Q. As I was working my way through the IR 3 guide booklet and filling out my tax form (I don't quite trust them to do it for me), I came across some instructions on page 16 that did not quite make sense: "Multiply Box 3 by 0.14 (1.4 per cent)." Mathematically, that is incorrect.

I figured my tax both ways and it obviously makes a rather large difference. So I called to ask which figure was correct. As I'd guessed, it should be .014, and the IRD cheerfully admitted to that.

Then it pointed out another mistake in the book another factor of 10. Oh well. Apologies.

I called again a few days later to talk to someone else, curious to see whether I'd get the same answer, and was told of several other mistakes in the book.

Perhaps my head has been in the sand, but I've heard of no public campaign to make us all aware of these errors.

When I questioned that, I was told that later versions of the guidebook were correct, and that all returns would be checked by them anyway.

But should we trust them to catch errors, or should we expect them to make new ones?

Obviously, I don't want my name connected with this they'll be breathing down my neck.

A: I wonder how Inland Revenue would respond if you reported your income as a tenth of what it is, and then, if they caught you, you said, "Oops, sorry."

Actually, I don't wonder at all. I'm sure they wouldn't give you the benefit of the doubt. There'd be penalties, interest charges and very little understanding.

I suppose, though, that the IRD has to operate that way. Otherwise all sorts of people would be claiming innocence about all sorts of errors and you can bet they wouldn't be of the kind that leave the taxpayers worse off.

Whether or not they were prepared to be understanding, the sad fact is the IRD goofed in two places in the ACC calculations on the IR3 tax return. The department knows of no other errors, despite what you were told, a spokeswoman says.

It shouldn't have made those two mistakes, and I bet there were more than a few red faces when they realised what had happened.

The department did issue a press statement apologising for the errors, and there was a story about it in the Herald. Here's part of the statement:

"The first error is in the text on page 78 of the guide and relates to the earners' account levy. The text in the guide has 0.019 per cent instead of the correct figure of 0.0019 per cent. However, the correct percentage is used in the calculation table.

"Inland Revenue's returns development project manager, Paul Stempa, says that if people use the wrong percentage to work out the amount for the earners' account levy, the mistake will be picked up by Inland Revenue and corrected in the processing stage.

"The second error is in the instruction for Box 4 on page 16 of the guide for calculating earner premium. It says "Multiply Box 3 by 0.14 (1.4 per cent) ... "when it should be 'Multiply Box 3 by 0.014 (1.4 per cent)'th.

"Mr Stempa says that some people may realise the mistake since, if they use the 0.14 calculation, the resulting amount will be much higher than the earner premium usually is.

"He says the processing will pick up this mistake, but if there is any doubt about the correctness of an assessment, taxpayers should call the department. Inland Revenue will be informing all tax agents of the errors so they can assist their clients with the returns."

The trouble is, many people apparently including you doing your ostrich act would have missed the story.

I asked the IRD spokeswoman why the department didn't also write to everyone who received the return, or at least run some ads about the errors.

They decided that wasn't necessary, she said, and repeated Mr Stempa's assurances that the department would catch any problems.

As for whether we can trust Inland Revenue, I don't know. I doubt if anyone there deliberately sets out to rip off taxpayers even those who squeal. But don't worry, I didn't give them your name.

Q: Sometimes you manage to annoy me by showing bias.

The Gold Coast turkeys (in last week's Money Matters) are not the properties themselves, but the turkeys who fail to do their homework and invest unwisely. The bottom line is always caveat emptor buyer beware.

Free advice from an investment adviser? If you're not paying him/her, then they're earning a commission on the investment they sell you, which means their priority is themselves, not you.

I have a Gold Coast rental property which I bought neither for capital gain, nor for a tax loss, but for a long-term asset with a revenue stream, allowing the tenant to pay off my mortgage over time (I expect to retire in Queensland).

I did so with my eyes open, and, after writing off the (unavoidable) acquisition costs to my (tax) benefit, have reduced the liability to a level which is mildly profitable.

I did my homework, and am quite happy with the development company and builder whom I dealt with. I paid a fair price.

I nearly bought another Gold Coast property last year from an unwise investor who was having to sell for some 30 per cent less than he had bought it for, as he could no longer support the payments which exceeded the rental income. He had paid too much.

As you sow, so shall you reap. Caveat emptor.

A. I'm not quite sure what bias annoyed you. I said last week that there must be some people who have done well with Gold Coast property. And, so far at least, you seem to be one of them, which is great.

But you readily admit that these investments can go wrong.

You give the example of the bloke with the 30 per cent price plunge. The fact that other Australians have also done badly on the Gold Coast just strengthens my original point. As you repeatedly put it, emptors should caveat. That was what I set out to say.

One thing does worry me in your letter, though. You say you've written off "the (unavoidable) acquisition costs to my (tax) benefit."

Generally, unless you're a regular trader in property, you can't treat your acquisition costs as expenses on your tax return.

Ongoing costs, such as mortgage interest, insurance and rates can be deducted each year. But the one-off costs of purchasing must be placed "on capital account," says PricewaterhouseCoopers tax manager Steve Henger.

They are added to the cost of the building, and can be depreciated gradually over the years. But, if you later sell the property at a profit, that depreciation is generally "clawed back."

I hope your eyes are open to that.

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