Trust us on ACC says the IRD

By BRIAN FALLOW


WELLINGTON - The Inland Revenue's IR3 guide contains a couple of errors in the calculation of ACC levies and premiums.

Follow the guide and you could pay 10 times too much.

But don't worry, says the IRD, its system will automatically check the calculations.

"The mistake will be picked up and corrected in the processing stage," said returns development project manager Paul Stempa.

One of the errors was pointed out to the bifBusiness Herald by Dr Brian Earnshaw of Mt Roskill. As a physicist, Dr Earnshaw is careful about decimal places.

Not so, it seems, the IRD.

The earner premium, which employees pay to cover the cost on non-work related injuries, is built into PAYE deductions and set at 1.4 per cent (1.4c in the dollar). But in the course of calculating what portion of the PAYE was ACC rather than tax, IR3 taxpayers are told by the guide to multiply the liable income by 0.14. That is 14 per cent, 10 times too much.

Some people might realise the mistake at that point, Mr Stempa said, as the resulting amount would be much larger than the earner premium usually is. The most it can ever be is $1162.

The other error relates to the earners' account levy, which is levied to pay for the "tail" or continuing cost of non-work injuries which occurred before July 1 last year. Again the guide is out by a factor of 10.

Mr Stempa said Inland Revenue would inform accountants and other tax agents of the errors. "We are investigating what else we can do to let customers know."

This is the first year most wage and salary earners will not have to file a tax return - a system which relies on wages, salaries, interest payments and dividends being accurately taxed at source.

But those who receive income from such sources as self-employment, rents, cash jobs or overseas interest, or who are leaving New Zealand part-way through the year, still need to file an IR3 return.