Since 2014 at Moneyworks we have had the privilege of working with our technologically advanced accountancy firm Beany.
Beany have used technology to make the preparation of annual accounts and tax returns so much quicker, easier and cost effective. Part of this work is their interface that they use with Inland Revenue, which reduces the manual work and exchanging of files.
We have introduced a number of our clients to Beany - let us know if you would like an introduction.
Moneyworks and Beany are continually reviewing how technology can assist our businesses, and so is Inland Revenue. A major overhaul of the way that Inland Revenue collects information form employers in April 2019 will mean that Inland Revenue can use the technology to issue automatic tax assessments.
They estimate that 1.67 million people will get a refund (of whom 720,000 had previously not sought one), a further 263,000 will get a bill (of which 115,000 will receive a tax bill for the first time). This will have a direct impact on the tax refund industry - see more information here.
115,000 Kiwis to get tax bill for first time
However, as Terry Baucher points out in that article, this may create problems for people where their tax affairs are a little more complicated than the technology can deal with.
As an example:
He said some of the underpayments of tax would relate to people being on the wrong tax code.
People who worked more than one job but do not use an S or secondary tax code for their second or third jobs were at risk of underpaying.
Baucher said those who earned income on investments and were not paying withholding tax at the right rate could also face a bill.
So we contacted Beany and asked them a few questions about the impact that these changes are likely to have on our clients.
Our questions: How are IRD going to deal with people who have deductible income protection insurance premiums, donations, and other deductible expenses (eg, our membership fee, their investment portfolio fees).
Will IRD be getting feeds from the insurers and investment providers, or will those people still need to do a tax return?
What happens if they are due a refund when all those things are taken into account, but IRD doesn't think about that and send them a tax bill?
Beany's reply:
If the IRD do automatically assess they will send you this assessment and if it is incorrect you can then change this - they have confirmed it will be easy to change but did not really go through the steps for this - if as part of this process they incorrectly refund you for the year and it then needs paying back you will have until the Terminal Tax due date to repay without incurring any interest or penalties.
Summary
It is vital that you have the correct tax rates on your KiwiSaver, bank accounts, with your employer an on any investments that you hold. If you would like to check your tax rates for investments that you have in place through Moneyworks, please email us by clicking here. If you have any queries about these changes, please contact your adviser or accountant directly.
