Govt sends gift tax packing
Revenue Minister Peter Dunne has confirmed the government’s intention to abolish gift duty – one of the country’s oldest taxes.
Under the existing law, gifts of up to a total $27,000 a year are exempt but anything above that is taxed. Gifts statements must be filed for all gifts valued above $12,000.
Earlier this year, the government began a review of the gift duty threshold – last updated in 1984 – but, as Mr Dunne told media at a midday press conference, it soon became clear that the rationale for keeping gift duty no longer existed.
Gift duty is estimated to cost $435,000 to directly administer each income year and has generated about $1.5m of revenue annually in recent year.
The argument against scrapping the tax has been based not so much on the revenue it generates, but on its role as a bulwark against avoidance of other taxes.
For example, gift duty slows down the transfer of assets to trusts or to children to, at the fastest, $54,000 a year if a couple is doing the gifting.
Mr Dunne – whose United Future Party has had a policy of abolishing the gift duty for the past two elections – said that the government was satisfied that existing legislation “more than covered” concerns about creditor protection and eligibility for social assistance.
“This tax has really outlived its usefulness and we’ve made the call to proceed with its abolition”, he told media.
“To some extent, gift duty also becomes irrelevant now that we’ve aligned the trust and personal tax rates, so a lot of those arguments about shifting those incomes don’t apply anymore.”
Officials have estimated that New Zealanders spend $70m each year complying with gift duty requirements, calculated by multiplying the average $285 + GST practitioner fees for drawing up a deed of forgiveness and completing a gift statement by the 225,000 gift statements filed per year.
Mr Dunne said that no adverse effects had been seen since Australia abolished its gift duty several years ago.
The abolition of gift duty will be included in the tax bill legislation to be introduced in November 2010 and will be effective from 1 October 2011.
Gift duty was originally introduced in 1882 to protect estate duty (abolished in 1992) by discouraging the gifting of assets before death, and to raise revenue.