Deposits
Deposits, deposit restrictions and interest
Making a deposit
Simply complete an Income equalisation deposit / refund form (IR155) and send it with your payment to Inland Revenue, PO Box 39010, Wellington. Alternatively you can attach a letter with your payment. The letter must state that:
- it's an income equalisation deposit, and
- which year it's for.
The general rule when a deposit is made is that it is accepted for the tax year in which the deposit is received. To be deductible in any income year, the deposit must be made within the specified period after the end of that income year. This is the shorter of:
- six months after the balance date; or
- one month after the due date for filing the return.
Inland Revenue can allow an extension of time for making a deposit.
Deposits made to the scheme reduce the taxable income for the year of the deposit by the amount deposited.
Example
Mr Apple Tree makes a deposit of $5,000 on the 31 October 2005. This is accepted and reduces taxable income for the 2006 tax year by $5,000.
Restrictions on deposits
The minimum deposit is $200. Deposit amounts can't exceed your net income from your business in the year the deposit is accepted.
New deposit from a refund
If a refund has been made 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 your business. The refund may be able to be used as a deposit for the previous tax year if an election is made in the specified period or by the required date for that tax year.
Example
Mr Forrest requests a refund on the 30 September 2004 of $5,000. He includes this income in the 2005 tax year.
As Mr Forrest has a tax agents' extension of time to file his 2004 return up until the 31 March 2005 he makes an election that the $5,000 be deposited for the 2004 tax year.
Interest on deposits
Interest of 3% per annum will apply where a deposit is left in the scheme for a period of 12 months or more. Interest paid becomes part of the deposit and is credited at 31 March each year or when the deposit is refunded.
Interest is not treated as income in the tax year it is credited only in the tax year when the deposit is refunded.
The expiry date of a deposit will be five years from the end of the accounting year in which the deposit was made.
Resident withholding tax (RWT) is liable to be deducted from any interest paid.
Date published: 27 Sep 2006
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