Tauranga woman's hefty tax bill sparks warning to others

Mount Maunganui woman's message to others after getting an unexpected $1500 tax bill. Photo / Getty Images

A Bay woman is urging others to check their tax codes after being hit with a big tax bill and says the rules need to be clearer with taxpayers.
Reporter Sandra Conchie reveals why people could be under or overpaying tax if they have more than one job, are on national super and working, or if they have other sources of income.

A Mount Maunganui woman stung with a $1500 tax bill has prompted her to warn other people to check they are on the right secondary tax rate.

Linda Thompson, 65, who works for NZME, said she began getting National Super in July last year. She thought she had been paying the correct amount of tax.

"But two weeks ago I got a bill from IRD for just over $1500. While I accept I will have to pay extra tax, what I do object to is this error happened in the first place," she said.

Thompson said was unaware when she applied for the pension online on Work and Income's website that there were three layers of secondary tax to choose from.

"I now realise I should have been on the SH tax code at 30 per cent instead of the 17.5 per cent secondary tax rate I was paying on my pension."

Thompson said a Work and Income staff member told her that IRD was supposed to inform the agency if someone had nominated the wrong tax code.

"But that never happened in my case, and I have been told there are probably lots of other people in the same situation," she said.

Photo/File

Thompson has urged Work and Income to change the notification on its website.

A Tauranga man, who runs a small business and receives National Super, also found out was on the wrong secondary tax rate. He was hoping for a refund.

The 65-year-old, who asked not to be named, said each week he had been paying $45 secondary tax after nominating his pension as the lower of his two incomes.

The man said he nominated to pay the 33 per cent top secondary tax rate after taking advice from two different accountants, and some friends in similar positions.

"I have just found out I should have opted to pay 30 per cent for people on a combined income of $48,000 to $70,000 which I definitely fit into.

"I hope this will be adjusted at the end of the financial year reconciliation, but I certainly could have done with the extra money on a weekly basis," the man said.

An Inland Revenue spokesperson said IRD did not comment on individual tax situations.

"If a customer has more than one job, is on national super and working, or they have other sources of income, they may end up under or overpaying tax."

"Thanks to a system's upgrade earlier this year, we can now identify during the year when people are under or overpaying and suggest to them that they look at a tailored tax code to help them pay the right amount," the spokesperson said.

"It's up to customers to choose to be on a tailored tax code. They can apply through myIR, and Inland Revenue will advise employers of their tailored tax code on their behalf."

Brent Rogers, a partner at local accountancy firm Staples Rodway, advised people to talk to the person who took care of the payroll.

"They should be able to advise you what is the correct tax rate to be on," he said.

BDO Tauranga accountancy firm partner Paul Manning said those due to turn 65 and want to continue working should get advice from a chartered accountant.

"We can ensure people nominate the most appropriate rate to fit their circumstances."