Inland Revenue has issued a Revenue Alert advising New Zealand residents that they are required to declare all income from foreign sources.
Revenue Alerts are issued by the Commissioner of Inland Revenue to provide information about significant or emerging tax planning issues.
Group Tax Counsel, Assurance, Graham Tubb said Inland Revenue was aware of New Zealand tax residents who may have taxable offshore income held in an offshore bank account, which is accessible in New Zealand, and this income may not be returned in New Zealand for income tax purposes.
He said that people who conceal income offshore are cheating other New Zealanders by not contributing their share of tax. "They do this by paying less income tax and child support, can decrease their student loan repayment obligation, and may claim a larger entitlement to Working for Families Tax Credit than they should."
"Some people hold credit or debit cards issued by a foreign bank and these cards are being serviced by funds held in an offshore bank account. The types of funds deposited into these bank accounts can include income paid by a non-resident employer, overseas life insurance policies, superannuation schemes, or equity investments held in portfolio accounts," he said.
Mr Tubb warned that if people deliberately divert income into an offshore bank account to evade or avoid the payment of tax, or to claim a greater amount of Working for Families Tax Credits, they may be committing criminal offences under the Tax Administration Act 1994.
"Inland Revenue is working in close collaboration with the revenue authorities of other countries to reduce the use of offshore bank accounts and offshore schemes to misrepresent income or assets and evade tax in this country. We have signed 18 tax information exchange agreements, with more under negotiation. These agreements give us access to key ownership and banking information," he said.
"Failure to declare offshore income or to make appropriate disclosures to Inland Revenue can attract serious penalties. Penalties may be reduced by making a voluntary disclosure.
"Any taxpayer who considers they may be at risk should consult a professional adviser and consider a voluntary disclosure before it is too late," said Mr Tubb.