Upcoming changes to tax disclosure rules for investment income

Changes affecting tax administration obligations for interest, dividends, portfolio investment entity (PIE) income, taxable Māori authority distributions and royalties are in the pipeline.

Once enacted, they will generally require more information more frequently from payers of investment income with consequent increases in compliance costs.

The changes are provided for in the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill, which was introduced to Parliament last week.

The Bill also amends the tax treatment of employee share schemes (see Chapman Tripp's commentary).

Detail and frequency of investment income information disclosures

  • Payers of interest, dividends and Māori authority distributions will be required to disclose more information about the payments to IRD, generally by the 20th of the month following payment.
  • Payers of interest, dividends and taxable Māori authority distributions that are exempt from withholding will have the option to report either yearly (by 20 April) or monthly at their preference.

New information disclosure requirements for PIEs

  • Multi-rate PIEs that are not superannuation funds or retirement schemes will be required to disclose information by 15 May, rather than 31 May.
  • Multi-rate PIEs will be required to disclose their investors' prescribed investor rates on a six-monthly basis.

Encouraging the provision of IRD numbers

IRD is seeking to encourage taxpayers receiving investment income to disclose their IRD numbers to payers by:

  • increasing the non-declaration rate for interest to 45%, and
  • requiring new PIE investors to provide their IRD number to the PIE to invest in the PIE.

Mandatory electronic filing

Payers of investment income will be required to disclose investment income information electronically, unless the Commissioner grants them an exemption.

Improving the administration of RWT

RWT exemption certificates will be replaced by “RWT-exempt status" and an electronic register maintained by IRD recording taxpayers with that status. Payers of investment income will be able to access the register to confirm a recipient's exempt status. Other RWT changes include:

  • removing the year end withholding tax certificate requirement, unless the recipient has failed to disclose their IRD number, and
  • allowing payers of withholding tax to make certain corrections to their withholding tax positions in the following year without having to amend their returns, or pay penalties or interest.

Most of the proposed changes will come into force on 1 April 2020, although some apply earlier (such as the requirement for PIEs to report by 15 May, which will apply from 1 April 2018).  

The Bill will be referred to the Finance and Expenditure Committee following its first reading in Parliament.  

If you would like to understand how these changes could affect you, and/or would like to make a submission, please contact us.

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Related topics: Tax policy reform

Tax; Financial services regulation

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