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Former real estate agent sentenced, sector campaign continues

A former Nelson real estate agent has been sentenced to home detention on tax fraud charges after overstating her expenses and under reporting her income.

Pauline Michelle Mere Johnstone plead guilty to a representative charge of knowingly providing altered, false, incomplete, or misleading GST returns to obtain more than $45,000 in GST refunds which she was not entitled to.

She was sentenced this month to 5 months home detention and ordered to pay $10,000 reparations.

Johnstone claimed expenses of $549,927.00 and reported income of $21,900.67 between 1 Oct 2016 and 31 January 2018. She received GST refunds of $45,105.16.

Johnstone’s actions are an example of the behaviour Inland Revenue highlighted last year when it started to focus on the real estate sector.

Inland Revenue started its campaign because a number of real estate agents appeared to be:

  • claiming private expenses against their business income and/or claiming expenses without supporting business records
  • using net versus gross values when reporting GST
  • ·not including wage subsidy payments received within their annual income tax return.

IRs Hidden Economy Lead, Trevor Jeffries, says analysis shows real estate agents commonly claim high levels of expenses relative to their income.

“Common errors include claims for gifts, personal clothing and grooming, meals and entertainment expenses, alongside issues such as calculation of home office and vehicle expenses, plus GST being understated.

“Inland Revenue believes the practices are widespread and we have to act. Some real estate agents are claiming private expenditure but not keeping logbooks or other business records to support the claim,” Trevor Jeffries says.

“Our approach has been to engage with the sector through targeted marketing and educational materials to make it easier for real estate agents to file correct returns. That’s been welcomed by real estate firms and tax agents.

“IR has also monitored and reviewed 2021 tax returns that fell outside industry norms.  Those reviews have reconfirmed our concerns and have led to many instances of real estate agents or their tax agent making voluntary disclosures to correct their returns. 

“Only a small number have been referred for audit action. Any resulting prosecutions will be an option of last resort.

“Inland Revenue will continue to use our data analytics to monitor 2022 returns as they are filed, and where necessary we will take the take appropriate enforcement action.  

“An additional important issue is the non or under-reporting of wage subsidy payments received.”

Trevor Jeffries says further information on how wage subsidy payments are reported can be found on our website. There are also tax obligations from receiving Covid Support and Resurgence Support Payments.

“Tax pays for the essential things that make New Zealand a great place to live.  If we all pay our fair share there’ll be more money to help with things like the health and education systems,” Trevor Jeffries says.

 

Last updated: 11 May 2022
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