History of Gift Duties in New Zealand

Gift duty was originally instated in 1885 as a method of discouraging taxpayers from making excessive gifts of property as a method of avoiding estate duties. On October 1st 2011 gift duties were abolished from the New Zealand tax system, following a government review which found that the tax was an antiquated measure that the system no longer served its originally intended purpose.

Gift duties were paid by any individual who makes gifts valued at over NZD 27 000 in any 12 month period. Individuals who made gifts in excess of NZD 12 000 were required to file the Gift statement with the IRD within 3 months of the gifting exceeding NZD 12 000.

Gift duties were levied at a rate of:

  • 5 percent on all gifting with a cumulative value between NZD 27 001 and NZD 36 000
  • 10 percent (plus a payment of NZD 450) on all gifting with a cumulative value between NZD 36 001 and NZD 54 000
  • 20 perent (plus a payment of NZD 2 250) on all gifting with a cumulative value between NZD 54 001 and NZD 72 000
  • 20 percent (plus a payment of NZD 5 850) on all gifting with a cumulative exceeding NZD 72 000

Following a series of reviews, the government found that this type of tax was no longer effective at fulfilling its original purposes of preventing tax evasion or raising significant tax revenues, and calls were raised for the system to be dropped entirely.

The government’s assessment of the gift duty system showed that:

  • The compliance cost for gift duties was very high, with taxpayers spending nearly NZD 70 million per year to meet their obligations and filing requirements.
  • The tax raised comparatively little revenue, only leading to a collection of NZD 1 million per year.
  • The protection from tax evasion offered by the tax has been incidental.
  • The Income Tax Act 2007 already implemented several provisions designed to ensure the integrity of arrangements involving gifting.

The government confirmed its intention to abolish gift duties in November 2010. The legislation that would remove gift duties was passed through Parliament on 17th August 2011 and received Royal Assent on the 30th of August 2011.

Despite gift duties no longer applying for gifts, all taxpayers are still required to maintain all records when executing any transaction involving gifting.

April 13th, 2012