Legislation and regulations update - Certain individual and small business taxpayers excluded from two year amendment period

Just before the end of the Parliamentary Budget sittings, two new tax Bills, Tax Laws Amendment (2006 Measures No 4) Bill 2006 and Tax Laws Amendment (Repeal of Inoperative Provisions) Bill 2006 were introduced into Federal Parliament. In addition, several amendments have been made to the income tax regulations recently, primarily as a result of the new personal income tax rates applicable from 1 July 2006, and the new fringe benefits tax rate applicable from 1 April 2006. We review these legislative and regulatory changes below. Parliament will resume for the Spring sittings on 8 August 2006.

• Demergers, NZ imputation and marriage breakdown roll-overs
• Repeal of inoperative law - the easy part
• Reduction to PAYG withholding rates where ABN or TFN is not quoted
• Adjustment for change in FBT rate
• Certain individual and small business taxpayers excluded from two year amendment period

Certain individual and small business taxpayers excluded from two year amendment period

In general, the Commissioner of Taxation may amend the income tax assessments of most individuals, and certain very small businesses, no later than two years after the Commissioner gives the taxpayer a notice of assessment.

However, this two-year amendment period does not apply to taxpayers in circumstances that are prescribed by regulations. In those cases, generally a four-year amendment period will apply to the excluded taxpayer.

A new regulation specifies that certain taxpayers are excluded from the two-year amendment period, including:

• taxpayers who are involved in non-arm’s length transactions with associates, where there is a mismatch in the review periods of the parties involved

• taxpayers involved in transactions to which Division 7A applies (ie deemed private company dividends), where there is a mismatch between the company’s period of review (four years or more) and the related entity’s period of review

• taxpayers involved in transactions to which Subdivision EA of Division 7A applies (ie deemed dividends arising from unpaid present entitlements)

• individuals and small businesses who omit, from a return or other documents provided in the course of an assessment, ordinary or statutory income from foreign transactions, or

• taxpayers involved in transactions where certain anti-avoidance provisions apply.

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