Trans-Tasman Tax Bill Introduced Into NZ Parliament

by Mary Swire, Tax-News.com, Hong Kong

24 June 2003

A bill was put before New Zealand's parliament yesterday which will enact the country's share of the double taxation avoidance measures with Australia and remove long-standing disincentives to trans-Tasman investment.

According to remarks made by New Zealand's Finance Minister Michael Cullen recently, the joint venture - which was announced in February 2003 - "reflects the commitment of both governments to the continued strengthening of the Closer Economic Relations agreement and to reducing impediments generally to transtasman business."

The Finance Minster went on to add: "To this end, the imputation systems of each country are being extended to include companies resident in the other country that want to take part. The bill will make New Zealand imputation credits available to Australian companies, while similar legislation before Parliament in Canberra makes Australian franking credits available to New Zealand companies."

Other major reforms included in the bill are changes to GST in respect of financial services companies, in order to bring the rules more into line with those of other industry sectors. This will mean that banks or life insurers, for example, will be able to recover GST on certain purchases in relation to the supply of their services to other firms. Also, a GST reverse charge will be applied on certain imported services to align them with domestically supplied services which are subject to the tax.

Another important measure will enable employer contributions to superannuation funds to be taxed at a lower rate of 21% if an employee's salary is below $38,000 per year. Also, the legislation will seek to curtail mass-marketed aggressive tax arrangements that aim to raise a larger tax reduction than the amount invested in the scheme.

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