Over the past 12 months, the team at Perriams have put together their top 10 most frequently asked questions from you, our clients. Those questions are now below and whilst it’s another 9 months until Christmas we have provided you with answers to these. We hope that you get some value out of these.
Q: When will I get a reminder to pay my tax?
A: We aim for three months before the due date.
Q: I have paid my GST/PAYE etc. to Inland Revenue but I can’t see the payments. Where is it?
A: This happens for many reasons. Some common errors include an incorrect IRD number or an incorrect tax type or period. A quick call to us letting us know the day you made the payment, who you bank with and the amount, and we can call Inland Revenue to resolve this for you.
Q: How long does it take to get my refund from Inland Revenue?
A: Once your tax assessment is completed, any refund is usually paid within a few working days. However, the full processing time for an income tax refund can take up to 10 weeks. GST refunds are generally processed faster and paid within 15 working days of receiving your return. The exact timing depends on whether Inland Revenue needs to review or verify any of your information.
Inland Revenue provides detail on their Current Processing Times here:
https://www.ird.govt.nz/contactus/current-processing-times
Q: I paid my provisional tax, but Inland Revenue refunded it, why?
A: This can happen if you have paid more than required during the year or your filed tax return for the year has resulted in a lower tax liability than expected.
Q: Why is my tax payable on 7 February and not 7 April?
A: As Tax Agents we have an extension of time arrangement with Inland Revenue to allow us to file tax returns up to 31 March of the following year. With this arrangement, the terminal tax is payable by 7 April the following year. An extension of time may be withdrawn if a return is not filed by 31 March. If this is the case then the income tax return would be due by 7 July of the same year and the terminal tax would be due for payment by 7 February of the following year.
To get your extension of time reinstated, your next tax return must be filed 7 July and then we can ask Inland Revenue for approval.
Q: Why do I have late payment penalties and interest for only being a few days late with paying and/or filing?
A: Inland Revenue policy is to charge late payment penalties in stages – 1% the day after the due date and 4% seven days later.
Interest is charged from the day after the original due date on outstanding tax of more than $100 (including penalties). Interest is calculated daily and the current rate Inland Revenue charge is 8.97%.
Late filing penalties (LFP) vary depending on the tax type:
Q: Why do I have to pay ACC levies?
A: ACC levies are mandatory for all workers and business owners to fund the “no-fault” personal injury insurance scheme covering accidents at work, work related or outside of work. ACC levies are paid through the PAYE system by employees or as a lump sum after filing the tax return by self-employed. ACC levies are based on the net income and the industry risk level. If unable to work, ACC pays up to 80% of your earnings, or on an agreed income cover policy, 100%.
Q: What is Dividend Withholding Tax (DWT) and why do we have to pay it on a dividend?
A: Dividend Withholding tax is a top up tax on dividends to cover the extra difference between the individual tax payable rate of (33%) on the dividend and the tax previously paid on those profits by the company (up to 28%). This means your dividend income is fully tax imputed at 33%. If your total taxable income is under $180,000, you have no further tax to pay.
Q: Why have we got provisional tax to pay this year?
A: When your residual income tax (this being the tax on your income that was not taxed at the source) is over $5,000, Inland Revenue requires you to pay provisional tax for the following tax year.
What this means is that instead of paying all of your tax for the year on the 7th of April (the terminal tax due date), your tax will be paid in three instalments: 28 August, 15 January, and 7 May (or two instalments if you are registered for GST on a six-monthly basis).
This allows you to manage your tax in smaller amounts throughout the year instead of one large payment.
Q: Do I have to tell Inland Revenue about my rental income? All the money just went to the mortgage and I never made a profit.
A: Inland Revenue treats the rent as taxable income less the allowable expenses and will need to be included in your tax return. The fact the rental income went towards the mortgage doesn’t make it tax-free as this will likely include principal repayments, and these are not tax deductible.
Also, please note if you don’t declare the rental income, you could face penalties or interest later, so it’s best to get it sorted now.
