ACCT 254 Pre-tutorial Preparation 2 Aaron Tan 98480137

1. Jane is aged 67. She has owned and operated a clothing manufacturing business in
Christchurch since 1998. Her son Nigel is now the managing director and effectively
controls and operates the business. Jane owns a home in Ilam as well as one in
Mooloolaba on the Australian Sunshine Coast.
Since retiring in 2015 and beginning to collect New Zealand superannuation, Jane has
spent six months of each year in Mooloolaba and six months in Christchurch.
Jane receives dividends on shares in companies in Australia and the United Kingdom.
She also has investments earning interest in New Zealand and Australia.
The New Zealand Superannuation and Retirement Income Act 2001 indicates a person is
not entitled to receive superannuation unless they are ordinarily resident in New Zealand.
The Commissioner of Inland Revenue in New Zealand has indicated that she intends to
assess Jane on all income earned by her in the last tax year.

REQUIRED:
Advise Jane if she has any grounds for challenging this (by way of the dispute resolution
process). Cite all relevant authorities. If there is more information you require from
Jane, outline what that is and why it is important.

The aim is to determine whether Jane is able to challenge the CoIR that she is a resident
of NZ and that she is entitled to receive the superannuation fund.
The rules that must be met in order to determine whether Jane is a residency can be
found in sections YD1(1) – (8),(11) of the ITA 2007. This basically states that an
individual is resident in NZ if:
The person has ‘a permanent place of abode’ in New Zealand (s. YD 1(2)). This
envisages that a person may have more than one permanent place of abode, one in
New Zealand and the other overseas. In such a case the relevant Double Tax
Agreement, if there is one, will apply.
OR
(b) The person is personally present in New Zealand for more than 183 days in total in
any 12-month period (s. YD 1(3). Residency commences from the first day of personal
presence (s YD 1(4)). This test is used to determine whether (and from what date) a
previously non-resident person coming to New Zealand has become a resident.
An individual will cease to be a New Zealand resident or is a non-resident if:
(a) A person is absent from New Zealand for more than 325 days in total over any 12-
month period (s. YD 1 (5). Non-residency commences on the first whole day of
personal absence (s. YD 1(6)).
AND
(b) Ceases to have a permanent place of abode in New Zealand.
Individuals present in New Zealand for part of a day are deemed to be personally present for
the whole of that day (s YD 1(8)).

A case that can be used to contrast the situation that Jane is in is Case F138 where a NZ
university lectuer went on study leave and leased his home and renting a home in
Cambridge, England. He was absent for almost a year and couldn’t rely on personal
presence test. It was held that considering all the factors, it was held that the lecturer
had a permanent place of residence since, he:
 His contract of employment was made in New Zealand
 Payment for his services was made in New Zealand
 Leave was granted in accordance with the terms of his New Zealand contract
 His intention was to return to New Zealand and he did so return
 He had continuing rights and duties in respect of his New Zealand employer
 He was obliged to return to New Zealand to continue his employment
 He was entitled to his New Zealand salary while he was absent
 He retained ownership of his New Zealand house, it was rented but the tenancy was
terminable with 30 days notice. He lived in it on his return
 He was absent for less than the required number of days
 He had temporary accommodation overseas.
Other cases would include Case Q55 and Case U17
Based on the Interpretation Statement IS 16/03 Tax Residence, the flowchart shows a
checklist whether one has would be counted as a tax resident in NZ since if Jane is a
tax resident, she would be entitled to the NZ superannuation.
2. You are employed by a local Christchurch accounting firm. Your immediate manager
has asked you to prepare some PowerPoint slides for a presentation on tax obligations
for a local organisation that deals with immigration issues.

REQUIRED:
a) Briefly discuss what a transitional resident is for tax purposes and who may qualify as
a transitional resident under the New Zealand tax laws.

Transitional residency is a migrant or returning NZder who is in the process of

becoming a NZ tax resident. This is where the migrant may be qualified for temporary
tax exemptions on most foreign secured income for a period of up to 4 years. This is
defined in HR 8(2).
The criteria to who may qualify as a transitional resident under NZ tax laws are:

1. Meet the requirements to become a New Zealand tax resident;

2. Not have been a New Zealand tax resident for the last 10 years;
3. Not previously used the transitional tax residency exemption; and,
4. Not be receiving any Working for Families Tax Credits.