NEW TAX LAW

Waikato Times, Volume 125, Issue 20923, 30 September 1939, Page 13

NEW TAX LAW

INCOME PROVISIONS INSURANCE PREMIUM LIMIT RETURN FOR HUSBAND & WIFE (By Telegraph.—Special to Times) WELLINGTON, Friday The Land and Income Tax Amendment Bill, which was introduced by Governor-General’s Message in the House of Representatives today, makes important changes in taxation. The Bill will apply to income being derived during the current income year. Two of the main provisions are those limiting the deduction from taxable income for insurance and superannuation purposes to £l5O, and allowing land tax levied on land used in the production of assessable income to be claimed as a deduction for income tax purposes. Exemption from the payment of income tax on service pay is given to members of the New Zealand forces serving outside New Zealand during the war, and the soldier’s pay does not operate to increase the rate of tax on the balance of his income. Deduction For Employer An employer who pays salary to an employee who is serving with the forces is entitled to claim a reduction from his assessable income in respect of the amount paid to the employee, with a limitation of £4 a week. The Bill removes from unincorporated bodies the special personal exemption of £2OO allowed to individuals, which they are at present granted. To relieve hardship on certain persons absent from the Dominion for health reasons, they are granted an exemption of £2OO whether or not their incomes exceed that sum. A pro rata exemption up to £2OO, based on the period in New Zealand, is granted to persons such as shearers, slaughtermen or non-resi-dent traders who come from abroad. Previously there was no such exemption. A special exemption of £SO is also granted to absentees. The exemption of £SO which has been granted in the past to a childless widower in respect of a housekeeper is removed, but the Bill confers the right to an exemption on a divorced person with dependent children. Where death removes a dependent, a taxpayer is granted full exemption for that year instead of a portion only. I The granting of a special exemption in respect of contributions toward the support of any dependent relative is to be permitted, except, in cases where the relative is a beneficiary under the Social Security Act. Life Insurance Exemption One of the most important clauses of the Bill is that limiting the sum which may be claimed as special exemption on account of life insurance premiums, superannuation and National Provident Fund contributions to £l5O a year, or 15 per cent of the assessable income, whichever is the less. Authority is given for the aggregation of the incomes of husband and wife for taxation purposes. A lengthy clause provides for the assessment of the incomes of a husband and wife living together at the rate of tax prescribed for the combined figure, except where the income of one is less than £SO. Where separate assessments are made the personal exemption of £250 allowable to them both is divided between them, in accordance with the respective amounts of their assessable income. Other personal exemptions, such as those for dependent children, will be apportioned as the Commissioner of Taxes thinks fit. Income tax is to be levied on all income derived from the use or occupation of land, whether the unimproved value is less than £3OOO or not. Legal Expenses On Mortgage A taxpayer who incurs legal expenses in acquiring a lease or in raising money on mortgage will be able to claim a deduction for those expenses if the property or money is used in the production of his assessable income. Any increase or decrease in the value of trading stock is to be taken into account when determining the taxpayer’s assessable income. When a business is realised the whole of the purchase moneys received is to be taken into account in computing assessable income. Farmers are to be empowered to fix a standard value for their livestock. This means that their assessable income will be determined by reference to sales of stock and purchases of stock during the year and not to any rise or fall in the value of stock held during that period. It is provided that income received from a source elsewhere within the Empire and on which tax has been paid in that country is to be used to affect the rate in the same way as are dividends from New Zealand companies. At present income received by a taxpayer in New Zealand from another Empire country is not taxable in the Dominion if it has borne tax in the country of origin, nor is this income used to affect the rate of tax payable. Another clause amends the provisions enabling losses to be carried forward by providing that a change in shareholdings consequent on the death of a principal shareholder is not to be taken into account. Under the present law a company which suffers a loss in one income year is precluded from carrying that loss forward and setting it off against profits in a subsequent year if the share holdings in the company have meanwhile changed by more than 25 per cent. Cases have arisen where this has happened because of the death of one of the principal shareholders. Position of Chain Companies The section in the principal Act by which two correlated companies can be assessed as one company is amended to meet the position of chain companies and there is a new clause defining the circumstances in which shareholders are deemed to be in control of a company. The definition of dividends is extended to bring it into line with that contained in the Social Security Act. There is a clause designed to assess principal shareholders in private companies as though they were trading in partnership. At present it is possible for persons who are in effect