Money: Happy returns

By MARK FRYER

Want some money from the Government? Just try asking.

It really is that simple for thousands of taxpayers who are in line for refunds. But in many cases, those who don't ask won't get.

That means taxpayers could miss out on money that is rightfully theirs because they can't be bothered asking, or don't know how to ask.

Once upon a time, when the art of tax extraction was less sophisticated than it is now, requesting a refund happened more or less automatically as part of filling in the annual tax return.

You worked out your tax bill for the year, subtracted what you had already paid and hoped the answer was a refund and not more tax to pay.

Back then you had to file a return anyway, so you might as well claim any refund in the process.

But tax returns are now a thing of the past for many of us.

While few mourn their passing, there is a downside. Now, if you want to claim a refund, it's up to you to take the initiative and work out the numbers.

It isn't a particularly complicated process, and now is the time to get started, especially if you fall into any one of half a dozen categories (see "Six of the best ... ", below).

The change in the process for claiming refunds is a result of moves to simplify the tax system, which made their first appearance in the 1999-2000 tax year.

The new system works on the basis that many of us don't need to file a return because we're correctly taxed through the year - as long as we've chosen the right tax code and our employers and banks have our IRD numbers.

Some, such as IR3 taxpayers (anyone who received any income apart from wages, salary, interest or dividends), do still have to file a return.

If you don't have to file a return, the document that matters now is the Personal Tax Summary, which details how much you earned and how tax you paid, and can be used to work out whether you need a refund or must pay more.

Some people automatically get a Personal Tax Summary.

Inland Revenue sent about 300,000 of them last month to taxpayers in certain categories - Family Assistance recipients, some people on Family Support, student loan holders who qualify for an interest writeoff and anyone who used the wrong tax code or a special code.

Others are required to apply for a Personal Tax Summary.

That category includes anyone who: received more than $200 in interest which was taxed at less than their personal tax rate; received more than $200 in interest or dividends and paid Child Support; or received more than $200 in dividends or interest, has a student loan and earned more than $14,768.

Then there's the rest of us, who don't get a personal Tax Summary and aren't required to ask for one.

The natural temptation is to do nothing. However, that could be a costly mistake, as requesting a summary could reveal a refund.

If you're in any of the categories below - or if you're just sceptical and want to be sure you haven't paid too much more tax - the summaries are now available and asking for yours could prove worthwhile.

But before you do, just be aware that there is the danger that you could be letting yourself in for more tax, not less.

The safest strategy is to ask for a summary only if you've already established that you're owed a refund (see "Look before you ask ... " below).

* Contact Personal Finance Editor Mark Fryer at: Business Herald, PO Box 32, Auckland. Phone: (09) 373-6400 ext 8833. Fax: (09) 373-6423. email: mark_fryer@herald.co.nz.