Clarity needed in land disposal income tax laws

The New Zealand Law Society has recommended that changes to income tax law relating to land acquired for disposal should be clarified.

Commenting on a draft Inland Revenue Department Question We’ve Been Asked: Income Tax – Land Acquired for a Purpose or With an Intention of Disposal the Law Society said it would be helpful to clarify the meaning of the word “mainly” which is used in both exclusion provisions.

Under the proposed law, a person who acquired a business or residential property who “mainly” used that property as a family residence or to carry on a substantial business would not have to pay additional taxes on the disposal of that property.

The Law Society said it was not clear whether “mainly” related to the percentage of time the land had been used as a residence or business – throughout the entire period of ownership, or if “mainly” means that where the land had one or more use or purpose, the predominant use or purpose was that of residence or business.

NZLS suggests amendment to draft ACC legal aid guideline

It is inconsistent with the principle of access to justice for the District Court to proceed to hear an ACC appeal when the appellant’s legal aid application has not been determined, the New Zealand Law Society says.

The Law Society has released its comments on the Draft Guidelines to Practice and Procedure for Accident Compensation Appeals in the District Court.

It notes that s 2.2 of the draft guidelines say “a hearing will not be delayed solely on the ground that a legal aid application has not been determined”.

“The availability of legal aid funding is often an issue in ACC proceedings, and it would be appropriate for the delays that can be involved to be recognised by the court,” the Law Society says.

Recommending that s 2.2 be amended, the Law Society says that if that is not done, it should be made clear whether or not legal aid delays will ever be accepted as a legitimate reason for filing submissions late.

“That may be what ‘solely’ indicates, but more clarity would be helpful,” it says.

Law Society supports Youth Justice eligibility extension

The Law Society has written to the Social Development and Justice Ministers, welcoming the Government’s announcement that Cabinet has agreed to investigate extending the upper age of the youth justice jurisdiction to include 17-year-olds.

Social Development Minister Anne Tolley says Cabinet has agreed to major state care reforms to “improve the long-term life outcomes for New Zealand’s most vulnerable population”.

Part of the reforms include investigation into raising the youth justice age to include 17-year-olds. Currently, 16 is the upper limit of the youth justice jurisdiction.

The New Zealand Law Society welcomes the announcement. Extending the youth justice jurisdiction would meet New Zealand’s obligations under the United Nations Convention on the Rights of the Child.

The Law Society has previously made submissions recommending that a “child” be defined as a person under the age of 18 years.

“Recent research into teenagers’ cognitive development has allowed greater understanding of how their decision-making capacity matures,” Vicki Thorpe, the convenor of the Law Society’s Youth Justice Committee, says.

“Managing 17-year-olds through the Youth Court processes presents better opportunities to get to the bottom of their offending and prevent them re-offending.

“The Youth Court is not a soft option – and cases of serious offending are escalated to adult courts.”

Ms Tolley says a new “child-centred” system to replace Child Youth and Family will be in place before April 2017.

Gold bullion tax law interpretation inconsistent, NZLS says

It cannot always be assumed that people who purchase gold bullion do so for the purpose of disposal, the New Zealand Law Society says.

Commenting on the Inland Revenue Department’s draft Question We’ve Been Asked: PUB00227: Income Tax – Are proceeds from the sale of gold income? (the QWBA) the Law Society says it disagrees with the QWBA’s conclusion that gold bullion bought for investment purposes “will necessarily be acquired for the purpose of disposal”.

That conclusion is inconsistent with other parts of the QWBA, the Law Society observes.

It also says gold bullion is sometimes acquired for purposes other than disposal.

The QWBA responds to issues encountered by IRD and taxpayers relating to whether or when there will be tax consequences from the sale of gold bullion investments.

Sale of bullion acquired for the purpose of disposal can attract higher tax rates than disposal of gold that was proven to be acquired for other purposes.

“Taxpayers acquire assets for a variety of different reasons,” the Law Society says.

“In some cases taxpayers will acquire gold with the hope and intention of never disposing of it, but to set aside the gold as a store of value outside of the monetary system, as a security measure in case of government instability affecting the banking sector and the availability of cash (such as the events affecting Greece), or a global economic crisis whereby precious metals such as gold would provide a proven source of wealth.

“Not all purchase decisions are reached on a rational basis and in some cases a taxpayer may not have fully turned their mind to the question of why they have acquired a particular asset,” the Law Society says.

Lawyers’ employees exempt from immigration adviser licensing requirements

A potential amendment to the Immigration Advisers Licensing Act 2007 (IALA) to ensure that lawyers’ employees are clearly exempt from the Act’s licensing requirements would be welcomed by the New Zealand Law Society.

Practising lawyers are exempt from the IALA’s licensing requirements, under s 11(e).

However, there has been some confusion about the scope of the exemption – namely, whether it also applies to the employees of a lawyer, law firm, or incorporated law firm, the Law Society says.

Under the existing regulatory framework, lawyers’ employees must be supervised and can be subject to disciplinary action for all work they do and advice they give in assisting their employer.

This ensures the protection of consumers where lawyers’ employees assist in providing immigration services, the Law Society says.

On that basis, it recommends the scope of the exemption for employees should be clearly stated in an amendment to the IALA, to explicitly provide that: “an employee of a lawyer, law firm or incorporated law firm may provide immigration services and advice to their employer’s client”.

The Law Society has also commented on a draft “Best Practice” document for immigration advisers and Immigration New Zealand (INZ) staff about how employees of lawyers may interact with immigration applicants and INZ.

Recent submissions

The Law Society recently filed submissions on:

• PUB00227 Income tax – are proceeds from the sale of gold income?
• PUB00260 Income tax – land acquired for a purpose or with an intention of disposal;
• Next steps for freshwater management: consultation;
• Accident Compensation Appeals: draft Practice and Procedure Guidelines – consultation;
• Geographical Indications (Wine and Spirits) Registration Amendment Bill; and
• Substance Addiction (Compulsory Assessment and Treatment) Bill.