Working with the 2009 Associated Persons Rules

For help with tax matters contact Sybrand van Schalkwyk
(379 4383)

The Associated Persons rules in the Income Tax Act 2007 were amended in 2009 with a view to broadening and rationalising the rules.

According to the Policy Advice Division of Inland Revenue, the changes address a number of weaknesses in the previous definitions that posed a risk to the tax base with significant base maintenance implications in areas such as the taxation of land sales, dividends and fringe benefits.

In IRD's view, the main changes:

deal with the weaknesses in the previous definitions in relation to trusts. In particular, there are new tests focusing on a trust’s settlor (that is, the person who provides the trust property);
provide more robust rules aggregating the interests of associates to prevent the tests relating to companies being circumvented by the fragmentation of interests among close associates; and
implement a tripartite test associating two persons if they are each associated with the same third person, thereby making the associated persons tests as a whole more difficult to circumvent.

Parry Field has advised a number of clients on the implications of the 2009 Associated Persons rules. The following presentation gives a brief summary of some of the key implications of the changes:

Parry Field Lawyers provide legal advice on a range of tax matters and are able to assist you with any PIE tax questions or income tax and GST questions that you might have. Please contact Sybrand at Parry Field's Christchurch office (379 4383) for help with tax matters.

Please note that this article is not intended to be legal or investment advice, and is only intended as a general guide. Reliance should not be placed on this article where any specific issues are concerned.