Budget 2013 tax announcement

There are four important proposed changes to tax laws announced by the honourable minister Peter Dunne today while making Budget 2013 announcement:-

Budget tax relief for ‘black hole’ expenditure

Budget 2013 will provide relief for six areas of ‘black hole’ business expenditure, bringing in tax deductibility on items where it previously has not applied:

1. Immediate deductibility for capitalised expenditure on legal and administrative fees incurred in applying for a patent or plant variety rights, but where no depreciable asset is recognised for tax purposes.
2. Making certain fixed-life resource consents granted under the Resource Management Act 1991 depreciable for tax purposes. 
3. Making expenditure immediately tax deductible if it is incurred on resource consent applications that are abandoned, rather than requiring the application to be lodged in order to be tax deductible.
4. Immediate deductibility for all direct costs associated with the payment of dividends by a company to shareholders.
5. Immediate deductibility on annual fees for listing on a stock exchange, while clarifying that the initial costs of listing on a stock exchange and the costs of additional share issues are not tax deductible.
6. Specifying that annual shareholder-meeting costs are immediately tax deductible, and special shareholder meeting costs are non-deductible.
The changes will be included in a tax bill to be introduced later this year and will apply from the 2014/15 income year.

R&D tax-break proposal to boost start-ups

Small, innovative businesses are set to benefit from proposed changes that will allow them to claim tax losses on research and development.

Property investment focus

Ongoing funding to the IRD to ensure effective compliance in property trades/dealings, where profit is made but proper tax payments are not made to the Commissioner.
The most important thing in property dealing is the purpose of purchase, even if one of the purposes was to earn profit regardless of how many years land is held the proceeds will be taxable. 
Generally, it has been since in the past years taxpayers were not revealing proceeds from property sales in their tax return. IRD is keeping vigilant eyes over such kind of dealings. 
Budget 2013 provides a permanent $6.65 million increase in annual funding for Inland Revenue to pursue property investment tax compliance, which is expected to return about $45 million a year, Revenue Minister Peter Dunne says.

Multinational investors – paying fair share of tax

Changes to the thin capitalisation rules are expected. The thin capitalisation rules are designed to address the situation where non-resident investors can artificially load debt into their New Zealand investments to limit their tax exposure, so limiting interest deductions for foreign-owned firms.

However, they currently apply only where one non-resident owns 50 per cent or more of a New Zealand investment. This means that the rules apply to traditional multinational companies, but not to other types of non-resident investors, such as private equity investors.
The Government has therefore decided to extend these rules to where non-residents are acting together, and together have a controlling interest of a New Zealand investment. 
Another area of concern is around the issue of shareholder debt, which can allow companies operating in New Zealand to have excessive levels of debt without the thin capitalisation rules applying.