Associated persons

The Taxation (Life Insurance, International Taxation and Remedial Matters) Bill, presented back at Parliament on Tuesday, included new rules for testing the association between natural persons who are each associated with a third person - the so-called "tripartite" test.

There are also changes for the test for association between trustees, settlors and beneficiaries.

One of the aims has been to close gaps in the rules as they apply to property developers and other investors.

However, the original draft was criticised for its sweeping nature. Several submitters suggested taking the associated persons rules out of the bill completely and going back to square one, but the select committee ruled that option out.

Instead, the rules have been narrowed.

The scope of the "tripartite test" has been confined to areas where the two persons are already associated to a third person under different associated persons tests (the act has a number of such tests).

The rule associating relatives with each other will not apply if the person cannot be reasonably expected to know the other person actually exists.

In a partnership, a partner will not be automatically associated with the partners of their partner in another partnership.

The committee, however, rejected suggestions that property developers be allowed to hold land on capital as well as revenue account, depending on what the developer bought the land for.

Officials advised this would be too easy for investors to get around.

KPMG tax partner Paul Dunne said this omission was "disappointing" but that the other changes would remove "some of the harder edges" of the bill for developers.