Law change on way to help flood-hit taxpayers

By BRIAN FALLOW, economics editor

Legislation to give Inland Revenue more flexibility in dealing with taxpayers affected by the flooding in the lower North Island last month is expected to be passed this week.

Prime Minister Helen Clark said yesterday the Cabinet had approved for enactment this week the Taxation (Disaster Relief) Bill and most other parties had agreed to expedite its passage.

The law change will allow Inland Revenue to waive use-of-money interest (at 11.9 per cent) on tax payments which are late as a result of the flooding, either because taxpayers' records have been destroyed, they cannot gain access to their records or they did not have time to make their payments because of higher priorities created by the flooding.

It will also be changed to allow Inland Revenue to accept estimates of provisional tax that are late because of the floods.

Taxpayers would need to be "significantly" affected by the flooding and would need to apply to the IRD.

Clark said two criteria would apply before such relief could be offered. A state of civil emergency had to have been declared, and an order-in-council (in effect a Government declaration) signed by the Governor General that the disaster was serious enough to warrant the measure.

The tax laws already allow the Inland Revenue to drop the normal penalties for late payment of tax or late filing of tax returns. The late payment penalty is 1 per cent the day after the tax was due, a further 4 per cent seven days later and 1 per cent a month thereafter. But the IRD has discretion to reduce the penalty if taxpayers make instalment arrangements before the tax is due.

The tax pooling company Tax Management New Zealand had already offered a month's worth of relief from use of money interest.

"Someone in a flood-affected area with a terminal tax payment coming up on April 7, for example, can just apply to us for an automatic roll-forward to April 29," managing director Ian Kuperus said.

There is a limit of $50,000 a taxpayer.