Thursday, December 9, 2010
New Zealand Revenue Minister Peter Dunne announced on December 8 that following discussions with the New Zealand Institute of Chartered Accountants (NZICA), legislation regarding the tax treatment of resident withholding tax on trusts’ interest income is to be amended.
Dunne explained that the issue related to Inland Revenue’s analysis that resident withholding tax (RWT) deducted from gross interest paid to a trust forms part of the gross interest paid to a beneficiary and had to be distributed with the interest. After consideration, officials have recommended that the law be changed.
“I have agreed to this recommendation. NZICA and Inland Revenue have a long history of working together to iron out aspects of tax legislation and policy. Such cooperation contributes to better tax policy and the integrity of the tax system,” said Dunne.
The amendment would apply to RWT deductions from interest income derived by trustees, and allow the trustees to allocate the resultant RWT credits over beneficiaries’ and trustees’ income as they believe is appropriate.
“The amendment will be made next year but will generally apply from the tax year commencing April 1, 2010. However, it will be retrospective to the extent that trusts have adopted this position previously,” Dunne advised.