Devastating Effect Of N.Z. Death Duties

Press, Volume C, Issue 29435, 10 February 1961, Page 7

Devastating Effect Of N.Z. Death Duties

tnv a BAaaisrzAj Death duties, in New Zealand, take two forms, estate duty and gift duty.

Estate duty is payable to the Crown on the final balance of the estate of everyone after his death at the rate of duty from time to time determined by Parliament. Gift duty is payable by living persons on any disposition of property by them for which the recipient has not paid the true value.

Until January 1, 1910, when the Death Duties Act, 1909, came into force, death duties in this country were comparatively light; and gift duty was payable only where gifts were made in written form, i.e., by deed of gift, and not, as now, on gifts made by word of mouth as well.

After that statute came into operation, the whole position was changed, and the basis for the present imposition of estate duty was then formulated.

Under the new form of death-duty imposition three kinds of property became chargeable with estate duty as a contribution to the State’s funds: (a) all property owned by a deceased person at the date of his death; (b) the value of all gifts made. by a person within three years of his death, apart from gifts which, in the eyes of the law, are “charitable” gifts; and (c) other classes of gifts made longer than three years preceding the deceased’s death, or within the three-year period, which were made with a reservation in favour of the giver or accompanied by a benefit to him for his lifetime (for example, a gift of a farming property to the giver’s family, reserving to the giver a right to retain full management of it and to be paid a manager’s salary for the remainder of his life). Gift Duty After January 1, 1010, the scope pf property on which gift duty became payable, at the time of the gift, was greatly extended. Thus gift duty may be payable in the case of a sale of a property, if the seller has agreed to receive something less than its true value; the difference between the true value and the sale price then becomes liable for gift duty. Charitable gifts, which are "charitable” according to the strict legal definition of that word, are in general exempt from gift duty. But, if the giver has attached a condition to his gift, gift duty will be payable on what is otherwise a charitable gift (for example, the gift of a property to a charitable institution on condition that the giver receives from it an annuity as long as he shall live).

The total amount of noncharitable gifts which a person may make within any 12month period without incurring gift duty is £5OO, an amount which was fixed when had greater value ‘than it has today. The giver of any gift over £5OO must, withih one month of making it, file a gift statement with the Duties Division of the Inland Revenue Department. He is liable to conviction if he does not do this, and to a fine of up to £2 a day for every day in wtych he delays, with a maximum fine of £lOO. Pre-Payment Payment of gift duty in the giver’s lifetime is tantamount to a pre-payment of part of the estate duty to which his estate will be subject on his death. As gifts made within three years of his death come into the computation of the final dutiable balance of his estate for estate duty (with some exceptions), the amount the deceased paid in gift duty during the last three years of his life is deductible from the final total amount of estate duty. Estate duty, according to the rates of duty fdr the time being in operation, is assessed on the final balance of a deceased person’s estate, ascertained by adding up the total assets owned by him on the day of his death, and taking from that total all debts incurred for money or ■ money’s worth during his lifetime and owing at his death, and the amount of reasonable funeral expenses. (It should be noted that there is no permissible deduction for the costs of the administration of commission and the like on the realisation of the estate, or for the estate duty which the estate has to pay).

(Exemptions, as where a wife succeeds to a husband's estate, are not considered in this article).

All the estate duty payable on a deceased person's estate must be paid to the Inland Revenue Department in cash before the expiration of six months after the death of the deceased. If it is not, then penal rates of duty are added to the estate duty demand. In any case the estate is held in abeyance till the whole of the duty is satisfied. As no allowance is made in respect of agricultural land, as in the United Kingdom, and no provision is made in respect of businesses or the payment of duty by instalments, as is the case there, New Zealand legislation compels, in many cases, the sacrifice of incomeproducing assets to meet the inexorable impact of “payment in six months, or else.” Furthermore, while many a husband by his will makes provision for the widow to receive income from his estate during the remaining years of her life, payment of the whole of the estate duty means that, the capital assets on which that annuity was anticipated to be paid are sacrificed to meet the demands of the Inland Revenue Department, which itself has no option under the legislation to grant relief, as by the postponement of payment of some of the duty till the widow’s death. Rates Of Duty The present rates of duty, imposed in legislation in 1958, are the highest anywhere in British countries. That they are of a confiscatory nature is shown from the following table of current estate duty rates:

Thls is the lint ef four articles on death duties in New Zealand, each written by an expert on the particular topic with which he deals. The second article, in which an estates consultant will discuss the expropriatory result of New Zealand's present death duties legislation. will appear soon.

Scale of Rates of Estate Duty Fmal Bslaws £1,001- £2,000 4 per eent of the exeess o the final balance over £1,000. £2,001- £3,000 £40 plus 5 pe eent of the excess of the final ha 1 over £2,000. £3,001- £4,000 £90 plus 7 pe eent ol the excess of he final ever £3,000. £4,001- £5,000 £160 plus 9,per eent o the excess of the final ha over £4,000. £5,001- £6,000 £250- plus 11 *er cent f the excess of the final balance over £5.000. £6,001- £7,000 £360 plus 13 x>r eent >f the exeess of the final balance over £6,000. £7,001- £8,000 £490 plus 15 per eent f the excess of the final balance over £7.000. £8,001- £9,000 £640 plus 17 »er eent f the excess of th* final balance over £8.000. £9,001-£10,000 £810 plus 19 >er eent >f the excess of the final over £9,000. £10,001-£l 1,000 £1,000 plus 21 per eent of the exeess of the find balance over £10,000. £11,001-£12,000 £1,210 plus 23 per eent of the excess ol final balance over £11,000. £12,OO1-£13,OOO £1,440 plus 25 per eent of the exeess of the final balance over £12,000. £1S,001-£14.000 £1,690 plus 27 per eent of the excess ol the final balance over £13,000. £14,001-£15,000 £1,960 plus 29 per eent of the exeess of the final balance over £14,000. £15,001~£16,000 £2,250 plus 31 per eent of the excess of the Anal balance over £15.000. £16,001-£17,000 £2,560 plus 33 per eent of the excess of the final over £16,000. £17,001-£18,000 £2,890 plus 35 per eent of the exeess of the final balance over £17,000. £18,001-£19,000 £3,240 plus 37 per cent of the excess of the final balance over £18,000. Cl 9,001-£20,000 £3,610 plus 39 per eent of the excess of the final balance over £19,000. £20,001-£21,000 £4,000 plus 41 per eent of the excess of the final balance ever £20,000. £21,OO1-£22,OOO £4,410 plus 43 per eent of the excea of the final balance over £21,000. £22,OO1-£23,OOO £4,840 plus 45 per eent of the exeess of the final balance ever £22,000. £23,001-£24,000 £5,290 plus 47 per eent of the exeess el the final balance ever £23,000. £24,001-£25,000 £5,760 plus 49 per eent of the exeess of the final balance over £24,000. £6,250 plus 51 per eent of the excess of the final balance oyer £25,000. £26,001-£27,000 £6,760 plus 53 per eent of the excess ol the final balance over £26,000. £27,001-£28,000 £7,290 plus 55 per eent of the excess of the final balance over £27,000. £28,001-£29,000 £7,840 plus 57 per eent of the excess of the final balance over £28,000. 429,001-430,000 £8,410 plus 59 per eent of the exeess of the final balance over £29,000. Over £30,000 £9,000 plus 60 per eent of the excess ol the final balance over £30,000,