Dunne: tax reform application dates should be deferred

Revenue Minister Peter Dunne is in favour of deferring the application date of a number of forthcoming tax reforms, many of which come into force on 1 April, although the bill is not expected to pass into law before August.

The changes are part of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill, introduced last July and currently under consideration by Parliament's Finance and Expenditure Committee.

"As 1 April approaches, many business people and their tax advisors are becoming increasingly concerned about the problems of working in accordance with complex tax reforms that have still to be enacted.

"My view is that it's simply not realistic to stick to all the application dates as originally proposed, and that Parliament should consider deferring the application dates of those large reforms that are particularly problematic for compliance with and administration of the new rules.

"The application dates of most concern are those for the reforms relating to our international tax rules, the taxation of the life insurance business, definitions of associated persons, and payroll giving for charitable donations.

"There are practical problems here. For example, provisional taxpayers who get it wrong in second guessing the final form of the changes to the international tax rules may well face penalties and interest for their mistakes.

"Likewise, employers who want to get payroll giving under way on 1 April will find they have no legislative basis on which to make charitable donations from their employees' pay.

"I have therefore written a letter to the chairman of the select committee, outlining my concerns and asking the committee to give serious consideration to a number of deferments, in whole or in part, of application dates in the bill.

"I am announcing my recommendations today to give greater certainty to affected businesses, although it is the select committee that will recommend any changes to the proposed legislation.

"For the international tax changes, I have recommended that the application date remain at the 2009-10 income year only for taxpayers who have balance dates on or after 30 June, the date of the bill is expected to be reported back to Parliament. For all others, the application date would be the 2010-11 income year.

"For the reform of the rules on taxing the life insurance business, I have recommended that the application date of the new rules be deferred until a date to be determined following further discussion with the industry.

"For the changes to the associated person rules, I have recommended a one-year deferment, to the 2010-11 income year, except for the land provisions, which would be deferred from 1 April 2009 to the date of enactment.

"For payroll giving, a change keenly awaited by charities but requiring changes to employers' payroll systems, I have recommended that the application date be deferred from 1 April 2009 to three months after enactment.

"I have also recommended deferrals of the application dates of a number of other, smaller changes, many of which are taxpayer-friendly or which simply clarify the rules. For example, changes to rules on provisional tax pooling would be deferred from 1 April to the date of enactment," Mr Dunne said.