We often get asked "how much longer will IRD take?" How can you check on the progress of your tax return at IRD? Are they processing it? Is there a problem?
Well, there is a free, simple and easy way you can check yourself:
1. Create a myIR account.
Make sure the address in the bar at the top starts with https://www2.e-services.ird.govt.nz. This is to make sure you haven't ended up at a fake website. There should also be a little padlock showing in the title bar at one end.
Generally you will be wanting to find out how the processing of your personal tax return is going, so choose this option (see graphic)
2. Next, enter your IRD number and then click Continue.
3. Then, enter your details and click Continue.
4. Check the details, and tick the box, then click Continue.
5. Voila! You will receive an email confirmation. You are now ready to view your info using myIR, including the status of your tax return processing.
This year (2016) we've seen a dramatic increase in requests for information from IRD, generally, letters where they want a more detailed breakdown of expenses. We've also seen some more "direct" methods employed. What is this all about?
Focus On Property
This year, as in previous years, IRD is continuing to focus on property. Why? Well, see articles like this at NZ Herald:
The Herald reports: "Inland Revenue's 52-strong property compliance team has generated an extra quarter of a billion dollars that landlords and property flippers avoided paying in the past five years. The team is spread around the country, with a strong focus on the hotspot of Auckland, and is charged with finding people who have not paid the required tax on rental income or property speculation."
So, the government has given IRD more money to find property owners who aren't paying the tax that they should. The results have been quite spectacular, and so the IRD has been given even more money to follow up. You can see how effective the program has been from looking at the Herald graphic. Really, this is good news for everyone as tax cheats hurt us all.
However, this also means that law-abiding people sometimes are caught up in this effort, and asked to provide extra info. And as mentioned, we have certainly seen an upswing of queries from IRD.
The "Direct Method"
IRD have starting calling people directly, instead of via their accountant/tax agent. Frankly, this can be intimidating. However, please feel free to refer them to your accountant (it is your right to do so).
Is there anything you can do to minimise risk? Well, apart from being honest, you may want to take a look at AuditShield insurance. Contact us for a quote. You may also be interested in reading WHAT DOES AN IRD "REQUEST FOR MORE INFORMATION" LETTER LOOK LIKE?
NB: This article does not imply any endorsement by NZ Herald or its writers. All rights belong to NZ Herald.
What is Tax Pooling for?
Tax pooling is used when you've underpaid your provisional tax - or if you haven't paid it at all
Why don't I just pay my tax to IRD direct?
If you find you've underpaid tax, or paid it late, IRD generally charge penalties. And interest. And interest on penalties. And interest on that. As you can imagine, it adds up pretty quickly.
When you pay IRD via Tax Pooling, IRD views the payment as if it was paid on-time. So, no penalties. The Tax Pool company also charges much less interest than IRD.
So, how does it work?
Do I have to pay it on a set date then?
TMNZ have something called FlexiTax, so you can pay as much as you like as often as you like.
Can I pay tax from past years this way?
Yes, TMNZ can help with provisional tax for the current tax year and one just completed.
What if I get audited or make a voluntary disclosure: can I fund my tax this way too?
TMNZ can also help with other tax years and types, provided there has been a notice of reassessment issued by Inland Revenue as a result of an audit or voluntary disclosure.
How do the Tax Pool people make their money?
They charge interest, naturally, but it is a lot less than what IRD charge. Usually, just a little over 1/2 of IRD standard rates.
Where do they get the money from?
Well, big corporates like the banks overpay their provisional tax. In the past, they would overpay it to IRD, and get a miserable interest rate. Companies like TMNZ came along and said "Hey, we'll give you a better rate than IRD." So, they said "OK." Then TMNZ, in turn, on-lends it to the little guys like us, and they pay their bills out of the difference.
Is this legit?
Yes. The service is government-approved and operates under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994.
Is the money safe?
Yes, all payments made to TMNZ are made into bank accounts administered by an independent trustee, Guardian Trust. With more than 125 years’ experience in New Zealand, Guardian Trust oversees the tax pool account at IRD in which payments are held. They authorise all payments and tax refunds, as well as transfers to taxpayer accounts. At no stage do TMNZ have any contact with, or access to, your payments.
Please see the document below, or contact us.
We recommend TMNZ for all your tax pooling needs. Visit tmnz.co.nz to find out more.
We often get asked if there is a GST component in a Sale and Purchase Agreement for a rental residential property, or if GST needs to be claimed on the purchase of something for the property.
The answer is no to both questions. Why? Residential rent is viewed as a "GST exempt supply" of services. Exempt supplies are goods and services which are not subject to GST and not included in your GST return.
IRD give these guidelines:
For more info, see this page at the IRD website, or contact us.
The answer is maybe. It really depends on your circumstances.
Please see this page at IRD for more info; remember though it is only talking about rental residential property, as different rules apply for property traders/developers.
As always, if you would like more information or are not sure about your situation, please contact us.
NB: If you are a property developer or trader, and therefore paying tax on the net profits from the sale of your buildings, then legal fees are one of the things you can claim.
Accounting for your rental residential investment property; general taxation advice.