Tuesday, 9 September 2008
Law change to relieve tax consequences of death in husband-wife partnerships
The government will introduce a law change to ensure that the death of one of the spouses in a husband and wife
partnership does not give rise to immediate tax consequences, Revenue Minister Peter Dunne announced today.
"The death of a spouse is upsetting enough without the surviving spouse also having to worry at that time about the tax
consequences of the death," Mr Dunne said.
"The problem arises in the case of a two-person partnership in which the partners are married or have a relationship
that is 'in the nature of marriage’, and the partnership holds assets that, if sold, give rise to tax consequences.
"Under the law, the death of a spouse in that kind of partnership automatically dissolves the partnership, which may
require tax to be paid on the surviving partner’s original shares of the partnership assets.
"Furthermore, the surviving spouse must then also track his or her share of the partnership's assets separately from the
inherited partnership assets, which can result in significant compliance costs.
"The government is therefore proposing a change that will keep things as simple, economical and humane as possible:
surviving spouses will not have to pay tax on their own share of partnership assets upon the death of their spouse, and
they will not have to pay tax on their own share of assets separately from those they inherit from their dead spouse.
"Any tax payable will be delayed until the assets are sold.
"The change will be legislated for at the earliest opportunity and, once enacted, will apply from the start of the
2008-09 income year, when the new partnership tax rules came into force," Mr Dunne said.
ENDS