By Hayes Knight – 1 April 2011

A number of tax changes announced in the 2010 Budget have come into effect on 1 April or for the 2011/12 income year.

These changes are intended to make businesses more competitive and rebalance the economy towards saving and exports.

The changes that apply from the beginning of the 2011/12 income year (which is 1 April for taxpayers with a 31 March balance date) include:

•  a reduction in the company tax rate from 30% to 28%;

•  ending building depreciation; a zero depreciation rate must be applied for buildings with an estimated useful life of 50 years of more;

•  LAQCs are abolished and replaced with a new tax entity known as a look through company (LTC);

•  changes to the thin capitalisation tax rules to limit the scope for foreign multinationals to reduce their New Zealand tax liability.

The changes that apply from 1 April 2011 (regardless of the taxpayer’s balance date) comprise:

•  new GST rules which include:

  • compulsory zero-rating of transactions involving land (subject to certain conditions);
  • clarification of the GST rules around nominations;
  • new change of use adjustment rules;
  • changes to the definition of “dwelling” and “commercial dwelling”;

•  the definition of “income” for Working for Families and the Community Services Card has been tightened so income from sources like family trusts are counted and rental and other investment losses are excluded.

Please contact Phil Barlow or Shelley-ann Brinkley if you would like to discuss these changes further.

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