You are here: Home › For tax agents › Newsletters and bulletins › AGENTS Answers › AGENTSanswers - 2003

Newsletters and bulletins
Nga karere panui

AGENTSanswers - 2003

Issue 43 March 2003

Arrangements for the payment of tax
L letter unavailability
Easier income tax refunds for salary and wage earners
Valuation of small amounts of trading stock
National standard costs
Linking and delinking clients during April
Clients who are unable to file their return by 31 March
Rebates and legislation changes
Family assistance change in circumstances - letter drop
Due date for FBT returned on income year basis
PTS or IR 3
2003 annual returns
UOMI threshold
New and updated publications

Arrangements for the payment of tax

With 7 April approaching, now is a good time to consider payment options for any clients who will not be in a position to pay their tax by that date.

We will discuss with you their circumstances and help determine the best option for dealing with amounts due. When looking at individual cases, we will look at their current situation, payment history and their ability to meet future obligations. If an instalment arrangement is the best option, we can negotiate this with you over the phone in most cases.

Contacting us and entering into an arrangement before 7 April can reduce the late payment penalties charged to your clients. An initial late payment penalty of 1% will be charged on 8 April 2003. No further late payment penalties will be charged as long as the agreed payments are made on time.

If you wait until the due date (or after the due date) to enter into an arrangement, a further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.

Interest is calculated daily on the amount outstanding, including penalties. The interest rate is currently 11.93%.

As previously discussed in the December 2002 edition of AGENTSanswers, available under the Newsletters and Bulletins section of our website, we now have greater flexibility in our approach to debt recovery. Changes mean that for payment arrangements for most outstanding tax the following will apply.

No incremental late payment penalties will be charged during the term of an instalment arrangement if payments are made by the agreed instalment dates.
If we need more information before an arrangement can be set up, incremental late payment penalties will not be charged for an agreed period of time while the taxpayer obtains the information. Interest will however remain payable throughout this period.
Any future refunds will not be used to pay the amount subject to an arrangement unless the taxpayer asks for this to happen. If the taxpayer has another debt not under arrangement, then credits will be automatically offset against it.
Inland Revenue will not review the arrangement for two years as long as the terms are being met.
The taxpayer can ask for their arrangement to be renegotiated at any time.

For more information, please read our Debt options (IR582) booklet. You can find this under the Forms and Guides section of our website. It can also be requested using INFOexpress or StationeryXpress.

L letter unavailability

As with last year, L letters will be unavailable from 1 April 2003 to 8 August 2003. This is to allow us to correctly establish filing statistics for the 2003-2004 year.

Easier income tax refunds for salary and wage earners

The threshold under which an income tax refund is automatically released will increase from $50 to $200. The change will apply to personal tax summaries issued in relation to the 2002-2003 income year and future years.

You will no longer have to contact us about clients who will receive a personal tax summary refund of $200 or less if the details are correct. This will save you time and effort.

This measure is an extension of the recent tax simplification reforms that saw over a million salary and wage earners no longer needing to file an annual income tax return. To claim a refund, however, it is necessary to request a personal tax summary, but this change will streamline the process for obtaining a refund of $200 or less.

Valuation of small amounts of trading stock

From the 2002-2003 income year there is new legislation concerning the valuation of small amounts of trading stock at the end of the income year (see section EE 2A of the Income Tax Act 1994). This means, some clients won't be required to do a stocktake this 31 March 2003.

Taxpayers are no longer required to value their closing stock or include any change in the value if:

their turnover (total gross income) is $1.3 million or less for the year, and
they reasonably estimate that their trading stock on hand at balance date is less than $5,000.

Simply use the same figure for closing stock in the financial statements as the opening stock.

Please note that even if taxpayers qualify for this simplified method for valuing stock, they don't have to use it (it's optional). They are still entitled to do stocktakes and get a true value for their trading stock if they want to.

This change is designed to reduce compliance costs associated with valuing and making adjustments for small amounts of trading stock at the end of the year.

National standard costs

The National standard costs for specified livestock determination 2003 is available on our website.

This determination is made in terms of section EL 3A of the Income Tax Act 1994. It applies to any specified livestock on hand at the end of the 2003 income year, where the taxpayer has elected to value that livestock under the national standard cost scheme for that income year.

Linking and delinking clients during April

To ensure the filing statistics for 31 March 2003 are accurate, Inland Revenue staff will not be able to update your client list to link or delink clients from 1 April to 14 April 2003. Any linking or delinking requests received by phone or mail during this period will be held and updated after 14 April.

You will still be able to link or delink clients through INFOexpress during these two weeks.

Requesting any changes to your client list prior to 31 March will also help avoid any delays in keeping your list up-to-date.

Clients who are unable to file their return by 31 March

We recognise that some clients are unable to file their income tax returns by 31 March because of circumstances outside their control. In these cases we can defer policing action for these returns by recording a D status for the client.

Circumstances where a client may qualify for a D status include:

difficult personal circumstances involving the client (for example, serious illness)
unavoidable difficulty or delays in obtaining third party information
pending legal proceedings
ongoing investigation into unresolved tax matters from previous year(s) that affect the year to be filed
other non-personal circumstances beyond the client's control where the client's records are damaged or destroyed (for example, major computer systems failure, major fire or flood).

We will also take the above criteria into account if they affect a related entity and you expect flow-on effects.

You should contact your agent account manager or corporates account manager if you have clients whose circumstances you feel may qualify them for D status.

Clients who do not file their 2002 income tax return by 31 March and who are charged a late filing penalty will lose their EOT for their 2003 return. The 2003 income tax return filing date will then be 7 July 2003.

Rebates and legislation changes

Currently there is legislation before Parliament which, once passed into law, will change the maximum rebate your clients can receive for donations.

Once the new legislation is passed, the maximum rebate your clients can claim for donations totalling $1,890 or more will be $630. It is intended that the new amount will take affect from the 2002-2003 year. Your client's partners may also claim a rebate of up to $630 for donations made over $1,890.

For donations made in the 2001-2002 and earlier years, the maximum rebate your clients could claim in any one year is $500 for donations totalling $1,500 or more.

E-File software developers have been given new specifications which include the threshold figure of $1,890. This means you will be able to claim the new maximum limit on E-Filed returns as well.

If you send in a claim for more than $500 the refund will be held until the legislation has passed. This action is expected to occur early April 2003.

Family assistance change in circumstances - letter drop

In February 2003, we sent a letter to family assistance recipients who choose to receive their family assistance as a lump sum after the end of the tax year, reminding them to tell us about changes in their family circumstances, which could affect their entitlement.

It is sent towards the end of the 2003 tax year to ensure that when we issue the family assistance end-of-year statement it will have the most up to date information. Some of this information hasn't been updated since the square-up process last year. Contacting us now with changes will help to reduce the number of contacts and waiting times during our peak period.

We also want to be sure that we have IRD numbers for as many children as possible prior to the annual square-up. To help achieve this, the number of children listed on the letter are only those that we hold an IRD number for.

This should prompt the principal child carer to contact us and provide the missing IRD numbers or apply for IRD numbers if the children do not already have one.

It would be appreciated if you could please check these letters or encourage your clients to do so to ensure the details we have are correct. If there are any changes please contact us.

Due date for FBT returned on income year basis

Fringe benefit tax (FBT) paid on an income year basis is due for payment by the employer's terminal tax due date. This will generally be 7 April where the employer's income tax return is filed by a tax agent under an extension-of-time.

We have become aware that the due date for FBT returned on an income year basis for clients of tax agents is sometimes being incorrectly recorded as 7 February instead of 7 April. This occurs when the FBT return is filed before the income tax return for the relevant year.

Until we are able to fix this problem, it can be avoided by filing the FBT return at the same time or after the income tax return.

We are able to alter any incorrect FBT due date after the income tax return for the year has been filed. To do this, please call us on the tax agents' 0800 number.

We apologise for the inconvenience this problem causes to you and your clients.

PTS or Individual tax return (IR3)

Recently several tax agents have requested both a personal tax summary (PTS) and an IR3 return for their clients. This would suggest that there may be some confusion around PTSs.

PTSs are for people whose income is from employment that is subject to the PAYE rules, Work and Income benefits, interest, dividends, and student allowance.

If your client earned any other type of income, for example from self-employment, or from overseas, or they left or arrived in New Zealand part-way through the year, they are required to file an Individual tax return (IR3).

A PTS should not be confused with a summary of earnings (SOE). An SOE shows income and tax deduction information from all the employers your client worked for during the year. If your client is required to file an IR3 return, they should receive an SOE if they had PAYE deducted from income from employment. You can use the information on it to fill in their IR3.

If your client has not received one automatically, you can request one for them.

If you're not sure if your client is required to receive a PTS or file an Individual tax return (IR3), read the IR3 guide which you can get from the Forms and Guides section of our website, StationeryXpress or the Tax Agents' CD Rom.

2003 annual returns

We intend to send you the 2003 annual returns for your clients on the following dates:

1 April to 5 April 2003
Claims for personal tax rebate (IR526)

8 April to 11 April 2003
Company income tax returns (IR4)
Estate or trust income tax returns (IR6)
Partnership income tax returns (IR7)
Maori authority income tax returns (IR8)
Club or society income tax returns (IR9)
Registered superannuation fund income tax returns (IR44)

14 April 2003
Family assistance end-of-year statements (IR541)

10 April to 14 April 2003
Resident withholding tax on interest reconciliation statements (IR15S)
Non-resident withholding tax reconciliation statements (IR67S)

17 April to 5 May 2003
Individual tax returns for use by tax agents (IR3A)
Non-resident individual taxpayer income tax returns (IR3NR)

16 May to 22 May 2003
Summary of earnings (IR544)

29 May to 30 June 2003
Personal tax summaries (IR537 and IR538)

UOMI threshold

The use-of-money interest (UOMI) legislation includes a threshold for individual provisional taxpayers who pay their provisional tax under the uplift option. Those taxpayers to whom this threshold applies are subject to UOMI from their terminal tax due date rather than their provisional tax instalment dates.

Recent legislation changes have increased the threshold from $30,000 to $35,000 of residual income tax. The change takes effect from the 2003-2004 income year.

New and updated publications

The following publications have recently been developed or updated and are available under the Forms and Guides section of our website or they can be ordered through INFOexpress or StationeryXpress.

Tax code declaration (IR330)
From 1 April 2003 a new version of the Tax code declaration (IR330) form will be introduced. You can find this under the Forms and Guides section of our website. We have made changes to the form to make it easier for employees to choose the right tax code. Feedback received from employers and employees indicated that some people found the form difficult to follow and led to some employees choosing the wrong tax code.

Also, a recent law change means that a statement has been included on the form to say the employee is entitled, under the Immigration Act 1987, to work for their employer.

Only new employees or existing employees who want to change their tax code need to complete the updated form.

Employers should receive a supply of the updated forms in mid-March 2003. If you have clients linked for PAYE, the supply of forms will be sent to you. If needed, further supplies of the form can be ordered through INFOexpress, or printed from the Forms and Guides section of our website.

Please dispose of stocks of previous versions of the form after 31 March 2003.

Conduit tax relief account return (IR406)
This is a new form that has been developed for dividend withholding payment companies that have elected to be a conduit tax relief company. This return must be completed and attached to the company's income tax return. If you require more information about conduit tax, please refer to Tax Information Bulletin (TIB),Vol 10, No 4. You can find this under the Newsletters and Bulletins section of our website.

Charitable organisations (IR255)
This booklet explains:

what tax exemptions are available to charities and approved donee organisations, and
the criteria an organisation must meet to get an exemption.

Entertainment expenses (IR268)
Sets out the entertainment deduction rules.

IRD number application - individual (IR595)
If an individual from overseas is applying for an IRD number, they were required to attach a copy of their visa or permit with their overseas passport. This form has been updated to show that only the overseas passport is now required for identification.

2004 PAYE deduction tables
The new PAYE deduction tables for the 2004 year are now being sent out to employers. If you are linked to a client for PAYE, you will receive the tables instead.

These tables apply to any pay periods that end on or after 1 April 2003.

Weekly and fortnightly PAYE deduction tables (IR340)
Four-weekly and monthly PAYE deduction tables (IR341)

Additional copies of these tables will be available through INFOexpress and StationeryXpress from 10 March 2003.

Tax information products for Maori
We have recently produced and updated a number of tax information products for Maori. These products are aimed at providing the Maori community with a number of high level overviews about their general tax obligations. And, while the products generally promote the Maori Community Officer service, they also encourage the Maori community to seek assistance from an accountant, solicitor or tax agent.

Below is the list of tax information products which have been produced for Maori.