Income equalisation scheme: Refunds
A refund can be requested for part or all of a deposit. Generally a refund cannot be made if the deposit has been in the scheme for less than 12 months.
To request a refund, simply send a completed Income equalisation deposit / refund from (IR155) or a letter to Inland Revenue, PO Box 39010, Wellington. The letter must state:
- The name and IRD number in which the deposit is held
- The amount to be refunded
- The income year in which the refund is to be assessable
- Your name and contact phone number and
the reason for the refund if the request is for an early refund.
Refund for adverse events or hardship
A refund of amounts deposited for less than six months may be made where the refund is required for the taxpayer for one or more of the following:
- to enable the purchase of replacement livestock as the result of a self-assessed adverse event or
- to avoid the taxpayer suffering serious hardship or
- for any other reason at the Commissioner's discretion.
When an application for a refund is made, the amount of the refund is gross income in the year in which the application for a refund is received. If the taxpayer elects in the specified period or in the time allowed for the refund to be deemed to be made for the previous income year then it will be income in that year.
If a refund has been granted in a tax year, a deposit cannot be made after that date for the same period unless we are satisfied that all of the refund has been used in the taxpayer's business.
Tax credits (formerly rebates)
In the tax year a deposit is made your taxable income is reduced by the amount deposited which reduces the amount of tax payable. In the tax year an application for refund is made, the amount is included as income and increases your tax payable. You can claim a tax credit in the tax year an application for a refund has been made if the amount of tax calculated to pay is higher than you would have been liable for on the original amount deposited.
Mr Farmer has a good year so a deposit is made into the income equalisation scheme for the 2000 tax year.
|Tax saved||$ 3,300|
After five years the original deposit is still in the income equalisation account and must be refunded for the 2005 tax year.
|Tax payable||$ 3,900|
Mr Farmer can claim a tax credit of $600 for the 2005 tax year as the tax calculated on the amount of the deposit for the 2000 year was only $3,300.
Date published: 27 Jun 2008
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