GST

Inland Revenue (IRD) is still actively reviewing taxpayers despite COVID-19 and the various business disruptions the pandemic has caused in the past 12 months, according to figures released by Accountancy Insurance.

They saw a 31 percent increase in claims in all categories during the 2020-21 financial year compared to the 2019-20 financial year.

In terms of the proportion of claims, most related to GST verification (55 percent) and income tax returns (nearly 28 percent).

GST verification claim activity increased by 48 percent and income tax return-related claim activity by 67 percent in the 12 months to 31 March 2021.

The income tax return claim activity included cases relating to two campaigns IRD commenced in late 2020: They were the increased enforcement of the bright-line rules in December and the Automatic Exchange of Financial Account Information programme in November.

Accountancy Insurance says the following taxpayer categories had the highest number of claims during the 2020-21 financial year:

• Sole trader/partnership/non-trading company and trusts.
• Business groups <$500,000-$3 million turnover.

Industries under the spotlight

As most know, IRD has access to several large data sources which they use to help identify high-risk industries where there could potentially be low levels of tax compliance.

Low levels of compliance are usually seen in sectors where there is a high level of cash transactions.

Hospitality and construction are two such industries that IRD monitors regularly. The tax department recently launched a new campaign aimed at the latter.

And as well as property and the real estate industry, IRD is also taking an interest in cryptoassets.

Accountancy Insurance notes that client risk review claim activity decreased by 62 percent in the 12 months to 31 March 2021. In fact, this accounted for just 9.74 percent of all claims.

However, that was likely because the businesses which are typically subject to these reviews and audits were the ones most affected by multiple COVID-19 lockdowns in 2020.

They expect things will return to normal throughout 2021 as IRD ramps up its audit activity.

Reminder: We can help with IRD audits and voluntary disclosures

As an IRD-approved tax pooling provider, Tax Management NZ (TMNZ) can be used to get significant savings on Inland Revenue interest if they owe additional tax as a result of IRD issuing a notice of reassessment after an audit or voluntary disclosure.

TMNZ lets someone apply tax that was paid to IRD on the original due date(s) against their liability.

As such, IRD treats it as if they paid on time once it processes this tax pooling transaction. This eliminates any late payment penalties. Please note the legislation prohibits us from assisting with shortfall penalties.

A taxpayer can use TMNZ to reduce the interest cost on the difference between the original assessment amount and the reassessed amount that arises due to an audit or voluntary disclosure.

We can assist with income tax, and other tax types such as GST, PAYE and FBT when there is a reassessment.

Someone has up to 60 days from the date IRD issues the reassessment notice to pay the tax they owe via TMNZ.

TMNZ has the largest and oldest supply of audit tax in the market.

Please contact us if you have any questions about tax pooling. We’re happy to help.