AGENTSanswers - 2005

AGENTSanswers Issue 65 January 2005

• Online services
• Look at account information
• Confirmation of personal tax summary amounts
• Adjustments to E-Filed returns
• Availability of L letters
• Shortfall penalty reductions
• GST (IR306) and employer (IR344) registration forms
• Does your client own a rental property overseas?

Online services

We have a selection of secure internet-based services that make it easier and faster for you to exchange information with us. You can register for an online services account and apply for the following services:

• Send and receive mail - allows you to send us information and receive our reply online.
• File employer schedule - enables you to send employer monthly schedules to us online.
• Look at account information - enables you to view account balances, transaction details and due dates online for your clients. If you want to register using a tax agency's IRD number you will require a visit from your agent account manager. Further information on this service is provided below.

For more information about the above, and the other online services available, check out the tax agents' area on our website.

We are interested in receiving feedback on our new website. So please send any comments you have to
content.management@ird.govt.nz

Look at account information

The look at account information service has received a good response with users telling us it's a better, smarter and faster way to get information.

Your agent account manager will have mentioned the service's emphasis on information security and the need to have internal processes in place to protect that security. So, have you thought about what happens to a user's access when they leave, or you transfer your client list or cease business?

• Do you have a process in place to cancel a staff member's user ID when they leave?
• Do you have a process in place to cancel user IDs when moving your client list from one IRD number to another?
• Have you thought about what will happen to active user IDs when you cease business?

The implications of not having a process are that the staff member may continue to access all the online services, eg file an employer schedule, send and receive mail and look at account information applied for during registration. Your personal and/or business account information and client accounts may also be assessed.

You should make cancelling a user ID online part of a staff member's exit process. However, if a staff member has left without this being done, or the business has already ceased, or the client list has been transferred and it is not possible to ask users to cancel their user IDs online, phone us on 0800 473 249 and ask them to cancel the user IDs.

Confirmation of personal tax summary amounts

Our policy of not confirming information on a personal tax summary (PTS) at the time of a request relates to the issue of protecting the interests of taxpayers. This process is applied across the board and includes the situation where you request a PTS and during the phone call modify details (interest, dividends etc) on it.

There is a risk that you may not have all the relevant information on hand at the time of the request. In a situation where you may not want to confirm the PTS, but want to confirm that your assessment calculation matches ours, the same risk applies. Confirming the PTS or acknowledging what the assessment may be, could create an expectation about an outcome which may later change.

Adjustments in E-Filed returns

When E-Filing returns for clients who receive family assistance, you may need to provide information at the end of the year for certain business adjustments, such as losses brought forward from a previous year, that must be made to correctly calculate their family assistance entitlement.

When a paper IR3 return is filed, the business adjustment information is included separately on an Adjusting your business income for family assistance (IR215) form which is sent in with the return. A similar process is followed where rental income is received, a Rental income (IR3R) schedule is filed with the return. This process is not available through E-File.

When E-Filing an IR3, details of any business adjustments need to be sent as E-Filed correspondence attached to the return. This information does not form part of the return and cannot be transmitted within the return details.

The required adjustments will be treated as correspondence and processed along with th return.

Availability of L letters

Just a reminder that we will be "turning off" L letters at the end of January 2005-they will be available again from early August 2005. This means you won't be able to request an L letter to be sent to your client during that period.

If you have any clients who have not yet provided you with their records and you would us to send them an L letter, you will need to make your request through INFOexpress before the end of January.

Remember, by issuing an L letter, the client is removed from your performance statistics until the return is filed.

Shortfall penalty reductions

You are reminded that shortfall penalties are reduced by 50% if, within the preceding specified probation periods, the taxpayer has not been liable to pay a shortfall penalty on a tax shortfall for the same tax type identified during an Inland Revenue audit.

If a taxpayer had been liable to pay a shortfall penalty for an earlier tax shortfall (which was not reduced for voluntary disclosure) and was eligible for a previous behaviour reduction, any subsequent shortfall penalties for the same or a lesser shortfall penalty imposed within the probation period, for the same revenue type, will not qualify for the previous behaviour reduction.

In this case, voluntary disclosure includes alerting Inland Revenue at the time that you file the return that contains the position.

The probation periods are the previous:

• two years - for GST, FBT, PAYE and RWT, or
• four years - for all other tax types.

The probation period runs from the due date for payment of the reduced shortfall penalty.

The date the taxpayer takes a tax position that gives rise to the subsequent penalty determines whether or not the subsequent tax shortfall is within the probation period or not.

There is no probation period in the case of an evasion shortfall penalty-any subsequent evasion shortfall penalties will not qualify for the previous behaviour reduction.

Voluntary disclosures by taxpayers do not count against previous behaviour. The probation period only begins when the taxpayer has been audited by Inland Revenue and a shortfall penalty (excluding an evasion shortfall penalty) is imposed. For further information, please refer to Standard Practice Statement (SPS) INV 295.

GST (IR360) and employer (IR334) registration forms

This is a further reminder to please destroy all old stock for the above forms (prior to June 2003). They were updated in June 2003, with the new versions capturing additional information.

We are still receiving a large number of old registration forms from agents. As the use of the old forms is distorting the information held, we are now looking at a number of ways to ensure the correct information is captured.

To ensure that all the required information is obtained, there may be a need in future to start contacting the registrants directly.

You can order a supply of the June 2003 forms through StationeryXpress or by phoning INFOxpress on 0800 257 773.

Alternatively, why not try the online registration forms available on the tax agents' area of our website? As well as being able to register your client for GST or as an employer, you can link them to your agency at the same time.

Does your client own a rental property overseas?

Rental income earned overseas is gross income for New Zealand tax residents, and the usual New Zealand rules apply for calculating the deductions allowable against the gross rental income.

If your client prepares their rental accounts using overseas guidelines, these will need to be adjusted to bring them into line with New Zealand tax rules.

For example:

• Any capital gain or loss included in Australian accounts may not be relevant in the New Zealand return.
• Depreciation will need to be recalculated at the applicable New Zealand rates.
• Deductions claimed will need to be checked to ensure they may be claimed in New Zealand.

If the tax calculations result in a loss for tax purposes, your client will be able to use that loss against other sources of income taxable in New Zealand.

If tax has already been paid overseas on the rental income, the foreign tax credits will be available to offset any tax payable in New Zealand for that rental income. Foreign tax credits are limited to the lesser of the overseas tax paid or the New Zealand tax payable on the rental income.

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Date published: 05 Oct 2004

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