IRD rules loosen for flood victims

By BRIAN FALLOW

The Government plans to legislate to give Inland Revenue more flexibility in dealing with farmers and other taxpayers affected by last month's floods in the lower North Island.

The tax laws already allow the Inland Revenue to drop the normal penalties for late payment of tax or late filing of tax returns. In cases of serious hardship it can scrub the tax. But a law change is needed to give IRD clear authority to forgo use-of-money interest payments on unpaid tax.

"The law will be changed to allow Inland Revenue to remit use-of-money interest on tax payments that 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," Finance Minister Michael Cullen said.

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

Strict criteria would apply: the taxpayers involved would have to have been "significantly" affected by the flooding, and they would have to apply for the relief.

The Government is seeking the support of other parties so the law change can be made quickly.

National's deputy finance spokesman, John Key, said: "Dr Cullen can expect our total support. We recognise the severity of the issue and we acknowledge he is trying to do what he can to help."

The interest rate payable on unpaid tax is 11.93 per cent a year.

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.

Other forms of short-term relief are on offer, such as switching to regular rather than end-of-year Family Assistance payments, or lower PAYE deduction rates where farmers have off-farm jobs.

The criteria for writing off tax debts on hardship grounds include significant financial difficulties which arise because of the taxpayers' inability to meet minimum living expenses, inability to meet medical treatment costs, or serious illness.

Tax info for flooded farmers