The Taxman may come knocking
A large percentage of audit targets used to be selected randomly. Time has certainly moved on and Inland Revenue (IR) now has much more sophisticated methods of targeting non compliers through methods such as ‘data mining’. For example the Land Information New Zealand (LINZ) database could be searched for entities that transferred more than a certain number of properties. This information could then be used as a starting point for targeting entities/individuals who may not have complied with the land sale provisions. IR has several specialist units set up solely for reviewing land transactions.
Another example where IR is likely to use a focused technique of audit selection is in relation to recent changes relating to foreign superannuation repatriated to NZ. There are a number of databases IR can search that will provide a telltale sign of who withdrew what when, which will then be data matched with tax returns.
The following list includes the main issues that IR has been reviewing recently:
- Continuing review of land transactions. Typically the purchase is with the intention of resale, subdivisions or for dealers and developers.
- Individuals who have overseas interests. This is particularly relevant for those with overseas credit cards and bank accounts.
- Overseas pensions and superannuation schemes, with an emphasis on those who have withdrawn lump sums.
- Entities with losses carried forward. The question is asked as to how the losses eventuate and how are they being utilised.
- Exchange gains or losses on loans and mortgages denominated in foreign currency. IR is matching information on Non-Resident Withholding Tax (NRWT) which is essentially interest and approved issuer levy payments with tax returns.
IR has always received ‘anonymous information’ regarding false tax positions. Often from disgruntled ex partners or ex employees. They do follow up on this information. So while the IR selection process is certainly more targeted based on risk, there will always be a certain element of serendipity. Even though your door may not have been ‘knocked on’ for a number of years, you cannot rule out it happening tomorrow.
To ensure you are protected in the event of a random audit, enquiry, investigation or review instigated by Inland Revenue, talk to your accountant about Audit Shield.
All of my clients have recently received their annual offer of “Audit Shield” and, no doubt, many business people within the Valley would have received a similar offer from their own accountants. With Inland Revenue now using data mining techniques, your chances of a risk review and audit are now much higher. To those of you who have accepted audit insurance for the coming year, you can now rest easy. To those of you not sure if you need it, let me tell you a story.
I recently had a client who, for whatever reason, did not take up my offer of “Audit Shield” last year. Inland Revenue choose to audit them and they received an invoice from me for a little over $3,000.00. This was for my time spent gathering the required information, time spent putting it together and then time spent with the auditor. It was no small task. He could have saved himself a lot of angst and money had he taken out “Audit Shield” in their case at a cost of $185.00.
Companies Amendment Act
For those of you who have relies or friends who are considering moving overseas on a permanent basis it may be worthwhile bringing the following to their attention.
“All New Zealand companies will be required to have at least one director that either lives in New Zealand; or lives in Australia and is a director of a company incorporated in Australia by 28 October 2015.
When filing annual returns after 28 October 2015 New Zealand companies will need to indicate whether any director living in Australia is also a director of a company incorporated in Australia. They will also need to provide details of one of those Australian companies (ACN, name and registered office address).”
By Dennis O’Grady
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Keep an eye out for September’s article!
TAX DATES TO REMEMBER
- 20th August. 2015 - monthly employers PAYE payment…
- 28th August. 2015 - Bi monthly GST Return for Jun/Jul 2015…
- 28th August. 2015 - 1st Instalment 2016 Provisional Tax …
haven't got the money to pay it?... check out www.tmnz.co.nz
Posted on Sat, 1 August 2015
by Shawn O'Grady