Tax Watch, Edition 6, November 2017

Tax changes on the horizon under new Government

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“Let’s do this.” 

Labour’s election slogan is now reality. New Prime Minister Jacinda Ardern has turned New Zealand politics on its head. The new Government has put in place a Coalition Agreement between Labour and New Zealand First, along with a Confidence and Supply Agreement between Labour and the Green Party.

Specific details of tax issues have not yet been released, leaving plenty of room for manoeuvre and leading us to place continued weight on Labour's 100-day plan as a guide to immediate action. The top tax priorities look to be Labour’s Families Package and the establishment of a Tax Working Group to consider reform of New Zealand’s tax system.

Tax Working Group

A strong Tax Working Group (“TWG”) could challenge existing frameworks and set out a pathway for reform. Whether the TWG is ultimately successful may depend on whether it is provided with the ability to “think the unthinkable”. Read more here.

Labour’s 100-day plan and beyond

Our prediction of other possible tax measures during the Government’s term include:

NZ IFRS 15 Revenue from Contracts with Customers – are you prepared for impacts on your future tax reporting?

Applicable for periods beginning on or after 1 January 2018 (with various early adoption methods available), this new standard affects contracts with customers to provide goods or services in the ordinary course of your business.

Your organisation will need to identify all affected contracts, related performance obligations and associated transaction prices to support the future profile of your revenue recognition.

For New Zealand tax purposes, the legislative and case law framework around derivation of income are not currently expected to change. Consideration of each contract type and its accounting recognition profile will therefore need to be considered from a tax perspective. Read more here.