Taking the trouble out of your taxes

By Dawn Picken, news@dailypost.co.nz

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PROFESSIONAL HELP: Rotorua's Nicky Old, director of True North Chartered Accountants, says hiring a professional to file your taxes can ensure compliance with complex tax requirements. PHOTO/BEN FRASER
PROFESSIONAL HELP: Rotorua's Nicky Old, director of True North Chartered Accountants, says hiring a professional to file your taxes can ensure compliance with complex tax requirements. PHOTO/BEN FRASER

The due date for income tax returns is July 7. And while salaried employees don't have to file, contractors and business owners do.

The Rotorua Daily Post spoke with local accountants who cited common mistakes people make when doing their own taxes.

Nicky Old, director of True North Chartered Accountants Limited, said taxes were complicated.

"If it's really simple, like a rental property, that's fine. But knowing what I know, I wouldn't have a crack at it myself unless I were suitably qualified." Mrs Old said business vehicles were one area in which people made errors.

"There are a lot of urban mythsa huge misconception is that if you sign write your vehicle, that means it's 100 per cent business and you don't have to do anything else. That's not true."

The chartered accountant said many contractors and business owners claimed far too much on deductions.

"Or they miss out on things they could be claiming. "

Property investments were another area of concern at tax time, according to Mrs Old.

"People file their own tax returns, the IRD does a review of their taxes and sends them a letter, and they freak out and come to someone like us to help them."

At that point, she said her firm mitigates mistakes.

"A lot of people think they can do it themselves, and some can, but I've never seen a good job."

Mrs Old said her firm's charges for a tax return ranged from $350 to $1000 for a sole trader contractor, depending on the complexity of the job and whether the business had employees.

Another advantage of hiring a tax professional is he or she can get you an extension. People linked to an accountant have until March 31 the following year to file a return.

Vanessa Trott, with First Class Accounts Rotorua, said tax rules changed all the time.

"People don't immediately think they apply to them, where in fact there might be circumstances, certain obscure tax laws that apply to what they are doing. They might not realise there's exposure there.

"One of the biggest errors is with GST. And often, they're not claiming deductions for valid, tax-deductible itemspeople go, 'Oh, that's a business expense, I'll claim it', but there are different rules about higher-valued assets.

"There's a raft of things you see that are typical of small, one-man bands, errors with employee payments and those types of things."

Mrs Trott said business owners may resist paying someone else to file their tax return, but accountants can add value to a company's bottom line. "looking at somebody's business and maybe working out where the problems are in terms of things inhibiting growth, or excessive costs, or working out more efficient ways to do things to free up timewe can put systems in place so you don't have to be at work 12 hours."

Getting a referral is one way to find professional accounting help.

Nicky Old said, "It's important to make sure you choose someone you can relate to."


Who Gets a Refund?


An Inland Revenue spokesman said 873,591 customers received a refund last year. The average refund was about $409, totalling $357.4 million in tax refunds.
He said the figures exclude customers who filed IR3 (individual) returns, such as contractors and self-employed. More than one million Kiwis filed IR3 returns last year.
Inland Revenue does not check all customers to see whether they have a refund or debit (for most people working full-time for the whole year in one position earning the same money).
They said the payroll system was designed to provide very small over and under deductions of income tax.
The reason most wage and salary earners might be due a refund are:
- They've only worked for part of the year.
- They've had more than one job throughout a year.
- They've earned less than $48,000 (meaning they qualify for the independent earner tax credit).
IRD says if people don't meet those criteria, it's unlikely they'll be due a refund. A spokesman says the easiest way for customers to see if they may qualify for a refund is use a no-obligation online calculator within their myIR account - if the calculator suggests a refund is likely, they can request a personal tax summary (PTS) and proceed with filing a return once it has been sent; if the calculator suggests they may have to pay tax, they don't need to proceed.
As for tax refund websites? They charge a percentage of the refund amount. One company's 19.5 per cent fee would cost the recipient of a $400 tax refund $78. Using the IRD website is free.
People with "other" income must file:
- Rental income;
- Taxable property sale;
- Overseas income;
- Cash income;
- Royalties;
- Estate, trust or partnership income.
People who left or arrived in New Zealand part-way through the year also need to file an IR3.
The tax year runs from April 1 to March 31.

Excerpted from www.ird.govt.nz


New Zealand Tax at a Glance


- The US-based Tax Foundation in 2014 ranked New Zealand's overall tax system as second in the developed world for its competitiveness - and top for its individual (i.e. personal) taxes.
- The top tax rate is 33 per cent for income over $70,000. The tax rate for income up to $14,000 is 10.5 per cent. Companies and corporations are taxed at a flat rate of 28 per cent.
- Source: www.newzealandnow.govt.nz

- Rotorua Daily Post

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