Miscellaneous technical amendments

Allocation of research and development tax deductions

Section EJ 21 of the Income Tax Act 2004

A remedial amendment has been made to the changes enacted in 2006 to the research and development (R&D) tax rules. An amendment to section EJ 21 of the Income Tax Act 2004 clarifies that when a company has had a breach of shareholder continuity the amount of R&D tax deductions allocated to an income year is the lesser of the R&D income in that year and the R&D deductions that have not been allocated to earlier income years. This amendment accords with the previously announced policy objectives of this reform.

Corporate migration terminology

Sections NF 4 and NG 11 of the Income Tax Act 2004 and sections 29, 49 and 51 of the Tax Administration Act 1994

To provide consistency of terminology in the recently enacted corporate migration amendments, the reference to "emigration date" in several provisions has been replaced by the correct defined term "emigration time".

Cross-referencing in Section NBB

Section NBB 5 of the Income Tax Act 2004

Changes have been made to section NBB 5 of the Income Tax Act 2004 to clarify the rules relating to the treatment of PAYE subsidy overpayments.

Subsection NBB 5(5) of the Income Tax Act 2004 has been redrafted to include correct cross-references.

The amendments apply for pay periods beginning on or after 1 October 2006.

Minor beneficiary rule clarification

Section HH 3C of the Income Tax Act 2004

Section HH 3C of the Income Tax Act 2004, which provides an exclusion from the minor beneficiary rule, has been clarified to ensure that the test is satisfied when one or more of the conditions are met.

Share-lending rules

Sections 2(17), 117, 132, 151, 155(24) of the Income Tax Act 2004 and 178 of the Tax Administration Act 1994

Remedial amendments have been made to the recently enacted share-lending rules. The amendments clarify that when resident withholding tax (RWT) has been paid by the share user as part of a share-lending arrangement, the share supplier does not get an imputation credit for that RWT as well as an imputation credit under section NF 8B. The amendments also remove requirements that are not relevant to share-lending arrangements from the sharelending statement and dividend withholding payment credit refund sections. These amendments accord with previously announced policy objectives of this reform.

The reference to an "associated person" in section ME 5(1)(ac) has also been removed as the definition of "returning share transfer" in section OB 1 already includes an associated person test.

The amendments are effective from 1 July 2006.

Date on which notices are delivered

Sections 14(9), 14b(8) and 14C(8) of the Tax Administration Act 1994

Rebuttable presumptions, that notices are posted on the day on which they are postmarked, have been removed from sections 14(9), 14B(8) and 14C(8) of the Tax Administration Act 1994. As Inland Revenue does not copy or store envelopes, the presumption is of little value.

The effect of the removal is that notices will be treated as having been given on the day on which they would have been delivered in the ordinary course of the post. That date will be determined after considering all the relevant evidence. If a postmarked envelope is held, Inland Revenue will accept it as evidence that the notice was posted, at the latest, on the day of the postmark.

The amendment applies from 1 April 2005, the date the presumptions applied from.

GST associated persons definition

Section 2A of the Goods and Services tax Act 1985

The Goods and Services Tax Amendment Act 2005 amended the test for associating relatives in the associated persons definition in section 2A of the GST Act. The purpose of the amendment was to associate individuals who are in a civil union or de facto relationship. This amendment was part of a number of amendments intended to remove unjustified discrimination in the application of laws on the grounds of marital status or sexual orientation so laws are neutral on their application to different relationships and consistent with human rights obligations.

Former section 2A(5) of the GST Act provided that the test associating relatives extended to trustees for relatives. The amendment in 2005 did not maintain the effect of this provision. It was not intended that this aspect of the relatives associated persons test be changed. An amendment correcting this drafting error has been made to the test associating relatives in section 2A of the GST Act to reinstate the trustee aspect of this test.

Extension of time bars

Section 108B of the Tax Administration Act 1994

Section 108B of the Tax Administration Act 1994 sets out the rules for extending the time bars for amending tax assessments. Subsection (1)(a) provides that the time bar can be extended by a period of up to 12 months, where the Commissioner and the taxpayer agree in writing. Subsection (1)(b) allows the taxpayer to extend the time bar for a further six months from the end of the 12-month extension period. This further six-month extension period was enacted in 2004.

Former section 108B(2) required any time bar waiver under subsection (1) to be in the prescribed form and to be signed and delivered to the Commissioner before the end of the original four-year time bar period. It was intended that the further six-month extension of the time bar in section 108B(1)(b) could be effected by the taxpayer giving notice to the Commissioner before the end of the 12-month extension period allowed in section 108B(1)(a). However, the necessary consequential amendment was not made to section 108B(2) when the further six-month extension period was enacted in 2004. A remedial amendment has been made to section 108B to allow a taxpayer to extend a time bar by a further six-month period by giving notice to the Commissioner before the end of the initial 12-month extension period. This amendment ensures that the time bar extension provisions operate as intended.