LAND AND INCOME TAX.

Digger (Invercargill RSA), Issue 38, 3 December 1920, Page 5

LAND AND INCOME TAX.

NEW LEGISLATION MADE CLEAR. AN INTERESTING STATEMENT. The following is an interesting official summary of the principal changes made _by "The Land and Income Tax Amendment Act, 1920." The Act, comes into operation on April 1, 1921. It will not, . therefore, affect the assessments now being made for the current year based on the returns made as at March 31 last. but will operate for the following year's land tax. • The exemption which may be allowed in respect of mortgages is increased from £1500 'to £4000. T'ne limit of unimproved value which is allowable is also increased from £6000 to £8000. An exemption up to ihe amount of the mortgages not exceeding £4000 is allowed in full in cases where the unimproved value does not exceed £6000, after which it decreases £2 for every*.£l of excess until it disappears at £8000. . The maximum exemption allowed in cases of hardship, as defined by the Act, is increased from £2000 to £2500, and the limit of income in such cases from £200 to £300. In the cases of widows with dependent children the maximum hardship exemption is increased from £3500 to £4000. An entirely new provision is inserted specially taxing unimproved land. Land which has been held for three years on -which improvements of a value equal to £1 per acre, or equal to one-third of the unimproved value, | whichever is the less, have not been effected, is to be subjected to a tax 50 per cent. gi'eater than other land, unless. in the opinion of the commissioner. it could not reasonably have been improved to the extent stated. Further, no deduction by way of special exemption is to be allowed Tn respect of such unimproved land. The provision does not apply to land in a borough, and will not come into force for : three years— i.e., until April 1, 1923. The . provision applies separately to all the lands of a taxpayer f orming one continuous area - 01 ®arated at their nearest points by a distance not exceeding three miles in a straight line. Provision is made to prevent evasion of tax by companies by the formation or acquisition of subsidiary companies. It will affect comDanies in which not less than half of the paid-up capital in one company is held by or on behalf of share/kolders in another company. The amended rate of tax is as follows Where the tax. able balance of the unimproved value, less : exemptions, does not exceed £1000. the rate is ld in the £1, plus a super tax of t ^ ^-3 per cent. Where the taxable balance exceeds £1000 the rate is ld in the £1, increased by l-2000th (sic) part of ld for Ievery poUnd in excess of £1000, with a Sgimum of 7s 1 7-20d. Tnis maximum wiU be reached at £138,000. A super tax -v33 1-3 per cent. is added in all cases. . ,0 maximum rate under the new provision is approximately the same as the •nperseded maximum rate (10 7-15d and

10^d respectively), but is reached at £138, 000 instead of £193,000. Income Tax. — No provision is made for the continuation of the special war tax. There wouid be only one assessment. A person who had been living out of New Zealand during the income year on account of his or her health or tne health oi the husband or wife or of any child of the tax. payer, and whose assessable income does not exceed £300, is not to be deemed to be an absentee. He will thus be entitled to the £300 exemption allowed tu a, resident taxpayer, and will, therefore, be free irom income tax. The exemption for children is increased from £25 to £50, and the limit of age from 16 to 18. The limit of exemption in respect of life insurance premiums and superannuation contributions is increased to an amount not exceeding in the aggregate 15 per cent. of the earned income of the taxpayer, or in cases where the total income of the taxpayer from all sources does not exceed £2000, then 15 per cent. of that income. A taxpayer whose income is £2000 or under will thus be entitled to the aggregate deduction up to 15 per cent., wnether his income is earned or unearned. An entirely new special exemption of £50 is granted in respect of contributions to the support of the widowed mother of the taxpayer. The exemption may be divided among two or more taxpayers, but the total exemption allowable in respect of the same person to all the contrifcutors is not to exceed £50. Thus, if, say, two sons contribute equally to the support of their widowed mother, an exemption will be allowed each of them of the amount of their contributions not exceeding £25. This exemption is allowed only against earned income. The income of the Public Trustee is to be subject to tax. The total exemption previously granted to cheese factory and butter factory companies will be subject to tax. It is provided, however, that a deduction is to be allowed of the joint tax paid or payable by the company during the income year to milk suppliers, in so far as such amount is apportioned among the suppliers. A distinction is made between earned and unearned a income. The tax payable in respect of the former is reducible 10 per cent., but if the earned income of a taxpayer exceeds £2000 the reduction shall be made only in respect of £2o00. All special exemptions in respect of children's life insurance, etc., with the exception of the 5 per cent. on unimproved value of land allowances, are deductible first from earned income and the balance, if any, from unearned income. Earned income includes income from employment and al' other income derived from any .source by a taxpayer by reason of his personal exertion. It is provided that when assets upon which depreciation has been allowed are sold at a price in excess of the value as written down by the departmental allbwance, that the commissioner may revise the allowance previously made and recover tax accordingly. An alteration is made with regard to income derived from shipping by taxpayers resident in iNew Zealand. Such income derived out of New Zealand the tax was previously exempt. This exemption has been withdrawri. Of course, under the general provision of the prTncipal Act, if the taxpayer is resident in New Zealand any income derived out of New Zealand which has borne 'income tax in any part of the British dominions will be exempt. Local and public authorities issuing debentures are brought into line with companies, and are liable as agents for all their debenture-holders in respect of the interest derived by them. The rate is fixed at 2s 6d in the £1. The tax will be deductible from the interest coupons, when these are presented for payment, but provision will be made to enable debentureholders, whose income is under £300, upon making a declaration to that effect, to receive the interest without deduction of the tax. Provision will also be made where the debenture stock is inscribed to enable debenture-holders to include the interest in their individual returns instead of having the interest deducted. The rate payable by companies, as agents for their debenture-holders, will be 3s in the £. Provision is made for a refund to any debenture-holder whose total income from all sources is of such amount as will carry a rate of less than 2s 6d or 3s in the — i, as the case may be, where debentures are issued subject to a floating rate oi interest. The interest paid thereon will be treated as part of the income of the company, and not of the debenture-holder. The penalties for late payment are reduced from 10 per cent. to 12£ per cent. and 15 per cent. to 5 per cent., per cent. and 8 per cent. respectively, Provision is made to prevent evasion of income tax by the dividing up of companies, or the acquisition and retention of small companies by larger companies, The provisions apply where two or more companies are under single control, or where

not less than half of the paid-up capital in one company is held by or on behalf of the shareholders of another company. The rat.es of income tax under the amending Act are as follow : — Where the taxable balance, i.e., the assessable income, less exemptions, does not exceed £400 the rate shall be ls in the £ (plus asuper-taxof 20 per cent.). Where the taxable balance exceeds £400, but does not exceed £6000, the rate is ls in the £1, increased by l-100th for each £1 in excess of £400 (plus a super-tax of 20 per cent.). Where the taxable balance exceeds £6000, the rate shall be 5s 8d in the £1, increased by l-200d (sic) for each £1 in excess of £6000, with a minimum of 7s 4d in the £1 (plus a super-tax of 20 per cent.). The minimum rate is thus 8s 9 3-5d, and i3 reached at £1000, instead of 7s 6d reached at £6400. The tax on earned income is reducible as previously stated.