Kirsty Keating, head of EY Law, says people who make an effort and stick to an arrangement with the IRD are likely to be treated better.
Kirsty Keating, head of EY Law, says people who make an effort and stick to an arrangement with the IRD are likely to be treated better.
Paying taxes is inevitable but there are ways to ensure you keep more of your money in your pocket this tax year. Tamsyn Parker talked to two tax experts to get their tips.
Be smart and more of your hard-earned money will stay in your pocket this year.
Kirsty Keating - head of EY Law
1. Pay up or refund?
Kiwis no longer have to fill out a tax return every year but that doesn't mean you can sit back and do nothing. Keating says some people can get caught out by bonuses which trigger the need to file a return and pay more tax. Likewise, she says, if you think you have paid too much tax you can't rely on it automatically being paid back to you.
Some people like to use a tax refund company to help them get money back but Keating says they need to be aware that the IRD checks their tax history for the previous four years to ensure they have paid the correct amount before paying out for any refund.
"They don't dish up any money before doing the checks."
Keating says one of the ongoing hot areas for the IRD is property transactions where the most common mistake is not having all the paperwork to back up your actions.
"Make sure it matches up with your bank and that you are telling the same information to your bank as you are to the Inland Revenue."
Keating says the IRD has some pretty draconian powers which include contacting your bank directly to ask what is going on.
3. Trust rules
Everyone seems to have a trust these days but it's important to make sure you are following the rules and documenting any decisions correctly.
When you have a meeting for the trust the resolutions need to be written down.
Keating says if you are treating trust owned property like personal property it is much easier for the IRD to treat it like that too for tax purposes.
4. Coming home or leaving nz?
If you are returning home after a stint living overseas check your tax obligations.
If you are on a lower rate than you should be you will have to pay the difference at the end of the tax year unless you notify your provider.
7. Pay less investment tax
Make sure your money is invested in a way that is tax efficient.
If you have money sitting in a bank account or a term deposit you could pay less tax if it is invested through a PIE fund.
That's because interest earned on money in the bank is taxed at your personal rate which could be as high as 33 per cent while earnings on money invested in a PIE is taxed at a maximum rate of 28 per cent.
8. Change in income?
If you are a pay tax as you earn (PAYE) employee there aren't any ways to reduce how much you are paying but you may be due a tax refund if you have changed your income in the last year. This could be due to changing jobs, taking a secondary job or taking time off without pay (ie maternity leave).
If you have had a change of income check you are being paid the right level of family support. If you are being paid too much ensure it is altered otherwise you will have to pay it back. Check the calculators here.
