The Government will move to simplify the rules relating to financial arrangements that are agreements for the sale and purchase of property or services, Revenue Minister Peter Dunne announced today.
Mr Dunne said the changes reflect concerns expressed by a number of business taxpayers and their representatives over the past few years.
“The proposed changes will have a beneficial impact on business taxpayers who sell or buy property or services. They will be particularly welcomed by businesses who export and import capital equipment,” he said.
Taxpayers who prepare financial reports using International Financial Reporting Standards (IFRS) will now follow their accounting treatment for taxation purposes for almost all of these arrangements. The exception will be capital account transactions other than depreciable property. Other taxpayers will use simplified rules that will give similar results.
The amendments will apply from the 2013/14 income year. However the legislation will allow IFRS taxpayers to elect to apply the accounting treatment to new arrangements from the 2011/12 income year.
The changes will also validate the past treatment of arrangements which have effectively used methods allowed under the new rules.
Mr Dunne said that simplifying the rules was consistent with the Government’s objective of making it easier for customers to interact with government.
“The rule changes will mean lower compliance costs, increased technical compliance and for some, less volatility of taxable income from year-to-year,” he said.
The amendments will be included in the next available tax bill, with draft legislation expected to be released for comment in March 2013.
More technical details on the proposed rules and their application can be found in a fact sheet at www.taxpolicy.ird.govt.nz