AGENTSanswers - 2002

Issue 40 December 2002

• Seasons greetings
• E-File over the Christmas break
• Call centres' availability over the Christmas and New Year break
• New rules for taxpayer financial relief
• New standard practice statements
• Internet tax payments
• FBT fourth quarter returns - requests to amend rate used
• Views sought on fringe benefit tax review
• FBT filers' prescribed interest rate for loans
• Consultation begins on tax compliance costs for smaller businesses
• E-Filing over the internet
• Review of the taxation for Maori authorities
• Requests for changes of balance date
• Registration and cessation processes
• Elections to be a provisional tax payer for the 2002 year
• ACC update
• Tax Agents' CD Rom questionnaire results

Seasons greetings

This is the last issue of AGENTSanswers for 2002, available under the Newsletters and Bulletins section of our website, so we would like to take this opportunity to wish everyone a Merry Christmas and a Happy New Year. We hope you and your families have a safe and enjoyable holiday break and we look forward to working with you again next year.

E-File over the Christmas break

Please note that the E-File system will be unavailable from midday 24 December to 8 am, 6 January 2002. You will not be able to E-File during this period. We apologise for any inconvenience this may cause you. This downtime is to allow annual maintenance to take place.

Call centres' availability over the Christmas and New Year break

23 December 2002	normal hours
24 December 2002	normal hours
25 December 2002	closed
26 December 2002	closed
27 December 2002	8.30 am to 5 pm
28 December 2002	closed
29 December 2002	Sunday (closed)
30 December 2002	8.30 am to 5 pm
31 December 2002	8.30 am to 5 pm
1 January 2003	closed
2 January 2003	closed
3 January 2003	normal hours

New rules for taxpayer financial relief

The Taxation (Relief, Refunds and Miscellaneous Provisions) Bill containing the changes to taxpayer financial relief provisions was enacted on 17 October 2002. Enactment was delayed due to the pre-election dissolution of Parliament in June and, as a result, the application dates of several measures in the bill had to be amended. The application date for the new rules on taxpayer financial relief has now been adjusted from 1 July to 1 December 2002.

The new taxpayer financial relief rules provide a framework for Inland Revenue to consider how best to provide relief for taxpayers in financial difficulties.

They provide us with considerable flexibility in our approach to debt recovery and allow us to reach a decision which is both right for Inland Revenue and the taxpayer.

The effectiveness of the changes relies on and encourages taxpayers to contact us as early as possible if they think they will have trouble paying their tax bill or are already in debt. The key features are:

• Inland Revenue's role is to maximise the recovery of outstanding tax, but not if the debt recovery represents an inefficient use of Inland Revenue resources or the recovery would place a taxpayer in serious hardship.
  
• If Inland Revenue can collect more of the debt over time through an instalment arrangement than from a bankruptcy or liquidation, Inland Revenue is required to enter the instalment arrangement and any amount not recovered under the arrangement is written off as unrecoverable.
  
• Fairer instalment arrangements, including provision that late payment penalties stop when taxpayers contact Inland Revenue requesting financial relief.
  
• Amounts not recovered are written off permanently, and generally cannot be reinstated.
  
• The definition of  "serious hardship" in the legislation lists both circumstances which meet that test and circumstances which do not.

Paying a tax bill by the due date is obviously still the best option but if people can't pay, the sooner they contact us, the less it will cost over time. There are a range of options available for paying amounts due. We take a taxpayer's individual circumstances into account in reaching a decision and the form of relief granted depends on the applicant's financial situation.

The options for payment are:

• payment in full
  
• an instalment arrangement where a taxpayer repays an agreed amount over time
  
• writing off an agreed amount if we determine that payment in full would cause a taxpayer serious hardship
  
• a combination of an instalment arrangement and a serious hardship write-off.

The new rules build on the recent amendments to the late payment penalty imposition structure. All of these amendments are aimed at encouraging taxpayers to comply with their tax obligations.

Taxpayers may apply for financial relief either in writing or over the phone. We will discuss their current circumstances, consider their payment history and their ability to meet future obligations, and determine the best option for dealing with the amount due.

New standard practice statements (Instalment arrangements for payment of tax debt RDC-610 and Writing off tax debt RDC-620) and operational guidelines for staff have been put in place to support the legislative changes.

If you would like to discuss the financial relief options for a client in debt, please phone us on the tax agents' freephone number.

New standard practice statements

RDC-610 Instalment arrangements for payment of tax debt
RDC-620 Writing off tax debt

The above standard practice statements set out the Commissioner's practice on providing relief by way of instalment arrangement and write-off when taxpayers are in financial difficulties. Standard practice statement RDC-610 replaces Arrangements for payment of tax debt RDC-6.1.

These standard practice statements incorporate recent legislative changes to the relief provisions contained in the Tax Administration Act 1994 and apply from 1 December 2002. They can be found in Tax Information Bulletin (TIB) Volume 14, No 11. You can find this under the Newsletters and Bulletins section of our website.

Internet tax payments

Three banks are now offering a tax payment service on their internet sites which meet our electronic payment requirements. These are:

• ANZ
  
• Kiwibank
  
• Westpac.

Customers of these banks are able to make payments to Inland Revenue for most revenues, including student loans and child support. Payments relating to income equalisation and most duties cannot be made this way.

If your clients are making payments over the internet, it is important that they check with their bank to find out what their daily cut-off time is for processing payments so that due dates are not missed.

FBT fourth quarter returns - requests to amend rate used

The Taxation (Relief, Refunds and Miscellaneous Provisions) Act 2002 amends section ND 1 of the Income Tax Act 1994. The amendment allows an employer who has filed their fourth quarter, annual or income year FBT return, using the 64% rate to subsequently amend their return using the multi-rate.

This means an employer can request to amend their FBT liability by providing the necessary information so that it can be calculated using the multi-rate. The employer must provide the information during the two months that occur after the date of the notice of assessment for the final quarter, or the year.

An employer who has received a notice of assessment for the final quarter of the 2000/01 or the 2001/02 income years before 17 October 2002 has two months from 17 October 2002 to request an amendment to the fringe benefit liability.

Views sought on fringe benefit tax review

You are invited to put forward your concerns about Fringe benefit tax (FBT), as the first step in the Government's FBT Review. The review will focus on reducing the difficulty and cost to employers of complying with FBT, while ensuring the revenue base is maintained.

FBT was introduced in 1985 to prevent people converting taxable income from employment into non-taxable income such as cars. It ensures that the correct amount of tax is paid on employment income, no matter what form it takes.

This is the first major review of fringe benefit tax since it was introduced, and the Government wants to make sure the review considers issues that are of real concern to employers and businesses. We know, for example, of several concerns relating to motor vehicles - including valuation, home-to-work use and work-related vehicles. We want to know what other areas of FBT are of concern to employers.

As a first step, the Government is consulting with employers and other interested parties about what issues they think should be covered in the review, and how fringe benefit tax compliance costs can be reduced.

The next stage of the review process will be the release of a discussion document in mid-2003, setting out proposals for change, followed by opportunities to comment on that document. Any legislative changes resulting from the review will be introduced in 2004.

The deadline for submissions is Friday 13 December. Interested parties should email their comments to us at policy.webmaster@ird.govt.nz or write to:

Fringe Benefit Tax Review
The General Manager
Policy Advice Division
PO Box 2198
Wellington

FBT filers' prescribed interest rate for loans

The prescribed rate of interest used to calculate the fringe benefit value of low-interest, employment-related loans has gone down from 7.98% to 7.83% for the quarter beginning 1 October 2002. The change was approved by Order in Council on 18 November 2002.

Consultation begins on tax compliance costs for smaller businesses

The tax-related compliance costs of smaller businesses are the focus of a wide-ranging consultation process. We have organised a series of events for hearing the views of small and medium-sized businesses about the tax compliance cost problems that concern them most.

This will include:

• 30 one-on-one visits to businesses, where we will work alongside businesses when they undertake their tax compliance work. This will be completed by the middle of December 2002.
  
• A series of 15 focus groups, run by an independent research company with six to eight taxpayers representing customer groups such as GST registrants, larger employers and small employers, in cities and towns around the country.
  
• A telephone survey, conducted during December, of more than 2000 small to medium-sized businesses and tax agents.
  
• A website where taxpayers not consulted in the visits, focus groups or telephone survey can submit their views. This survey is open to anyone who wants to participate and is available at www.ird.govt.nz/otherservices/compliancesurvey.html (survey now closed)

The information gathered will feed into our Small and Medium-sized Enterprise Project. It will form the basis of a discussion document, scheduled for release in the middle of next year.

E-Filing over the internet

In March of this year we carried out a review of the E-File service to look at its infrastructure needs and to identify any risks that might impact on its availability.

Approximately 900,000 income tax returns are currently E-Filed with us each year. The ability to file returns in bulk, to send E-Filed correspondence and to receive information from the Tax Agent Management System means that E-File provides a unique service that will not be superseded in the foreseeable future.

With these attributes in mind, two major outcomes of the review were that our servers that support E-File need to be updated, and more importantly, tax agents need an E-File option over the internet.

The internet option will allow information to be transmitted over the internet rather than via the PACNET service.

Work is already well advanced towards achieving both of these goals.

We have been talking to the E-File software developers to keep them up-to-date with what is happening and we will be working closely with them to make sure there are no disruptions to the service when the changes go live.

We will provide more information about this nearer to the time that this service is ready.

Review of the taxation for Maori authorities

This review has examined the specific rules applying to organisations that are known as "Maori authorities". It also included a review of how aspects of the law of charities, such as the "public benefit" test, apply to Maori organisations seeking exemption from tax on the grounds of charitable status. The review focused on the income tax treatment of Maori organisations. It did not extend to how these entities must account for GST; nor did it extend to how certain income sources (such as Treaty settlement payments) are to be treated.

The proposed changes for Maori authorities are included in the Taxation (Annual Rates, Maori Organisations, Taxpayer Compliance and Miscellaneous Provisions) May 2002 Bill.

We will keep you informed when the proposed legislation changes are enacted. You can view tax information for Maori authorities under the Forms and Guides section of our website.

Requests for changes of balance date

Here are some tips to remember about balance dates.

• A change of balance date cannot be approved for a balance date that is earlier than the date of application. A change of balance date is permitted to take effect in the income year in which the request is made or in a subsequent year. For more details, refer to Tax Information Bulletin (TIB) Vol 7, No 13, under the Newsletters and Bulletins section of our website.

• If you are asking for a change of balance date for a partnership, you also need to consider whether the balance date for each partner should be changed. If so, you need to state this in your request.

• Before filing an income tax return, check the balance date we have recorded for your client. You can do this from the following reports:
  AMBR 1002: Filing statistics by return type
  AMBR 1003: Summary of filing statistics for all return types
  
  A return reflecting a new balance date should not be filed until approval for that balance date has been given.

• The September 2002 edition of AGENTSanswers contains information about the different rules for paying provisional tax in a year a client changes their balance date (transitional year). You can find this under the Newsletters and Bulletins section of our website.
  
  There may also be a special calculation of the residual income tax to take into account the portion of the income year covered by the return.

• If your client no longer requires a non-standard balance date and would like to revert back to 31 March, this must be requested in writing.

Registration and cessation processes

What would make the process of registration or cessation of tax types work better for you?

We are currently reviewing the process of registration and cessation of tax types. It is hoped that any changes made will streamline and simplify the current processes for you and your clients.

We have recorded a number of issues which we are considering. We are also very keen to learn what difficulties you have with the current registration or cessation processes, what suggestions you have to improve these, and what you like and want retained.

Please send your comments and ideas to agents.answers@ird.govt.nz by 20 December 2002.

Elections to be a provisional tax payer for the 2002 year

Previous issues of AGENTSanswers have included reminders about making elections to be a provisional tax payer when filing income tax returns.

In keeping with the spirit of the legislation, which allows taxpayers to elect to be a provisional tax payer so they can receive use-of-money interest, we will be continuing our practice of accepting elections for the 2002 year, even if the 2002 income tax return has already been filed.

If you would like to make an election for a client who meets the requirements set out in section MB 2A of the Income Tax Act 1994, contact us and we will update their account.

ACC update

ACC Self-employed invoicing
ACC will start mailing invoices to self-employed customers from late November 2002 until around May 2003. A factsheet providing more details is available by calling ACC's Agent's line on 0800 222 991 or from their publications website under the Related Website section of our site.

ACC CoverPlus Extra information on ACC website
ACC are updating the Agents and Advisors section of their website with all you need to know about ACC CoverPlus Extra when advising your clients.

This information will be available from mid-December at the ACC website for Agents and Advisors under the Related Websites section of our site.

They will also make it easy to download the tools onto your computer desktop.

Tax Agents' CD Rom questionnaire results

Thank you to all tax agents who returned the questionnaires regarding the Tax Agents' CD Rom that was included in September's edition of AGENTSanswers. You can find this under the Newsletters and Bulletins section of our website. These replies have assisted us in the design of the next version which is due for release at the end of March 2003.

The overall response was that the CD Rom continues to be useful and widely used. It is also clear from the responses, that there are a number of issues regarding the CD Rom that need to be clarified. These are:

Fill-in forms
It was our aim to have all the forms on version 4 of the CD Rom to contain onscreen fill-in formats. The majority of the forms are on this version but due to timeframes we could not get them all completed. The forms that are not in a fill-in format are available on the "Web updates" page that can be accessed on the Tax Agents' CD Rom or under the Forms and Guides section of our website.

If you have your CD Rom copied to a network or hard drive you can overwrite the old forms with the new versions. Instructions on how to do this are outlined in the Frequently Asked Questions (FAQs) section of the CD Rom.

Speed of loading main "Forms and Booklets" page
Version 3 of the Tax Agents' CD Rom had the booklets in groups of eight and users had to press scroll buttons (up and down) to go to the next group of publications. In the survey conducted for feedback on version 3, it was suggested that all the forms and booklets would be better in one list.

We incorporated this feedback into version 4 but this unfortunately reduces the speed at which the page loads. We have found that this page will load quicker in Internet Explorer than in Netscape Navigator. Also, you can use the "Tax Categories" page to reduce the number of publications on the page by only choosing a list that is relating to a particular tax type or group.

Filing of tax returns electronically
Inland Revenue is presently working on electronic strategies for taxpayers to file forms electronically. A number of forms can already be filed this way. Please keep an eye on this publication and the Inland Revenue website for new forms that are available for electronic submission.

Once again, we thank you for taking the time to complete and return the questionnaire. If you have any further questions or comments please email us on agentcd@ird.govt.nz

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Date published: 19 Nov 2004

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