Government could include a PIE surprise in a planned August ‘omnibus’ tax bill, according to DLA Piper partner, David Johnston.
Johnston told a DLA Piper industry gathering last week that officials were mulling changes to the portfolio investment entity (PIE) tax settings that would be included along with any KiwiSaver amendments in the August legislation.
Despite some speculation that the maximum PIE prescribed investor rate (PIR) of 28 per cent might rise following the recent trust tax increase, he said cuts were more likely.
The PIE system has always offered tax relief for those in the top income brackets with the differential between the highest PIR and marginal rates blowing out to 11 per cent in the 2021/22 fiscal year.
Prior to the increase in the top marginal rate from 33 per cent to 39 per cent put in place by the-then Labour government, the gap between PIE and regular income tax rates for high income-earners stood at just 5 per cent.
The National-led government also retained Labour-created increases in the trust tax rate (again, rising to 39 per cent from the previous 33 per cent) that came into force this April – making PIEs more attractive investments for trusts.
While the PIE regime still offers some relief for those on the mid-tier marginal rates (33 and 30 per cent), lower-bracket PIRs and income tax rates are currently set at the same level.
Johnston said government had also deferred the alignment of the new marginal tax brackets, set to start on July 31, and PIRs until April 1 next year to ease administrative issues for fund managers and others.
If adopted in the omnibus bill, any PIE and KiwiSaver changes would top the charts but other investment industry tax favourites are also knocking around in officialdom, he said, including the foreign investment fund (FIF) and fair dividend rate (FDR) rules and the sleeper hit, GST on unit trust fees.
The GST and fund fees issue has been in rotation since at least 2013 and is currently “parked with Crown Law”, Johnston said.
Financial services legal teams have plenty of other work stacked up, too, DLA Piper lawyers told the gathering, including fluid COFI rules, fund manager liquidity guidance, climate-reporting and the new ‘outcomes-based’ regulatory style.
