The broader benefits of a consultative approach to insurance solutions.
It was no real surprise that changes were made to Resident Land Withholding Tax (RLWT) Act in the middle of last year. From 1 July 2016, a new tax was imposed on ‘offshore persons’ who sold New Zealand property within two years of purchasing the property.
What was surprising in the changes to the Act were the potential consequences for a lawyer deemed to be the vendor’s conveyancer. The vendor’s conveyancer (or purchaser’s conveyancer if the vendor does not have one) becomes the RLWT agent and is responsible for collecting the tax and paying it to the IRD. While the ‘agent’ is not liable for the tax, they can face penalties if the RLWT is not collected and paid to the IRD on time.
One of our clients brought this matter to our attention and asked if their existing insurance policies would provide cover should they be exposed to fines imposed by the IRD?
On the face of it, any fines the IRD could impose for RLWT are not covered by traditional insurance policies. A professional indemnity insurance policy responds to a claim for compensation and will usually contain exclusions for fines and penalties. A statutory liability insurance policy excludes any fines or penalties that are imposed by the IRD.
To us it seemed unreasonable for a lawyer to receive penalties in a situation where they discharged their duties appropriately but were not aware their client was an offshore person. We began a process to develop an insurance solution with an insurer.
The outcome of that process is a new insurance approach that specifically addresses the financial penalties that lawyers can face by not collecting RLWT. That cover is now available to all lawyers who are clients of Austinsure and is the result of a collaborative product development process that started when the need was identified by our client.
As a specialist insurance broking firm, Austinsure takes a highly consultative approach and works with insurers to find insurance solutions that meet specific needs for our clients. We think the development of this new cover for the RLWT situation is a good example, where the solution addresses a specific need identified by one client and which can benefit all our legal clients.
If you’d like to know more about the implications of the RLWT on your practice, or discuss any other business risks, please contact me or one of my colleagues at Austinsure.
Blair Dyer
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