The 2021 tax year was the third time that we’ve issued automatic individual income tax assessments - to approximately 2.9 million customers as at 30 June. We worked to get the assessments out faster than in previous years to give customers certainty faster - especially families.
Under our old processes, many people who could claim refunds never did. The automatic assessments mean we’re working out refunds, and tax to pay, for most individual customers and paying refunds promptly.
- 90% of the $455 million in refunds and credits issued as at 30 June 2021 - $410 million - has gone to customers earning less than $70,000.
As at 30 June 2021, the total amounts of refunds and of tax to pay were less than in 2019-20, which reflects our proactive work throughout the year to ensure customers are paying the right amount of tax. You can read more about this in our case study.
Year 3 of automatically issued income tax assessments
We’re focused on further improvements. From 31 March 2021, income from portfolio investment entities - such as KiwiSaver schemes - is included in the end-of-year income tax assessment process. It’s automated where possible.
People paying a tax rate on their investment that’s too high will have their overpaid amount refunded. Those on a rate that is too low will pay the correct tax rather than their marginal tax rate.
With 2.9 million New Zealanders receiving automatic assessments, we expected some would have concerns and questions. A significant number of people received an extra pay this year, leading to extra tax and causing confusion for some. Consistent with the policy intent, it was written off if the bill was solely due to the extra pay day.
Some of our letters requiring more information from customers also caused confusion, including those to around 1,000 people who receive superannuation and employment income but were on the wrong tax codes. We continue to learn from each year and focus on how to make the next process run as smoothly as possible.
Provisional results as at 30 June 2021
- 2.9 million assessments have been issued.
- 239,000 customers contacted us by phone about their assessments.
- $455 million has been refunded to 1.29 million customers.
- $353 is the average refund amount.
- $70 million is the total amount of tax to pay by 169,000 customers.
- $24 million of tax to pay was written off.
Greater certainty for families from week to week
Having certainty from week to week is essential for many customers who receive Working for Families Tax Credits - they may be checking myIR to see when payments are coming so they can get to the supermarket or pay bills.
Inland Revenue uses information from employers to pick up changes in our customers’ income - such as pay increases - much sooner. We automatically adjust entitlements in most cases, and get in touch with some people, to prevent either over- or under-payments.
Over-payments can mean customers face a major tax bill at the end of the year, putting low-income families especially under a lot of stress. On the other hand, under-payments can result in a large refund, meaning families may have missed out on that money when it was most needed.
We're using our systems to check that customers are receiving all their entitlements. For example, we identify approximately 50 to 100 customers a week who should be but are not receiving a credit, and we get in touch. A law change from 1 July 2020 means many families are now eligible for an in-work tax credit because the Government removed a requirement for them to work a minimum number of hours.
We texted 11,000 of our customers to let them know they now qualify for the credit and paid it automatically. We also ran a marketing campaign to let families who weren’t our customers know about the law change.
Increasingly, families customers interact with us online. They’re using myIR to change or update their details and carry out actions related to their entitlements. We’re texting customers and using social media to let them know about anything that affects them. It’s made the annual rollover of people’s entitlements easier. In February 2021, when we assessed the entitlements of over 380,000 customers for 2022, we simply let 92% of them know their entitlements via myIR.
We did face some issues, which we’re working to prevent from happening again. For example, entitlements for some customers were estimated incorrectly because they’d had multiple employers and the employer had not provided key information to us. We’ve been updating customer accounts, encouraging people to do this themselves online and focusing on improvements to our processes.
We’ve taken paid parental leave online
We process paid parental leave applications and make payments for the Ministry of Business, Innovation and Employment - approximately 700 customers apply every week.
The payments provide essential support for parents losing an income when they take leave to care for a new baby or child.
In February 2021, the process to apply for this payment went online. Customers can now apply via their myIR account and some of their details will already be in the online application.
Parents can also check on upcoming payments.
Before the changes, parents had to find, print and complete forms, have employers verify income information and then post the applications to us. Now, 90% of applications are processed online, giving customers quick confirmation of what they’ll receive and faster payments. This is much less effort for parents and their employers.
A Twitter user’s comment in May 2021 illustrates what we’ve wanted to achieve with the changes:
“I filed paid parental leave forms with IRD yesterday. All approved, with full list of payments and dates, within 24 hours. Including a text prompt to go to portal for detail. That’s bloody impressive - yes?”
- Paid parental leave is available for 26 weeks.
- Parents can check their eligibility through the joint government initiative SmartStart.
- $503 million was paid out in 2020-21 to approximately 50,000 parents .
Improved KiwiSaver services
KiwiSaver members get better information about their contributions in myIR. This year, they saw 95% of their contributions transferred to scheme providers within 2 days. Previously it took an average of 20 to 23 working days.
Our new system’s analytics are also helping ensure members are getting their correct entitlements. For instance, in the latter half of 2020, we identified over 56,000 instances where KiwiSaver employer deductions or contributions were likely incorrect or short paid, and we contacted customers to have these corrected.
During the changeover of systems in April 2020, some contributions were held back to ensure correct amounts were going through to members’ accounts. This saw unacceptable delays in transferring some contributions, affecting 664,000 members. We made an ex gratia payment of $6.6 million in February 2021 to compensate for any missed investment returns. An additional payment of $0.58 million was paid in June 2021 to 83,260 members.
- KiwiSaver contributions are reaching member accounts quickly.
- $8 billion was transferred this year to 3.1 million KiwiSaver members.