Our previous post mentioned that the Government intends to abolish gift duty: http://www.taxblog.co.nz/?p=236
The Government announced on the 1st of November that it intends to repeal gift duty.
Gift Duty was originally introduced to ‘buttress’ estate duty so that that taxpayer could not avoid estate duty by simply making a gift whilst alive.
With estate duty repealed, the Government now considers that gift duty no longer fulfils its original purpose of protecting the estate duty base and has raises minimal revenue. Furthermore the Government considers the significant compliance costs, estimated at approximately $70 million per year that gift duty imposes on the private sector do not outweigh the benefit of retaining it.
The McLeod report published in 2003 looked at gift duty and its’ place in the NZ Tax system concluding that it should be repealed. However at the time the Government was not satisfied that sufficient safeguards were in place to protect creditors.
However Inland Revenue records show that of 430,000 IRD numbers for which gift statements were filed between 1 July 2001 and 28 May 2010, less than 0.003% have gone into bankruptcy, and where this does occur, there are opportunities to recover through the insolvency Act 2006.
The repeal will take effect from 1 October 2011.