Proposed new section 25D in clause 212 sets out the information that payers must provide in relation to joint accounts. Officials recommend that the Bill is amended to provide that information on the beneficiaries of a trust, shareholders of a company, and partners in a partnership that are required to file a joint return (a partnership”), is not required. The “formal rationale behind obtaining more frequent information is to enable pre-population of tax returns and to allow Inland Revenue to adjust tax and social policy payments. Income earned by a trust/company is generally not income to the beneficiaries/shareholders until distributed, which may not occur until sometime later. It would therefore be contrary to this rationale to obtain the information at the point where income was paid to the trust or company. For look-through companies (LTCs), and partnerships that are required to file a partnership return, there is little benefit in receiving this information to enable pre-population into the LTC/partnership tax return, given the shareholders/partners will then need to file their own returns and include the income relative to their respective shares. Information on the partners in a partnership will be required it is held by the payer, however not for formal partnerships as mentioned above. Recommendation That the submission be accepted. Joint investments splitting investment income – Submission (Chartered Accountants Australia and New Zealand, Financial Services Council) Joint owner account information should not be automatically assessed on the assumption of an equal split as this will often be incorrect. Joint owners should have the option of determining how the income is apportioned, however if the proposal to pre-populate the income on an equal basis proceeds, the Commissioner should be required to alert the taxpayer that jointly owned investment income has been included in their tax record based on the assumption that it has been derived in equal shares. (Chartered Accountants Australia and New Zealand) The Bill should be amended to provide clarity in relation to joint owners, including the basis of splitting by the Commissioner. (Financial Services Council) Inland Revenue should publish guidance on how it will investment income between joint account holders. (Financial Services Council, AMP) Comment Officials recognise that pre-populating income on the basis of equal shares may not be correct in all instances. However, by not pre-populating the information there is a risk that the income will not be returned. Whilst tax would have been withheld on that income, not including it on the taxpayers’ tax information may affect the tax rate applicable to the taxpayers’ other sources of income.
Proposed new section 25D in clause 212 sets out the information that payers must provide in relation to joint accounts. Officials recommend that the Bill is amended to provide that information on the beneficiaries of a trust, shareholders of a company, and partners in a partnership that are required to file a joint return (a “formal partnership”), is not required. The rationale behind obtaining more frequent information is to enable pre-population of tax returns and to allow Inland Revenue to adjust tax and social policy payments. Income earned by a trust/company is generally not income to the beneficiaries/shareholders until distributed, which may not occur until sometime later. It would therefore be contrary to this rationale to obtain the information at the point where income was paid to the trust or company. For look-through companies (LTCs), and partnerships that are required to file a partnership return, there is little benefit in receiving this information to enable pre-population into the LTC/partnership tax return, given the shareholders/partners will then need to file their own returns and include the income relative to their respective shares. Information on the partners in a partnership will be required it is held by the payer, however not for formal partnerships as mentioned above. Recommendation That the submission be accepted. Joint investments – splitting investment income Submission (Chartered Accountants Australia and New Zealand, Financial Services Council) Joint owner account information should not be automatically assessed on the assumption of an equal split as this will often be incorrect. Joint owners should have the option of determining how the income is apportioned, however if the proposal to pre-populate the income on an equal basis proceeds, the Commissioner should be required to alert the taxpayer that jointly owned investment income has been included in their tax record based on the assumption that it has been derived in equal shares. (Chartered Accountants Australia and New Zealand) The Bill should be amended to provide clarity in relation to joint owners, including the basis of splitting by the Commissioner. (Financial Services Council) Inland Revenue should publish guidance on how it will investment income between joint account holders. (Financial Services Council, AMP) Comment Officials recognise that pre-populating income on the basis of equal shares may not be correct in all instances. However, by not pre-populating the information there is a risk that the income will not be returned. Whilst tax would have been withheld on that income, not including it on the taxpayers’ tax information may affect the tax rate applicable to the taxpayers’ other sources of income.