Money: Taming the tax monster

By MARK FRYER

Feel like giving the taxman even more of your hard-earned money?

Didn't think so.

So why is it that so many of us aren't prepared to spend a few minutes to claim tax rebates that are rightly ours?

The number of taxpayers claiming rebates for donations to charity, the cost of childcare or housekeeping dropped sharply last year.

That fall followed changes to the tax system which meant most of us were no longer forced to fill in an annual return.

Suddenly, about 106,000 people who used to claim a rebate apparently could no longer be bothered, or didn't know how to under the new system.

The 1999-2000 tax year was the first for the new, simplified tax system, under which wage and salary earners no longer have to file an IR5 return.

According to Inland Revenue figures, that change spared about 1.2 million of us from an annual bout of form-filling.

While only a masochist could regret the IR5's demise, the change means the onus is now on us to file a new claim form if we want any rebates.

Taxpayers who are still obliged to file an IR3 form - because they earn income that is not taxed at the source - must also claim any rebates on the separate form.

The result can be seen in the numbers seeking rebates.

In 1998-99, the last year of the old tax system, 533,177 taxpayers claimed $96.2 million in rebates.

The following year, with IR5s no longer required, 427,410 claimants got back $90.1 million.

In other words, 105,767 fewer claimants - one out of every five who used to claim - decided it was not worth the bother.

The total paid out in rebates was $6.1 million less.

In a tax system that raked in some $34 billion, $6.1 million more or less is a drop in the bucket.

But, even shared among 106,000 or so taxpayers, that $6.1 million would have been enough to pay them a rebate of about $57.50 apiece.

That's not exactly a fortune, but it's better than the proverbial poke in the eye, and more than most of us are likely to earn for a few minutes of form-filling.

The fact that the value paid out in rebates had been rising until 1999-2000 suggests that the fall happened because most taxpayers were no longer forced to fill in a return.

When you had to fill in an IR5, you might as well claim any rebates at the same time. But with the legal incentive removed, inertia apparently took over for many taxpayers.

The fall in the number of rebate claims would have been much sharper but for the fact that the Government made a last-minute decision to extend the deadline for filing claims.

In most cases, rebate claims must be made by the end of September, but last year that deadline was extended to the end of December. Announcing that extension at the end of last August, Revenue Minister Michael Cullen said the message about changes to the system was not getting out clearly enough.

With the deadline looming, he said, only $60 million in rebates had been claimed and taxpayers were at risk of missing out on $35 million or so.

But that extension was a one-off. This year the deadline is September 30 once again. If taxpayers are as slow to claim as they were last year, many more could miss out on their rebates.

Don't blame Inland Revenue. The department posted about 700,000 claim forms last year to taxpayers who had claimed rebates in the previous two years.

And in November it followed up by sending another 300,000 forms to people who had already received one but who had not lodged a claim, along with explanations of the new system.

This year it won't make quite the same effort, although forms will be sent to anyone who claimed last year, and there will be an advertising campaign explaining the system for claiming rebates.

If you don't get a form, you can ask for one (see "You're Entitled").

Last year the IRD quizzed taxpayers who received rebate claim forms but did not bother claiming.

Most of them - 58 per cent - said they had no claims to make, or not enough to make claiming worthwhile. Another 11 per cent said they had not kept the necessary receipts, 8 per cent just couldn't be bothered and 6 per cent said either it took too long to complete the form or they didn't know how.

For once, the answer is in your hands - if you're entitled to a rebate, claim it. If you don't need the money, you could always give it to charity.

And if you can't claim because you didn't keep receipts for your charitable donations, at least resolve to be a little more organised in the year ahead.

Compared with taxpayers in most parts of the world, we don't have many opportunities to claim anything back from the taxman. Why ignore one of the few chances we have?

Claiming what's yours - the rules


You can claim a total of up to $810 a year in rebates. To qualify, you must have had taxable income and donated $5 or more to an approved charity or paid for childcare or a housekeeper (under certain conditions).

Donations:


You can claim a third of any donations, up to a maximum claim of $500.

You must have given the money to an approved charitable organisation, an approved New Zealand religious organisation, medical research schools and universities, approved overseas aid funds, schools, school boards of trustees or parent teacher associations. To qualify, a school must be a state school - including integrated schools - or approved as a charity for tax purposes. Only donations qualify for the rebate; you can't claim tuition fees or payments for school trips or other specific activities.

Receipts must be attached to the claim form.

If you donated more than $1500, your partner may also claim up to $500.

Childcare / housekeeping:


You can claim a third of these costs - in some cases - to a maximum claim of $310.

Childcare costs qualify for a rebate if any of these circumstances applied during the tax year:

* You were a single parent, and your child was under 18 or unable to work because of a disability.

* You and your partner were both working (unless you are separated).

* You and your partner were disabled or physically unable to care for the child.

You can claim housekeeping expenses if you or your partner were disabled or physically unable to do housework and paid for a housekeeper.

You do not need to provide receipts when applying for this rebate - but keep them in case IRD asks for them later.

Things worth knowing:


* Claims must now be made on the new rebate claim form (an IR526 form, to be precise).

* Those forms are automatically sent to anyone who claimed a rebate last year.

* If you don't receive a form by the end of this month, or know you didn't claim last year, call 0800 257 773 and ask for one (have your IRD number ready).

* The deadline for rebate claims is September 30, except in exceptional cases.

* File the rebate claim separately, not with an IR3 return or any other documents.

* The rebate can be paid into your bank account, or used to offset tax you have to pay; you can't receive it as a cheque.

* Only the rebates for donations and childcare or housekeeping expenses can be claimed in this way. Use your Personal Tax Summary (if you previously filed an IR5) or an IR3 to claim other expenses - for example, fees paid to someone to complete your return, the cost of income protection insurance or interest on money borrowed to invest.

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