Can you confirm??
IR has released an operational statement (OS 19/02), which deals with the issue of who has the authority in the Commissioner’s eyes, to be able to confirm an income statement of a deceased person or to be able to provide information to IR to finalise the tax account of the deceased.
O/S 19/02 covers two separate income year periods:
- in respect of an income statement (who can confirm) for the income year from 1 April 2008 to 31 March 2019 of a deceased person who died without a will, and an executor or administrator has not been appointed; and,
- in respect of providing information to enable IR to finalise a tax account for income years from 1 April 2019, where the deceased does not have a will and no executor or administrator has been appointed.
Those with the appropriate authority will include:
- the widow or widower of the deceased person
- a person who is the surviving civil union/de-facto partner of the deceased person
- a child of the deceased person
- a person who is entitled to administer the estate
- a person related by blood or marriage and be maintaining the deceased person’s child/children, and
- a person who has the custody and control of the decreased person’s child/children.
The statement is effective from 4th April 2019.
All is not what it seems
A recent TRA case decision should be a warning to all shareholders in close companies, of the need for accurate record-keeping should you wish to be able to dispel a subsequent contention by IR, that amounts received by you in your capacity as a shareholder of the company are income.
In the tax years in question, the taxpayer had received various payments from the companies of which she and/or her husband were shareholders, and certain expenditure had been paid on her behalf. The taxpayer filed nil income tax returns for each of the years in question, claiming that all amounts she received from the various companies, were in respect of repayments of shareholder loans.
IR on the other hand, having reviewed the taxpayer’s records, contended that the amounts were instead either wages, dividends or income under ordinary concepts. The Revenue’s position was that the taxpayer had failed to provide sufficient evidence to support her position, that the amounts were indeed repayments of loans, and therefore non-taxable.
The taxpayer’s position was not assisted by the fact that the company’s bank statements, narrated certain payments to her as “wages” and were coded as such. The taxpayer argued that this was simply a coding error, however this argument was in essence discounted by both IR and the Court, because on the same day she had also received amounts which were narrated as being drawings and therefore coded as such. Further, the payments were also regular in nature, and the taxpayer had admitted that she did undertake some work for the companies.
In relation to other amounts that were not narrated as being “wages”, because the taxpayer had insufficient records to support a position that the payments were in fact repayments of shareholder loans, there was then no basis to negate the Revenue’s argument that section CD 4 applied to treat the amounts as being dividends received by the taxpayer.
And as if IR’s determination being upheld by the Court was not already painful enough for the taxpayer, just to add further salt to the wound, the Court also agreed with the Revenue’s shortfall penalty assessment of 40% for gross carelessness.
Special Reports released
Further to the recent enactment of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019, IR has now released two special reports to explain some of the new rules:
- simplifying tax administration – individuals’ income tax; and
- the taxation of bloodstock.
I expect that the “simplifying tax administration” special report will be more keenly sought after by most of you, than the special report on the “taxation of bloodstock”. You can find the former report here – http://taxpolicy.ird.govt.nz/sites/default/files/2019-sr-individuals.pdf and it contains detailed information on:
- the year-end income tax obligations of individuals;
- refunds and tax to pay;
- pro-active actions;
- tailored (special) tax codes; and,
- the administration of donations tax credits.
Public Rulings program
The latest update to IR’s Public Rulings program can be found here –
http://cdn-au.mailsnd.com/14617/MHozKjkWAG_897VB4T4O4tVFkfcisBXRqBhhhj8I570/2183433.pdf.
For those of you who have not viewed the report previously (which is usually updated monthly by IR), it is a useful guide to see what taxation items IR are presently seeking public feedback on, what items are presently in progress (some of which may not yet have reached the public forum stage), and what items IR have in the pipeline for future consideration (what can provide valuable insight into whether some of the hot topics you are experiencing with your own clients, may soon be addressed by IR).
Some of the items which may be of interest to you all per the latest report include:
- Income tax – Depreciation – Residential rental properties and healthy homes standards (which I expect will discuss the capital v revenue treatment when you have no choice but to incur the required expenditure);
- Income tax – Trusts – New Zealand/Australia DTA (which I suggest could provide useful guidance in respect of cross-border implications for your family trust due to NZ’s settlor taxation basis v Australia’s trustee taxation basis);
- GST – Definition of “dwelling” (useful to understand your client’s potential GST registration exposures); and,
- Income tax – Land – Work of a minor nature (perhaps a revamp of the 2005 interpretation guideline to assist with determining whether your land subdivision may trigger income tax exposures (although potentially a CGT introduction will knock this item on the head).
Naturally as various items are released, AWIR will endeavour to provide an update.
