Tax Updates: 16 October 2023

Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion on any national or international tax issues, please contact Richard via email at richard@gilshep.co.nz.

Technical Decision Summaries

Yet again, it was a quiet week on the tax front. however, with the Election now past, and a new Government on the horizon, that may soon change depending on how fast the wheels are put in motion to legislate for some of the promised goodies – reduction of the bright-line test to two years (potentially effective from July 2024, but you’ll be safe if you acquired pre-July 2022), phased in reinstatement of interest deductibility on residential land, and amendments to the personal tax rate thresholds.

Therefore, I thought in this week’s edition I’d provide a timely reminder with respect to Inland Revenue’s (IR) Technical Decision Summaries or TDRs. A TDR is a summary of a decision by the Tax Council Office (TCO), which, those of you who have been involved in a tax dispute with IR, will appreciate It is essentially the gatekeeper to the Courts. If your dispute makes it this far, the TCO will cast one final “independent” look over the Commissioner’s case, to ensure he has got it right, before everyone heads off to the Court. If the TCO rules in your favour, that decision is binding on the Commissioner, and consequently, the dispute ends there. However, if the TCO rules in the Commissioner’s favour, you are still entitled to pursue your dispute through the Courts.

A couple of years back, IR commenced publishing TCO decisions as a TDS, so you could read for yourself the types of issues that were making it as far as the TCO, and with a brief outline of the statement of facts, you could appreciate firstly how IR was interpreting the case. But secondly, and more importantly, in my view, you could see the decisions made by the TCO and how those decisions were arrived at. I find the TDS publications very useful reading, providing some insight into the types of issues IR are disputing and why, which naturally can assist you with dealing with your own client’s cases, which may have a similar fact set.

So far in 2023, 12 TDS have been issued, which have covered topics involving GST taxable activities (existence thereof and input/output tax considerations), expenditure deductibility (application of capital limitation – registration fees; weather tightness costs; legal expenses), the timing of income and expenditure, whether settlement payments employment income and correct treatment of taxpayers unexplained amounts.

Naturally for confidentiality reasons, any taxpayer’s specific details which could lead to identification are excluded, and having recently been involved in a case that went as far as the TCO, IR actually provides you with a draft of the proposed TDS before it is published, to ensure that you are comfortable with the content included.

If you have not been reading the TDS publications and would like to, click here. Most of the TDS is only 6 pages long, so a relatively quick read, although the latest TDS 23/12 was a biggie, at 27 pages.

I hope you enjoy.

This article was originally published through the ‘A Week In Review’ newsletter. If you would like to receive Richard’s tax updates every Monday morning, you can subscribe here.