Tax department prepares for biggest shutdown ever; 1.6 million Kiwis set for refunds

More than 1.5 million Kiwis are due a tax refund this year while 240,000 people are likely to owe money to Inland Revenue. Photo / 123rf

The head of the tax department says she expects "some glitches" as it completes its biggest switchover in 30 years to a new technology system but in the main it will go "smoothly".

The Inland Revenue is shutting down its services from this Thursday at 3pm until 8am Friday April 26th in the third stage of its $1.6 billion transformation of the tax system.

The latest iteration will include all personal tax as well as family support payments like Working For Families and follows an update on GST and business tax undertaken in the previous two years.

IRD Commissioner Naomi Ferguson says the change will see 19 million tax records migrated in a process which has around 670 tasks that must be done in a specific order.

But after two previous shutdowns she has confidence in the process.

"It is the third one so we do know - and that was part of taking this in small stages, taking over part of the system, making sure we knew how to do this.

"We have also done something like over 90,000 tests for this release alone. We have run three full mock go-lives which is like a practice run and "everything went really smoothly in those".

"There will be some glitches - there will be something that happens that we didn't foresee."

"We still have a handful of issues we are smoothing out but out of 90,000 tests that is nothing. In a big operation like ours - there are things that happen all the time. So we will work our way through."

Naomi Ferguson, the Commissioner of Inland Revenue, is confident its third major shut-down will go smoothly this weekend. Photo/Marty Melville.

This change is a big one for the general public as it will mean salary and wage earners no longer have to put in a tax return as refunds and bills will be automatic.

From mid to late May all salary and wage earners will hear from the tax department with around 1.6 million people expected to be due a tax refund of which around 440,000 people will be getting a refund for the first time.

The refunds will come direct into people's bank accounts and people are being urged to check their account details are correct in their myIR account before the end of May.

On the flip side 240,000 will be told they have tax to pay (unless it's under $50) - of those, about 86,000 also will have had no recent contact with Inland Revenue over their tax.

Those with a tax bill will have until February 7, 2020 to pay it but after the switchover to the new technology people will be able to set up automatic payments themselves online to pay it off in instalments ahead of the deadline.

The new system will also allow people to upload receipts for donations like school fees, church donations and charity donations to their online MyIR account as they come in rather than waiting until the end of the tax year to send the information by email or post.

Ferguson said the old system was no longer working as it was based on a paper-based world and basically didn't recognise the digital world we now operate in.

"We had added lots of bits on over the years but it was getting pretty creaky at the seams".

Changes were costly and time-consuming. While redesigning the technology Ferguson said it also wanted to take into account changes in society.

"People's lives are very different these days. Thirty years ago people left school, went into one employer stayed with that employer and had a pretty full-time job.

"These days people switch jobs much more often, they might be running a small business and working - they may have more than one job concurrently.

"Both the way we live our lives and the way technology works - it was the opportunity to rethink how the tax system worked not just the IT."

The shutdown means employers and accountants can either file the March employer monthly schedule by April 18th or wait until April 26th without facing any penalties or interest charges.

Those who would normally get paid Working For Families on Tuesday April 23 will get it early on Friday.

Anyone who has a draft they are working on online in the IRD's system either needs to complete it before the shutdown or they will lose the information and have to re-do it after the system comes back up.

More change will come next year as the IRD looks to add KiwiSaver and student loans into its myIR service. Ferguson said that would likely take place around April next year.

TAX OVERHAUL: What you need to know
• How long will the IRD shut-down last? From Thursday April 18 at 3pm to Friday April 26 at 8am.
• Why is it being shut? To transfer personal income tax and family support into a new system which will enable automatic tax refunds for salary and wage earners.
• When will I know if am getting a refund or bill?
Letters will go out to all salary and wage earners between mid May and July with payments being direct credited to bank accounts.
• What do I need to do to get my refund? You don't need to apply for it. But it's a good idea to check the IRD have the right bank account details for you on their myIR service by logging into it or calling them. People need to do that by the end of May.
• What if I have a tax bill to pay? You will have until February 7, 2020 to pay it and after April 26 can set up an installment online to pay it off ahead of the deadline.
• What else will I be able to do after the overhaul? You will be able to make family support adjustments online through the myIR service after April 26. Donation receipts can also be uploaded as you receive them throughout the year.