Weekend Money: Those taxing questions

Will employers still have to tell you how much you've earned?

Not any more, or at least not as far as the IRD is concerned. Which means no more IR12 or IR13 forms - those yellow slips we receive at year's end showing our total income and tax paid.

However, the paperwork is not disappearing altogether.
Instead of employers providing those details, the IRD will send them to many taxpayers - either in the form of an "earnings certificate" or an "income statement".

The certificate will just be a record of your income and tax already deducted. The IRD is still working out the details, but at this stage it only plans to send those out if you ask.

The statement, on the other hand, will be a formal assessment, showing how much the IRD thinks you owe, or it owes you.

How can you check you're not being over-taxed?

By asking for an earnings certificate, which will come with a calculation sheet so you can work out how much tax should have been paid. But you'll have to ask for it.

Unless, that is, you're one of the estimated 400,000 taxpayers who will automatically get an income statement. That category includes anyone receiving family assistance, some with student loans, those on special tax codes, or anyone who used an incorrect tax code.

If the IRD says you have more to pay, you'll have two months to challenge its assessment before the figure becomes final (after that, you'll have to use a more formal disputes process).

If you're owed a refund of $50 or less - and you agree with the IRD's figures - you need do nothing except wait for the money to be paid out.

If your refund is over $50, you'll have to confirm that you have declared all your income before the IRD will pay out.

Will it still be worth checking the figures yourself?

Could be, for some taxpayers. Possibly not if your tax situation is dead simple and you trust the IRD and your employer to get things right.

Very definitely if you fall into some other categories.
Shareholders, for example. If you receive dividends, the IRD will assume they have already been correctly taxed.

If you're on the top tax rate (earning over $38,000 a year) there will be nothing to gain by claiming the imputation credits which go with those dividends.

However, anyone on a lower tax bracket is likely to be better off claiming the credits, which can be used to cut the tax on their other income.

Anyone whose interest earnings were over-taxed [because they didn't give their bank their IRD number] will also be in line for a refund.

Can you still claim rebates?

The new system doesn't change the existing rebates for charitable donations, childcare or housekeepers. However it will change the way you'll claim them.

Instead of claiming on your tax return, you'll have to use a separate rebate claim form. Those will automatically be sent to anyone who has claimed one of those rebates before, says the IRD, but, if you want to claim for the first time, you'll have to ask for the form.

Questions on those rebates will also be dropped from the IR3 tax return, so taxpayers in that category will also have to use the new separate rebate claim form.

Given that most of us hate filling out forms, and the rebates are often quite small, many people probably won't bother claiming rebates they are entitled to.

What about interest?

It's not just wages that are taxed before you see the money, so is interest on things like bank deposits.
If you don't tell your financial institution your IRD number, your interest earnings are automatically taxed at 33 per cent.

Since that's the rate that would apply anyway if you earn over $38,000 a year, there's no real incentive for anyone in that category to provide their IRD number.

To provide that incentive, from April 1 next year anyone who doesn't provide their IRD number to their financial institution will find their interest being taxed at 45 per cent.