On 3 March 2020, Supplementary Order Paper (SOP) No 453 was introduced into Parliament. This SOP proposes a number of remedial and technical amendments to the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill.

One of the proposed amendments is an amendment to to s LD 3 of the Income Tax Act 2007, which will provide  that donation tax credits and gift deductions will not be available for gifts to donee organisations where the gift is made by way of debt forgiveness.

This proposed legislative change was announced by the Minister of Revenue, the Hon Stuart Nash, on 17 December 2019, following the decision by the Court of Appeal in C of IR v Roberts [2019] NZCA 654.

The Court of Appeal had found that donation tax credits were available for gifts made by way of debt forgiveness.

The Minister of Revenue was of the view that this was contrary to policy, the intent of which was that donation tax credit and gift deductions were to be limited to gifts of cash or cash equivalents such as payments made by bank transfers or credit card and it was not intended that donation tax credits or gift deductions should be available for gifts in kind or gifts made by way of debt forgiveness.

The proposed amendment will apply retrospectively from 1 April 2008.  However, a savings provision will apply to taxpayers who have already taken a position in reliance on the current legislation and filed a return or donation tax credit claim before 17 December 2019 (the date of the announcement by the Minister of Revenue).

For further background to this proposed amendment see Is debt forgiveness on account of a loan to a charity a gift that allows a tax credit?

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