes any cheques they sent to their customers that were defaced or spoiled before the customer used them.

Offences specific to cheque duty

The following criminal offences (and associated penalties) specific to cheque duty contained in section 144 of the Tax Administration Act 1994 were repealed on 1 July 2014 by section 4(1) of the Cheque Duty Repeal Act 2014:

• failure to comply with a provision of section 84 of the Stamp and Cheque Duties Act 1971;
• being licensed under section 83 of the Stamp and Cheque Duties Act 1971, or being a printer authorised under that section, and failing to comply with a provision of that section, or of a licence or authority granted under that section; and
• without first being licensed or authorised under Part 6 of the Stamp and Cheque Duties Act 1971 to do so, printing on a bill of exchange or bill of exchange form an inscription indicating that the cheque duty for the bill or form has been paid.

The following existing offences remain in force after 1 July 2014:

• being a bank licensed under section 81 of the Stamp and Cheque Duties Act 1971, failing to comply with a provision of that section or of any licence granted under that section; and
• being a printer licensed under section 82 of the Stamp and Cheque Duties Act 1971, failing to comply with a provision of that section or of a licence granted under that section.

However, from 1 July 2014, a bank or printer that had its licence cancelled under section 3(2) of the Cheque Duty Repeal Act 2014 on 1 July 2014 is treated under section 4(2) of the Cheque Duty Repeal Act 2014 as being licensed (under the applicable section), for the purposes of these two offences. This ensures that these two existing offences continue to apply in respect of non-compliance with the requirement for these banks and printers to file a final cheque duty return and make a final payment of cheque duty by 21 July 2014.

As they will become redundant after the 21 July 2014 due date for final cheque duty returns to be filed and payments made, the two remaining offences will be repealed on 22 July 2014 by section 5 of the Cheque Duty Repeal Act 2014.

Cheque duty repeal – questions we've been asked

Q: Now that cheque duty has been repealed, are printers of cheques required to be licensed by Inland Revenue?

A: No. The purpose of the requirement for printers to be licensed by Inland Revenue in order for them to be allowed to print cheques prepaid with cheque duty was to protect the integrity of the collection of cheque duty. Now that cheque duty has been repealed, this need for Inland Revenue to administer a licensing regime for printers of cheques no longer exists. If the licensing regime provided any other benefits, these were purely incidental.