Applying (For the 1st Time)
If you are making a loss on your rental properties or self-employed income, and you are also paid wages or salary, then you might want to think about applying for a special tax code.# Why?
Well, usually you wait until the end of the financial year, then your accountant submits a tax return, then you wait more for the IRD to process it, then finally you get your tax refund. Waiting, waiting, waiting!
But, if you submit a special tax code application, then you can get the refund as you go, rather than having to wait until after the end of the tax year.* How? The IRD sends a letter back which you give to your Payroll people. It authorises them to deduct less tax from your wages/salary. Voila! Tax refunds as you go.
What are the benefits?
The money is in your bank account, not the IRD's. So you get the money in the hand, meaning more interest earned or saved and better cash flow.
Hmmm, sounds interesting. How easy is it?
1. Download the form from IRD, complete, sign and print
2. Complete a profit and loss projection:
3. Post all to:
PO Box 39010
Wellington Mail Centre
Lower Hutt 5045
Renewing Your Application
Your special tax code expires each year at the end of March. So, to beat the rush, we recommend you reapply in early March. What to do?
1. Download the form from IRD
2. Complete as much as possible^ and email to firstname.lastname@example.org
3. We'll post it to IRD
4. The IRD will reply to either you or us with a letter to give to your Payroll people.
5. Voila! Sorted for another year.
* 31 March
^ if any income or costs have changed from the prior year, please let us know so that we can make an adjustment on the application
# note that due to the intro of ring-fencing of losses from residential rental property, you cannot as of 1/4/19 include this loss on your personal tax return, so if this was your only source of loss, there's little point in submitting a Special Tax Code app. However, there are other ways to use rental property loss; please contact us to discuss
Accounting for your rental residential investment property; general taxation advice.