New year - end tax obligations for individuals
The Bill proposes a number of amendments for the end of year income tax obligations of individuals and some of the processes that will be undertaken by Inland Revenue (IR). In summary, the proposed changes are:
- IR will make a pre-populated account available to each individual containing the income information that IR holds for the individual.
- IR will calculate the refund of tax to pay without the individual needing to provide any additional information.
- Individuals will be required to provide any income information other than reportable income to IR subject to some de minimis rules.
- Individuals will be able to provide other relevant information such as deductible expenses and tax credit information to IR.
- Individuals will be required to provide or correct reportable income where they know or have reason to know that the reportable income information provided to IR is incorrect.
- And individual's tax assessment will occur when they have confirmed the tax information is complete, when IR is reasonably satisfied that the information is complete, or when IR is not satisfied that the information is complete and issues a default assessment.
- Individuals and IR will be able to make corrections to the information held where they become aware that it is incorrect or incomplete and there will be error correction processes for adjustments made before and after an assessment has occurred.
- The end of year income tax process will replace the current personal tax summary and will replace the IR3 tax return processes over time as the paper IR 3 is phased out.
Individuals will be required to provide information on their other income (income other than their reportable income) and will be able to provide information on deductions and tax credits. This additional information will be added to the individual's pre-populated account (now their adjusted account) and will become the individual's self-assessment.
Changes for refunds and amounts of tax to pay
The Bill also proposed a number of amendments to improve the process for issuing refunds and advising individuals that they have tax to pay or are due a refund. In summary, the proposed changes are:
- IR will calculate whether people who are not expected to be required to provide information to IR are entitled to a refund or have tax to pay
- Refunds will be paid out without individuals having to request them.
- IR will issue income tax refunds by direct credit, unless that will result in undue hardship or is not practicable.
- Amounts of tax to pay arising from withholding tax regimes where tax was withheld in accordance with the PAYE rules, or where tax was withheld at the rate corresponding to the individual's marginal tax rate, will not have to be paid.
- Amounts of tax to pay arsing from a withholding tax regime where less than $200 of income was taxed incorrectly will not have to be paid.