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A few tax intermediaries have been surprised to see money in client’s accounts returned unexpectedly.

This is part of our plan to simplify the tax system for all customers. If we cannot see any debt in an account, or do not know which tax account the balance should be going to, we will return the overpayment in near real-time.

It’s their money after all - we don’t want to hold onto it if we haven’t been told what to do with it.

We’re aware this is a change that some customers and intermediaries will need to adjust to. Here are a few ways you can make this new process work for you.

Making a payment

When making a payment - including by direct credit or internet banking - make sure you and your clients include the correct details. These details include the IRD number for the customer, as well as the payee code.

The payee code is the account that you’re paying (for example, INC) followed by the period (DDMMYYYY). If you’re paying for more than one account or more than one period, you need to include this in the details.

We do see some customers submit incorrect details with their payment - for example, they might include INC instead of FAM. This will direct the payment to the wrong account, so we will return it to the nominated bank account within 24 hours. To prevent complications, we recommend double-checking the details of a payment before you make it.

If you make a payment in advance of filing a return in a period, that credit will be held until the return is processed. For example, if you’re making voluntary payments for a period where you have not yet filed a return, we will hold the credit in that account. The credit will be returned once the period has been assessed and there is no debt to offset.

Filing a return

When filing a return - either in myIR or through software - there will always be an option to request a transfer of any credit.

As with making a payment, all you need to do is tell us where you want the credit to go, and we will transfer it. If you don’t, we’ll return the credit to the bank account we have on file.

Existing credits

If you or your clients have old credits in your accounts, we'll start refunding them.

We'll start returning credits from 2016 and earlier from August 2019. If you or your clients would rather keep these credits in our system, you can move them to an unassessed period or transfer them to another account.

The majority of credits dated back to 2017 have already been processed for the 2018-2019 tax year for the tax account they were held under. If there was credit remaining after the tax account was processed - and it was not assigned to another tax account - this credit would be returned to the nominated bank account.

How we return money

Amendments to the Tax Administration Act 1994 (section 184A TAA 1994), that came into effect from 1 April 2019, state 'a refund of tax paid in excess must be made by direct credit to a bank account nominated by the taxpayer entitled to the refund'.

For the next release, we’re looking into new payment direction options to prevent payments made to Inland Revenue not getting to the right place.

Go to Section 184A of the Tax Administration Act 1994 on the New Zealand Legislation website

Our changes

We’re looking into some options to help simplify the process of making payments, such as asking banks to reorder the display options in their pay tax drop-down menus to list INC before GAP.

We’ve also made some changes for provisional tax, which will assist with payments for 7 May 2020. The 2021 financial year will now be open from 1 April 2020, to prevent payments being automatically returned if you select the 2021 financial year rather than 2020.

If you make a payment for the 2019 financial year on or after the due date, we will transfer available credits to the provisional tax liability going forward. If you have overdue amounts in other accounts, these credits will be transferred to those liabilities first.

For more information

If you have any questions, please contact your account manager.