Have they finally listened for once?

Back in a mid-March edition of AWIR, I outlined the Government’s latest proposals targeted towards taxpayers who were supposedly using a company structure to avoid predominantly the 39% personal tax rate, but also the 33% rate.

The discussion document was titled ‘Dividend integrity and personal services income attribution’, and suggested:That if you had a controlling interest in a company, and the company had retained earnings when you sold your shares to another party, then a portion of your historically tax-free capital gain will be treated as a taxable dividend;

That all companies be required to maintain a record of their ASC (available subscribed capital) and ACDA (available capital distribution amount) balances, so that the Revenue could easily verify the non-taxable amount when either shares are repurchased by a company or the company is liquidated; and,

That the PSI thresholds should be modified to the extent that the 80% single customer rule would disappear, and the working person threshold should reduce from 80% to 50%.As you can imagine, the proposals triggered a public outcry and a raft of negative submissions accordingly, including from MBIE who waded in with concerns that an unintended consequence of the policy may be to dis-incentivise the establishment of, and investment in, start-ups by founders and investors, and further, that this policy may have high compliance costs for small business around record keeping and reporting of ASC and capital gains.

Now those of you who have been around the track as long as I have, probably appreciate that more often than not (I have to be a little kind to them I guess?), these types of submissions usually fall on deaf ears, and the Government simply charges on like a bull in a china shop, introduces the changes as proposed, and then has to use band-aids for the next ten years or so to repair the carnage they’ve created due to legislative over-reach.

However, I almost spilled my morning coffee (which would have been a crime in itself!) when I read that the Government has actually taken a breath, and asked its officials to do some more work on the proposals as a result of some of the concerns raised.

Now I’ve also been around long enough not to get overly excited when I see these types of media releases, considering that the Government has not dropped the proposals outright, but has simply requested “more work be done”. So let’s just give them some credit for now, and wait and see what comes out in the wash in a few months’ time.