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Commercial

GST and land transactions

Business & Investment, Commercial, Employment, Estate, Fair Trading, Financial Services Regulation, First Job
0

Understanding your tax obligations

 

If you are buying or selling land (with or without a home on the section), it is important to have an accurate understanding about your tax obligations and whether GST will be applicable to your transaction.

GST is not typically applicable in residential sale and purchase transactions but, if you are GST-registered and the sale is part of your taxable activity, GST may apply.

Potential GST outcomes

If the buyer and seller are both GST-registered, the transfer of land is part of a taxable activity (for example: farming, or a commercial building), and the property is not used as a private residence, the transfers are typically zero-rated for GST (meaning GST is charged on the transaction at a rate of 0%).

If the buyer is GST-registered and the seller is not GST-registered, and the buyer intends to use the land as part of a taxable activity, the buyer may be able to claim GST.

If the seller is GST-registered (and claimed GST) and sells the land to a buyer who is not GST-registered, or does not intend to use the land as part of a taxable activity, the seller may need to return GST to Inland Revenue following the sale.

There can be additional complications where some part of the property is used for private purposes, and some part is used for a taxable activity. In this instance, some of the purchase price may be subject to GST, but some part of it may not.

Warranty as to GST status

The standard sale and purchase of real estate agreement contains a statement on the front page – ‘the vendor is registered under the GST Act in respect of this transaction and/or will be so registered at settlement.’

If you are GST-registered and the sale is a taxable supply, you will need to complete schedule one in the agreement. As a seller, you will need to tick either ‘yes’ or ‘no’ to this statement. You must provide a warranty that the answer you provide is correct and will remain correct as at settlement. If it later transpires that your answer was incorrect, you have breached a warranty and could be liable to the buyer for any losses they have suffered because of this breach. For example, if you provided a warranty that you were not GST-registered in relation to the transaction, the buyer may presume that they may claim GST from Inland Revenue following settlement if they will be GST-registered and intend to use the property for taxable supply. If you were, in fact, GST-registered, the buyer will not be able to do that, therefore you may be required to reimburse 15% of the purchase price to the buyer due to your breach of warranty.

If you are the buyer, the agreement contemplates your GST status potentially changing throughout the transaction. For example, you may initially sign the agreement in your personal name (and you are not GST-registered) and later you nominate a GST-registered company to complete the purchase.

The purchase price will be expressed as either ‘plus GST (if any)’ or ‘inclusive of GST (if any),’ which dictates how much you need to pay on settlement, depending on your GST status. It should be clear to all parties whether the buyer will be GST-registered on settlement date, as this can have GST implications for both parties.

Purchase price allocation

If GST is applicable to the transaction, you should consider whether you should agree with the other party on a purchase price allocation; completing a purchase price allocation is highly recommended in some situations since GST may be claimable on some items, but not others.

If the buyer and seller agree on a purchase price allocation in the agreement, this allocation must be used by both the seller and buyer when completing their respective tax returns. This provides certainty to both parties. The purchase price allocation can therefore have tax consequences for both buyer and seller, so it is important to get accounting advice on this allocation before signing the agreement.

Where to from here?

If GST is (or may be) applicable to your transaction, it is important that you get legal and accounting advice before signing the agreement. A mistake in the agreement cannot always be fixed by your professional advisers after signing; it could result in an unexpected GST bill, which can be very costly. We and your accountant will work together to ensure that the sale and purchase agreement accurately reflects your GST position and that you fully understand any potential tax consequences before signing the agreement.

 

 

 

 

[1] Purchase price allocation is where the price is allocated between the land and any buildings, and other fixtures, fittings, chattels or improvements.

DISCLAIMER: All the information published in Property Speaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Property Speaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

 

Firearms reform 2025

Commercial, Employment, Health Issues, Latest news, Media, News
0

Government considers current legislation to be outdated and overly complicated

The government is currently undertaking a comprehensive reform of our firearms laws; it aims to modernise the Arms Act 1983 which it considers to be outdated and overly complicated. The overhaul is the fourth phase of a commitment to reform the firearms regulatory system following on from three previous phases implemented after the 2019 Christchurch mosque shooting.

Public consultation on the proposed changes took place earlier this year.

 

Proposed changes

Key proposals include:

  • Rewriting the Arms Act 1983 entirely to create a more coherent and effective legislative framework that balances public safety with the rights of lawful firearms users
  • Strengthening Firearms Prohibition Orders, expanding the criteria and allowing the courts to impose Orders on gang members and associates convicted of drug, firearms or violent offences
  • Reviewing the Firearms Registry to assess its effectiveness and identify areas for improvement. The government aims to ensure it is promoting public safety without imposing unnecessary burdens on lawful firearms owners
  • Transferring the Firearms Safety Authority (to be renamed the Firearms Licensing Authority) from the responsibility of New Zealand Police to the oversight of another government entity. The government believes this will enhance independence and effectiveness of firearms administration, and
  • Amending the regulations of shooting clubs and ranges to ensure their facilities are operating safely and compliantly while supporting legitimate activities of firearms enthusiasts.

 

Potential benefits

The proposed reforms have several potential benefits, including:

  • Improved public safety with stricter controls and strengthened Firearms Prohibition Orders
  • Better regulation and oversight to modernise outdated laws
  • More effective firearms licensing through an independent Firearms Licensing Authority, allowing police to focus their resources more on illegal firearms and gang-related gun violence rather than administrative licensing work
  • Enhanced gun owner responsibilities through increased requirements for safe storage, record-keeping and reporting, and
  • Stronger measures against gun trafficking through stricter background checks, licensing and a well-regulated system.

With each benefit, however, shortcomings follow. Potential drawbacks include:

  • Possible overreach and bureaucracy leading to inefficiencies, delays and higher administrative costs
  • Limited impact on criminals and gangs given most gun crimes involve illegally obtained firearms, unaffected by strict laws. Police unions have expressed concerns that moving licensing away from the police could weaken police ability to monitor gun-related crime
  • Compliance challenges, with some gun owners struggling to comply with new laws due to lack of awareness or financial barriers, such as affording secure storage or meeting new licensing requirements
  • Potential for unintended consequences, such as over-regulation leading to more non-compliance or a larger black market, and
  • Farmers and pest controllers who rely on firearms for work may face unnecessary restrictions affecting their business operations.

Federated Farmers has been particularly vocal about the rewrite, noting that the changes over the previous government’s term were ‘a whole lot of really silly, impractical amendments’ that have made it harder for people to access firearms.

Farmers have noticed how those changes have made it harder but cannot identify anything that has made it easier. Farmers have a genuine need for firearms and gun laws need to be more straightforward for those who need reasonable access to firearms.

The government has now completed public consultation; it aims to pass the new firearms legislation before the end of its current term in 2026.

Emissions Trading Scheme

Commercial, Employment, Estate, First Job, Health Issues, Online, Property
0

A change in approach?

The Emissions Trading Scheme (ETS) will turn 17 years old in September. An integral part of the Climate Change Response (Emissions Trading) Amendment Act 2008, the ETS has undergone significant change throughout its existence.

 

What is the ETS?

The ETS is New Zealand’s main tool for reducing greenhouse gas emissions. It essentially works by requiring participating businesses to measure and report on their greenhouse gas emissions. Businesses that participate in the scheme must surrender what is known as an ‘emissions unit’ for each tonne of carbon dioxide that they emit. One tonne of CO2 will cost you one emissions unit.

Over time, the government will reduce the number of units that are supplied into the ETS. The effect of this is that emissions units increase in demand as participating businesses buy and sell emissions units from each other. The price of emissions units in the ETS will (in theory) trend upwards, helping New Zealand to steadily move towards the goal of being a net zero emitter of greenhouse gas by 2050.

 

Recent developments in the ETS

There has been some concern regarding the conversion of productive farmland into forestry in order to gain emissions units. The government has announced changes to the ETS; its aim is to strike a balance between achieving New Zealand’s climate goals, and protecting the longevity of our most profitable farmland.

The government has signalled that the proposed changes to the ETS will be formally introduced to the House this year, with the new rules expected to come into force by October 2025.

 

All trees created equal?

The most significant proposed change to the ETS is the temporary prohibition of the registration of exotic forestry (non-native) for emissions units on Land Use Capability (LUC) 1–5 farmland. LUC separates land into eight categories based on an assessment of the land’s capability for use. LUC Class 1 land is the most versatile, with LUC Class 8 land being the least versatile.

At present, any tree can be planted on any farmland to earn emissions units (provided the tree species planted can reach at least five metres in height). This means there is no incentive to prioritise the planting of native trees over the planting of exotic species, such as the Radiata pine.

The proposed changes will also require ETS participants to exercise greater discretion in choosing which areas of farmland to plant on; should you wish to plant an exotic species, you must do so on your less productive land.

 

A flexible approach

The proposed rules are not entirely hard and fast as there is some wriggle room for ETS participants. Up to 25% of LUC Class 1–6 land on a farm can be used to plant exotic forestry for the purpose of registering it under the ETS.

The proposed new rules have also scrapped plans to include agricultural processors (meat processors, dairy processors, nitrogen fertiliser manufacturers and importers, live animal exporters) in the ETS. Agricultural processors had been due to enter the ETS from 1 January 2025, but the passing of the Climate Change Response (Emissions Trading Scheme Agricultural Obligations) Amendment Bill on 26 November 2024 has stopped this.

 

Why the changes?

The proposed changes clearly signal the government’s desire to promote the planting of native species. It appears, however, that consideration has been given to the idea that ETS participants have benefitted from the planting of exotic species that can be planted en masse and grow quickly. This practice will remain, with the caveat being that it will need to take place on less productive farmland.

Updates to the residential tenancies legislation

Animals, Commercial, Employment, House, Latest news, Media, News, Property, Rural
0

Tenancy terminations and pets

The Residential Tenancies Amendment Act 2024 has significantly updated the Residential Tenancies Act 1986 and the laws governing the relationship between landlords and tenants.

Some of these updates took effect on 30 January and others are expected to  roll out in the remainder of 2025. These updates transform the rights and obligations of landlords and tenants – for better or for worse. We summarise the key updates below.

Termination of tenancies

No reason needed to terminate tenancy: Since 30 January 2025, landlords are no longer required to provide a reason to their tenants for terminating a periodic tenancy; they simply have to state they are giving 90 days’ notice of termination. For clarity, a ‘periodic tenancy’ is a standard tenancy with no end date, unlike a ‘fixed term’ tenancy which lasts for a set amount of time, say 12 months. Before 30 January 2025, landlords had to give grounds for terminating a tenancy, such as for demolition or extensive renovations.

Terminating on ‘special grounds’: Landlords now only need to give 42 days’ notice when they are terminating the tenancy on special grounds, including if a family member needs to live in the property as their main residence, or the property has been sold and needs to be vacated for the new owners to take over. Until 30 January,  landlords had to give 63 days’ notice.

More rights for tenants: The legal rights and abilities of tenants have also increased. Tenants now have up to 12 months to apply to the Tenancy Tribunal for an order declaring a termination notice to be unlawful and that the landlord has retaliated against the tenant for enforcing their legal rights, or in response to legal actions taken against the landlord by another person or body. If a tenant applies within 28 days of receiving the termination notice, they can request that the notice be cancelled.

Before 30 January 2025, tenants only had 28 days to apply to the Tenancy Tribunal in respect of a notice in general.

Tenants also now only need to give 21 days’ notice for ending a periodic tenancy. Previously, they had to give at least 28 days’ notice.

The Amendment Act also confirms that tenants may leave their tenancy at shorter notice if they, or one of their dependents, are experiencing family violence.

It will be interesting to see how these amendments play out, especially when reviewing future decisions of the Tenancy Tribunal, including where tenants dispute termination notices. We touch upon other changes and updates to the powers of the Tenancy Tribunal below.

As an aside, the ways in which landlords and tenants can give notice to one another has changed. The Amendment Act confirms that landlords and tenants can give notices in more modern ways, such as over text or messenger, rather than a physical written notice.

Pets

In the second half of 2025, we expect to see major law changes relating to pets kept in rental premises. Landlords will be able to require their tenant to pay a ‘pet bond,’ on top of their original bond, which can  be an additional two weeks’ rent on top of the original bond. A tenant must obtain their landlord’s written consent to keep a pet on the premises. A landlord may refuse the request only on reasonable grounds, including the premises not being suitable for the type of pet or vice versa. It could be that the breed of dog is too large, and/or the nature of the breed is considered destructive or aggressive and/or could be disruptive to neighbouring properties.

If a tenant’s pet dies during the tenancy, the tenant is entitled to ask for the return of the pet bond from the landlord less any compensation for any damage, and reasonable wear and tear attributable to the pet.

We look forward to seeing how these new rules relating to pets play out.

Tenancy Tribunal

Since 20 March 2025, the Tenancy Tribunal should become quicker and more efficient in its day-to-day operations. The Tribunal now has, for example, the ability to determine matters ‘on the papers’ (considering an application and response, then making a decision) without the need for a hearing.

In more complex and technical cases, and where there are major factual disputes, however, it is likely that the Tribunal will still require a proper hearing.

New deed of lease documentation

Commercial, Employment, House, Media, News, Property
0

Landlords and tenants should be up to date

 

In November 2024, The Law Association of New Zealand (TLANZ), formerly the Auckland District Law Society, released an updated version of the standard form deed of lease document, its 7th edition.

This new edition of the deed of lease (DoL) includes a number of new or varied provisions that TLANZ has included in response to the evolving commercial leasing landscape; in some cases these provisions address pitfalls in earlier DoL editions that sought to deal with issues that arose during Covid. The result is that there are a number of new default provisions for both landlords and tenants to consider when entering into a lease, and new procedures to be aware of that didn’t form part of previous leases.

Rent

Numerous provisions affecting rent, rent adjustment and rent abatement have been included in this new DoL. Where previous DoL editions referred only to CPI or market rent adjustments, the 7th edition includes an option in Schedule 1 to include a fixed rate adjustment for rent. That means that on the rent adjustment date recorded in your lease, the rent will be adjusted by a fixed percentage, rather than an adjustment being based on market rent or a CPI calculation.

There are benefits in this approach for both landlords and tenants. It provides a greater level of certainty for anticipating rent increases for tenants and income for landlords.

In addition to adding this option, the 7th edition has added to Schedule 1 an option to include upper and/or lower limits on rent adjustments. This sets out at the forefront of the DoL limits on any ratchet-type provisions which previously would have been buried in the standard/further terms of the lease.

Again, these provisions can give greater clarity to both parties around the extent of any rent adjustment, where the adjustment is not a fixed rate, and would advise tenants whether an adjustment could result in a lower rent payable (although it is rare that this would be the case).

Outgoings

The outgoings are other expenses under the lease that the landlord passes on to their tenant. The 7th edition requires, as the default position, that the landlord provides an annual budget of outgoings to the tenant.[1]

This is a helpful inclusion for tenants as it provides certainty for budgeting and greater transparency around the costs additional to rent that the tenant must pay. This is invaluable information for anyone looking to enter into a lease and should be reviewed by any prospective tenant prior to entering into a new lease.

Reinstatement

Reinstatement is not a new concept under the lease, although provisions have been added to better define the rights and obligations relating to signage, tenant’s chattels, alterations and the premises overall.

An important aspect of this relates to the tenant’s chattels; this is a new inclusion in Schedule 6. Items listed here will inform the obligations around the removal of tenants’ chattels under the new reinstatement provisions.[2]

Knowing what tenants need to remove, put back and who bears the cost is crucial to understand before entering into a new lease, especially if you plan on modifying the premises in any way before or during the term. A tenant will always need the landlord’s permission to make any changes or alterations, and it is best to get this in writing.

Rent abatement

If at any time a tenant cannot access the premises (or part thereof), they should receive a discount on the rent at the rate that is set out in Schedule 1. This has been included to set a starting point for rent to be discounted during no access periods rather than tenants having to endure a long determination process to agree the discounted rate during the term of the lease.

The rate recorded in Schedule 1 can be reviewed under the terms of the lease and the process for this is clearly set out.[3]

These are just some of the changes that have been included in the Deed of Lease 7th edition. Whether you’re a tenant entering into a new lease for your business or you’re looking to get a lease prepared for a commercial property you own, talk with us so you understand and use these changes to ensure the terms are best suited for you.

 

 

 

[1] Clauses 3.7–3.10 in 7th edition.

[2] Clauses 23.1–23.5.

[3] Clauses 29.3-29.5.

Life Stage – Business

Commercial, Media, News, Property, Retirement
0

Sally is not happy with Luke for crashing their brand-new Tesla. The car only appears to need minor repairs but was bought for the purpose of having a ‘safe’ vehicle for their baby on the way. Time is of the essence as Sally’s due date is approaching

 

Luckily for Luke, his father Steve owns a car repair business. He gives his father a call and is told he can bring the car in right away.

 

Steve feels terrible when his son brings in the brand new Tesla, which appears to be falling apart at the front. He takes a closer look and is relieved, it really is only a few repairs which are needed. He often gives discounts to his family but decides he will do this for Luke free of charge, seeing as him and Sally have a baby on the way and are under a lot of stress.

 

He has been under a lot of stress himself with work as the lease has just run out on his car repair yard. He has leased the property for the last 5 years without any issues. He was friends with the owners and would often invite them for drinks and barbecues, and had no concerns that he would be able to lease for another term. When he found out that they had sold the property to new owners, Steve had noticed no difference at first, as the lease was still in effect with the current terms.

 

As the expiry date was approaching, Steve had gone to the new owners and advised he would like to continue the lease for another term of 5 years. The new owners advised Steve that he had no right of renewal and the lease had expired, but they would provide him with a new lease to sign on their terms. Steve received the new lease and read through it, but he did not like the terms as they were fundamentally different to the original lease.

 

This left Steve with the following options, and just as many concerns:

  1. Accept the new terms and sign the lease – Steve had signed the original lease five years ago without properly looking through it, or understanding it. He had been friends with the landlords and hadn’t anticipated them selling. He should have ensured he had options to renew so he would have more security of this property.
  2. Find a new premises – This is not ideal for Steve. His current premises is right in town and only a five-minute drive from home. However, he is aware that he has not even looked at what other opportunities may exist. His business has expanded a lot in the last few years and this could give him an opportunity to find a property with more room and potentially grow his business even more
  3. Negotiate with the new landlords. If they are unable to find other tenants while Steve is able to find more premises, he will have more bargaining power.

 

Steve sighs as he begins fixing the Tesla. He will search online tonight for available commercially leased properties. He vows to take any new lease to his solicitor before signing to avoid future stress.

Macayla Brdanovic

Fencing Feuds: How the Fencing Act Can Keep the Peace

Commercial, Employment, House, Kids, Latest news, Media, News, Property, Rural
0

Fences may not create friendships, but they do help make properties look tidy and defined. However, disagreements over who should pay for them can quickly turn a friendly wave into a frosty silence. Fortunately, the Fencing Act 1978 sets clear rules to help property owners handle fencing disputes without unnecessary stress.

 

Who Pays for the Fence?

If you are building or replacing a fence on a shared boundary, your neighbour is generally required to share the cost—provided the fence is “adequate,” meaning it’s reasonably fit for purpose. Before you start digging, discuss your plans with your neighbour. If you cannot agree, the Fencing Act provides a formal process to resolve disputes.

 

A Formal Process with Strict Timeframes

If you want your neighbour to contribute, you must serve them with a fencing notice detailing the fence type, cost, and who will build it. They have 21 days to agree or object. If they don’t respond, they are deemed to have accepted and must pay their share.

 

If they object, they must issue a cross-notice within 21 days, outlining their concerns or suggesting changes. If no agreement is reached, mediation, arbitration, a Disputes Tribunal, or a District Court ruling may be needed.

 

Common Fencing Issues

What if my neighbour wants a premium fence, but I prefer something simple?
They can only require you to pay half the cost of an adequate fence—not a luxury upgrade.

 

What if my neighbour sells their house mid-process?
You will need to start over with the new owner.

 

Can my neighbour refuse to let the builder step onto their land?
Yes, but you can seek a court order for reasonable access.

 

What if they damage the fence?
They must cover the full repair cost.

 

What if urgent repairs are needed while they are overseas?
You can fix the fence and recover half the cost when they return.

 

Fencing Around Swimming Pools

If your neighbour installs a swimming pool near the boundary, they must fence it in. You may need to contribute, but only up to the cost of a standard boundary fence.

 

Height Restrictions

Most fences can be built without needing council consent. However, local council rules may impose restrictions, particularly in heritage areas, so it is always worth checking before starting work.

 

Need Help?

Navigating fencing laws can be tricky but getting it right the first time saves headaches. If you need advice or assistance, the team at Edmonds Judd are here to help your fencing project go smoothly— hopefully without neighbourly disputes turning into courtroom battles.

 

Fiona Jack

Business briefs

Commercial, Employment, News, Your Own Business
0

Commerce Act 1986 and Commerce Commission review

Last year the government announced a comprehensive review of New Zealand’s competition framework to combat monopolistic practices and boost economic productivity. Limited options and high price points in the grocery, banking and building supply sectors are reflective of market failures resulting from such practices and, subsequently, prompted this review.

 

Commerce Act 1986: The review includes a revision of the long-standing merger regime embedded in this legislation. Although mergers can enhance efficiency, they may also create a power imbalance in the market and limit consumer choice. The current regime will be reconsidered to mitigate the risks posed by larger companies that make small, incremental acquisitions of smaller companies.

 

The government also wants to provide greater clarity to the Act’s anti-competitive conduct provisions. Its aim is to increase certainty as to what constitutes anti-competitive collusion – in turn, appeasing concerns that typically deter businesses from engaging in beneficial collaboration.

 

Commerce Commission: The review will also evaluate the commission’s structure and governance – specifically, whether it is capable of effectively enforcing competition laws. The introduction of specific commissioners and a divisional model to contribute to accountability and strategy will also be considered.

 

The government’s focus on strengthening competition laws aims to deliver greater choice, lower costs and increase productivity for all New Zealanders.

 

 

Reform of overseas investment laws to boost economic growth

The Overseas Investment Act 2005 will undergo significant reform, the government has announced. New Zealand is currently ranked the most restrictive country in the OECD for overseas investment.[1] The reform intends to combat this position by increasing openness to foreign investment that should attract more international investors.

 

To achieve what the government believes will be a more dynamic and competitive economic environment, a suite of statutory changes have been proposed to reduce barriers to investment where such investment does not present any identified risk to New Zealand’s interests. Key proposed changes include:

  • Fast tracking approvals: simplifying the assessment process by establishing basic tests and assuming investment will be permitted unless risks are flagged
  • Targeted scrutiny: retaining flexibility to analyse investments on a case-by-case basis and impose conditions or block them if necessary, and
  • Retaining current scope: ensuring the government can continue to scrutinise sensitive investments, including farmland.

 

Legislation to implement these changes is expected to be introduced this year.

 

 

Tax changes for charities

Charities can expect to see a raft of tax changes in May. These changes are intended to reduce the scope for exploitation of loopholes in the current framework. In other words, the government wants to ensure that entities receiving tax benefits are distributing their funds for charitable purposes – as opposed to structuring themselves as charities and building up funds that are not being used for charitable purposes.

 

This review will focus on charities that operate commercial businesses and whether they should pay tax on profits retained in the business. When announcing the changes, the Minister of Finance, Nicola Willis, mentioned that entities such as cereal manufacturer Sanitarium and early childhood education provider BestStart are among the types of organisations potentially impacted by the changes.

 

This removal of tax-free status is to be balanced against the need to support charities and to recognise the significant role New Zealand charities play in our communities. As a result, some charities may lose certain tax benefits.

 

These changes are part of a broader tax policy work programme that also includes exploring user-pays models for infrastructure projects and other revenue raising measures. The changes aim to ensure fairness while maintaining vital support for the charitable sector.

 

 

[1] BusinessNZ, 6 September 2024. https://businessnz.org.nz/wp-content/uploads/2024/09/240906-A-future-for-Foreign-Direct-Investment-into-NZ.pdf

 

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Fair Pay Agreements Repeal Act 2023

Commercial, Employment, First Job, Your Own Business
0

What this has meant for you

Many people welcomed the introduction of the original Fair Pay Agreements Act 2022 (FPA) to set minimum pay and working conditions across various sectors. Others worried it could limit flexibility or create extra compliance costs. Now, the Fair Pay Agreements Repeal Act 2023, enacted just over a year ago, has turned back the clock on these industry-wide agreements.

 

Why repeal?

The main reason for the repeal stemmed from a change in government policy. The FPA, introduced by the previous government, aimed to improve wages and standardise conditions for employees in historically low pay sectors such as cleaners, hospitality workers and early childhood educators. Critics argued that this approach was too broad, as it could force employers to follow terms that they hadn’t agreed on, leading to reduced flexibility in workplaces.

 

By repealing the FPA, the current government signalled that pay and conditions should largely be negotiated between individual employers and employees or through standard collective bargaining processes rather than a universal, sector-wide system. Supporters of the repeal believed this would allow businesses to be more agile and able to respond quickly to changing market conditions.

 

Implications for employees and unions

For employees who would have benefitted from agreements under the FPA, the repeal has meant a return to individual employment agreements or traditional collective bargaining through unions. Workers in industries where wages are typically low may feel the difference most, especially if they were expecting a lift in pay or improved working conditions under the FPA process.

 

Unions have lost a tool for coordinating negotiations. The FPA regime gave unions a clear pathway to start negotiations on behalf of employees across an entire sector, even if there was initially low union membership. Without the FPA, unions are now focussing again on bargaining at a company level or encouraging voluntary industry-wide agreements. This may be a setback for union-led initiatives to raise pay and conditions in sectors with historically vulnerable workers.

 

Implications for employers

Employers now have more freedom to negotiate pay and conditions directly with their teams, without the worry of being locked into sector-wide rules. Businesses that operate in specialised markets or have unique staffing needs may welcome this. They can continue to tailor employment agreements to suit their circumstances, offering different pay structures, benefits or flexible arrangements.

 

On the other hand, before the repeal some employers saw a benefit in a level playing field for everyone in their industry. If all competitors had to meet the same pay and conditions then there was less concern about undercutting each other on labour costs. Those businesses may now have to keep a closer eye on what others in their sector are doing, particularly if new entrants offer lower pay.

 

Looking ahead

With the Fair Pay Agreements Repeal Act 2023 having been enacted just over a year ago, any ongoing negotiations under the FPA system may have continued in the same manner. In many cases, however, collective bargaining would have reverted to the familiar structures of individual employment agreements or smaller-scale union negotiations.

 

Unions and advocacy groups are now working on other ways to improve working conditions, such as lobbying government for different legislation or regulations. Meanwhile, most businesses wanting to be seen as good employers have developed their own internal policies to offer competitive pay and benefits. Despite the repeal, it’s unlikely the debate over fair pay will disappear. The broader issues of cost of living, pay equity and income inequality remain hot topics, particularly for Māori, Pasifika, women and young people.

 

Final thoughts

By repealing the FPA, the government returned New Zealand’s industrial relations framework to a more traditional form of negotiation. That shift has had significant effects on those who had hoped the FPA would boost minimum wages and conditions.

 

Whether you are an employee wondering about your pay, a union leader planning next steps or an employer seeking certainty around labour costs, the key takeaway is the same: make sure you understand your current rights and obligations, and be ready to adapt.

 

If you’re unsure about how this change has affected you, do talk with us. With the future of workplace legislation still in flux; staying informed and being proactive will serve you best.

 

 

DISCLAIMER: All the information published in Commercial eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Commercial eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Health and safety: Successful prosecution of former chief executive

Commercial, Employment, Your Own Business
0

Lessons to be learned

Stevedore, Pala’amo Kalati, was struck and killed by a falling container at the Auckland port on 30 August 2020.

Mr Kalati’s death led to Maritime New Zealand’s successful prosecution under the Health and Safety at Work Act 2015 (HSWA) of both Port of Auckland Ltd (POAL), the company that runs Auckland’s port, and its former chief executive.[1]

This is the first time that the chief executive of a New Zealand company has been prosecuted over a workplace death.

 

The accident

The circumstances leading to Mr Kalati’s death were complex. However, the principal cause of his death was that he had been instructed to work on the deck of a ship contrary to the port company’s policy of remaining more than three container lengths away from an operating crane. Consequently, Mr Kalati was in the path of a falling container when the mechanical locking mechanism securing it to the crane failed while it was being lifted.

 

Prosecutions

Maritime New Zealand brought prosecutions against both POAL and its chief executive under section 48 of the HSWA. This section makes it an offence to fail to comply with a duty under the legislation that exposes a person to a risk of serious injury or death.

POAL pleaded guilty; it was fined $561,000 in 2023. The port’s chief executive defended the charges.

 

Due diligence requirement

Section 44 of the HSWA imposes a duty on the officers of a company, which includes directors and senior managers such as a chief executive, to exercise due diligence to ensure that their company complies with its legal duties under the legislation.  This is defined as exercising the skill and care that a reasonable person would use, taking account of their position, their responsibilities and the nature of the company’s business.

 

This section of the HSWA specifically states that to exercise due diligence, an officer must:

  • Keep up to date on health and safety issues
  • Understand their business and its health and safety risks
  • Ensure their business has, and uses, appropriate measures to eliminate or minimise health and safety risks
  • Ensure their business has processes for assessing new information about health and safety risks, such as incident reports, and acting on it promptly, and
  • Confirm that the measures and processes referred to above are being used and are working.

 

The court had to consider the duty imposed by section 44 on an officer in a large organisation when they were not involved in the day-to-day operations of that organisation. The chief executive’s lawyers argued that the chief executive could not be expected to know about everything that was going on at the port. The court accepted this but it found that the chief executive had a personal duty to ensure that the port company had measures in place to counter health and safety risks, and that they were implemented. He also had a duty to verify from time-to-time that these measures were effective.

 

The former chief executive was found guilty of two of the three charges brought against him. He is yet to be sentenced.

 

Lessons for company officers

This is the first case in New Zealand in which a senior officer of a company has been convicted following a workplace death. The outcome of any similar future prosecution will depend heavily on the facts of the individual case. For example, the extent of the duty in section 44 depends on the exact role the officer has in the company and the type of business it operates. The court’s decision, however, makes it clear that officers need to ensure that:

 

  • Their company has systems to ensure accurate information about health and safety matters flows to them from those carrying out the company’s work
  • They know how the company’s staff actually carry out their work as opposed to how they are supposed to do it (work as done v work as planned), and
  • New health and safety measures are implemented promptly once they know they are needed.

 

If you have any concerns about whether your company is fulfilling its duties under the HSWA, or the extent of your personal duties as an officer of a company or other organisation, please do not hesitate to contact us.

[1] Maritime New Zealand v Gibson [2024] NZDC 27975.

 

 

 

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Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

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