Mila Amber sold the property at 46 Weka St, Nelson in December 2017. Photo / Google Maps
Mila Amber sold the property at 46 Weka St, Nelson in December 2017. Photo / Google Maps
A Nelson woman who tried to avoid paying a huge tax bill by selling her property in an “unusual” way may have lost more than half a million dollars in the long run.
Mila Amber had been living at the property at 46 Weka St, Nelson and operating a bed and breakfast out of it until the end of 2017, but developed a “scheme to defeat the IRD” after being told she owed at least $110,000 in taxes, penalties, and overpaid tax credits.
The figure was later amended to nearly $365,000.
Mila Amber ended up worse off financially than if she had just paid the bill, a tax consultant said.
What followed was a “staggering” plan that left the Inland Revenue Department (IRD) unable to recover the money without court intervention.
Less than a week after being told how much she owed the IRD, Amber entered into a written agreement to sell the property to a UK-based telecommunications company for $847,000 on the condition the buyer did not have to pay a deposit or any interest, and would pay off the property annually over 25 years with the first payment due a year after settlement.
The terms of the sale meant the Inland Revenue Department (IRD) could not claim back debts from Amber in any meaningful way without the court’s intervention.
Tax consultant Terry Baucher, who also hosts The New Zealand Tax Podcast, said Amber’s actions were “staggering”, and left her significantly worse off financially than if she had just paid her bill.
The decision was handed down by the Wellington High Court.
In the recent Wellington High Court decision, Associate Judge Owen Paulsen noted on an interest rate of 4 per cent, had Amber received the full amount of money for the property at settlement and invested it, she would have made more than $30,000 in interest in the first year alone.
Instead, Amber remained living in the property and paying rent with a reduced ability to make income.
Kevin Collins, the director of Elite Telecommunications, the company that bought the property, told the court if interest had been payable on the sale, Amber would have had to pay tax on that.
“It is hard to see how it is beneficial to avoid tax by foregoing all income,” Judge Paulsen noted in his decision.
He cancelled the sale and transferred ownership of the property to the Official Assignee, part of a government body that can sell people’s assets to pay back their creditors.
Judge Paulsen said in his decision Elite should not be able to benefit from the property after participating in a “scheme to defeat the IRD”.
People should not underestimate the IRD, tax consultant Terry Baucher said. Photo / 123RF
Baucher told the Herald the story was “wild”.
“I’m still trying to work out what they thought they were trying to do,” he said.
“I think this is an example of people thinking the Inland Revenue are stupid . . . It’s completely underestimating it.”
But Amber’s actions were an “absolutely extreme case”.
Baucher said if Amber had sold the property and paid off her debts, she would have had a deposit for another home. Assuming she did not still owe a mortgage on the property, she had lost out on at least half a million dollars, he estimated.
On top of that, she had bankruptcy on her permanent record and would remain under the watchful eye of IRD if she ever wanted to start a business again. Baucher said the ongoing psychological pressure from such a situation would also be “pretty grim”.
Baucher said taxes could be very “triggering” for people and bring out particularly stubborn behaviour, but he always told clients and podcast listeners if they were having trouble, they should get in front of the IRD at the earliest opportunity.
“It is frustrating dealing with Inland Revenue and the penalties that can be charged do seem extreme . . . there is no substitution for engaging early.”
IRD had vast data-gathering capabilities and collection powers, and people who tried to avoid tax were doing so “at their peril”.
He said the IRD was usually willing to engage “realistically” with people who were being reasonable, and could often be amenable to waiving certain penalties.
Collins’ lawyer and Amber have both been contacted for comment.
Melissa Nightingale is a Wellington-based reporter who covers crime, justice and news in the capital. She joined the Herald in 2016 and has worked as a journalist for 10 years.
