Proposed tax changes to simplify securitisations in New Zealand

The Trustee Corporations Association of New Zealand has been engaging with New Zealand Inland Revenue to effectively extend the SPV ‘look through’ for income tax purposes that is available to certain financial institutions in respect of their securitisation and covered bond transactions to other corporate securitisations and other forms of securitisation assets (currently it only applies to RMBS assets).

It is now proposed that the Income Tax Act 2007 be amended to provide for this extension. The intended effect is to allow all income from the SPV to be included in the originator’s (or their group) tax return without the SPV having to be registered as a separate tax payer and without having to give extensive consideration as to whether the SPV is ‘tax neutral’ (e.g. whether SPV income can be vested in the beneficiary). It should also reduce some of the cost and complexity associated with establishing many of the typical NZ securitisation programmes.

Guardian Trust NZ has been working with several of the NZ law firms on a submission to the draft bill. However, the ASF believes that there would be some benefit in circulating the draft bill to NZ ASF members and will consider the merits in preparing a separate submission. It will be important to ensure that the extension will not result in any unintended consequences (the fact that the extension is elective may mitigate this) and that it operates as intended.

The draft Taxation (Annual Rates for 2018-2019, Modernising Tax Administration, and Remedial Matters) Bill and parliament information on this Bill are available here on the Inland Revenue website. A summary of the proposed changes can be found on page 107 of the bill commentary.  Bell Gully has also prepared a note on the changes (PDF) that is helpful.

The ASF would like to convene a small working group to discuss details for an ASF submission.  Please contact Robert Gallimore if you would like to be part of this group and we will organise a meeting shortly.  The last date for submissions is 13 August 2018 so we will need to make arrangements in short order.

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