Workers who are paying too much tax because of incorrect secondary tax codes are in line for relief with the passage of legislation through Parliament late last night.
The Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill passed its third reading and will come into effect on 1 April.
“We promised to eliminate unnecessary secondary tax for workers with more than one job. We are delivering on that promise,” says Revenue Minister Stuart Nash. “I am disappointed that National and Act voted against this measure.
“The changes mean Inland Revenue will more closely monitor the tax paid by wage and salary earners through the year. If it appears the worker is being over taxed, Inland Revenue will suggest a more suitable PAYE tax code tailored to that worker.
“Till now the tax on the second job has often seemed too high. These changes ensure wage and salary earners are only paying the tax they should. Just under 600,000 secondary tax codes are used every year.
“Inland Revenue will also make it easier for individuals to apply for tailored tax codes that suit their earning circumstances, and provide an online process to apply for the codes.
“The legislation also enables automatic tax refunds for about 750,000 New Zealanders every year.
“The simplified tax rules remove the need for people who only earn employment or investment income to file a personal tax summary (PTS) to get a tax refund. Till now, the only way to get a refund was to file a PTS. However 750,000 people failed to do so and miss out on their money as a result. We want refunds to flow automatically.
In other changes, the legislation will:
- add new KiwiSaver contribution rates of 6% and 10% and make the savings scheme accessible to those aged over 65;
- allow depreciation roll-over relief for properties affected by the Canterbury earthquakes in 2010 and 2011. This extends the deadline for obtaining the replacement property from the end of the 2018–19 income year to the end of the 2023–24 income year;
- allow new racehorse investors to claim tax deductions if they purchase a standout yearling;
- grant overseas donee status to the New Zealand Memorial Museum Trust, Le Quesnoy, to raise awareness of New Zealand’s participation in and contribution to the First World War;
- clarify how Inland Revenue can collect, use and disclose taxpayer information;
- introduce a ‘short process ruling’ where small businesses can more easily apply for a binding ruling from Inland Revenue on any tax matter;
- set the annual tax rates for the 2018-19 tax year, which remain unchanged from previous tax years.
- address unintended gaps in the current law governing the tax treatment of non-for-profit-entities;
- exempt directly funded disability support payments from income tax; and
- ensure that the company demerger rules are effective in providing tax relief for New Zealanders who receive shares because of a demerger by an ASX listed Australian company.
“This Bill represents a significant step in the modernisation and simplification of New Zealand’s tax system, supporting much of Inland Revenue’s Business Transformation work,” Mr Nash says.
More information can be found at: http://taxpolicy.ird.govt.nz/bills/52-72