Like many people in business, I find Provisional Tax and GST to be one of the more stressful aspects of life. Fortunately - after 17 years !!! I managed to create a system that eliminates the stress and makes my life a lot more pleasant. One of the problems with tax is that the rules are continually changing and it can be difficult to keep up with the new rules.
For our clients, particularly complicated tax rules include Provisional Tax on non PAYE or RWT income, (if your tax liability is more than $2500 a year), Foreign Investment Fund/Fair Dividend Rate Tax (FIF/FDR) on overseas investments and taxation on Overseas superannuation that is brought back to New Zealand.
The power of the IRD to gather information about your situation is enormous and I know that there are other people like me - where putting aside money for taxes happens way before anything other expenditure is undertaken.
However, some people prefer to 'play the game' and challenge their tax liabilities and obligations.
Diana Clement has written an excellent article that highlights the following things (see link to the article below)
- Tax evasion is a criminal offence and dodgers could end up with free board and lodging in prison.
- The IRD can start investigations for all sorts of reasons. It may receive a tip-off. There's even a form, the IR873, for those who want to report tax evasion or fraud anonymously.
- IRD can get access to bank accounts and credit card data held by Kiwis in 51 different countries.
- Last year the IRD asked pension transfer companies for the details of up to 30,000 clients, says Baucher. It waited until the deadline to declare the transfers had passed. Anyone who hadn't made appropriate declarations was sent an audit letter.
- Tradespeople, shop owners and others who do cash jobs sometimes get a nasty shock.
- When it comes to tax, Kiwis are guilty until they prove their innocence.
- For every $1 spent by the IRD on investigations, about $5 is recovered. Its recent hospitality industry campaign netted $146 million in "hidden economy" discrepancies in the 2014-15 year to June 30.
- The IRD also has a 52-member property compliance team that focuses on landlords and speculators who avoid or evade tax.
- However you're caught, ignorance of the tax laws is no excuse.
- Some audits are just random and don't relate to specific projects. It's just because "your number is up".
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For more blog entries that you might be interested in:
Retirement Planning – Why assumptions are important
By Carey Church
