PKF Francis Aickin Limited, Far North, New Zealand
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07 Nov 2019
The IRD will no longer accept payments by cheque after 1 March 2020 as part of its digital upgrade. A pre-approved exemption may apply to a small number of taxpayers, but ironically, income equalisation scheme deposits must still be made by cheque.
Other payment options are through MyIR, by credit or debit card through the IRD website (fees apply), online banking, in person by cash or EFTPOS at Westpac Bank or Westpac Smart ATM. Paying at Westpac requires an IRD statement that shows a barcode, or a barcode created off the IRD website - save to mobile phone or print!
Take care when paying online that the correct tax type and period are included. If the wrong details are used, the deemed overpayment may be auto-refunded by the IRD’s computer. If you receive an unexpected refund, check its origin promptly and repay to IRD for correct period. Also, notify the IRD by secure mail or phone to minimise exposure to late payment penaties or interest. Your tax agent can help with this if necessary.
Payments must still be made on or before due date except if the due date falls on a weekend or public holiday, when IRD will accept returns and payments on the next working day without imposing penalties. For online payments, ensure payment is made before your bank’s nightly cutoff time.
The system upgrade has also changed the way IRD applys legislation to provisional taxpayers. It is now essential the correct amount is paid for each instalment of provisional tax by due dates, to ensure that UOMI (use of money interest) is not charged on any extra (terminal) tax due the following year - normally 7 February or 7 April.
Large, unexpected UOMI bills can arise. One taxpayer’s first provisional tax payment, due 28/8/17, was shortpaid by $10. This was caught up in the second instalment in January, with the final third instalment due 7/5/18 paid correctly. Because all instalments were not paid correctly by due date, the IRD deemed all tax for the 2018 tax year should have been paid by 7/5/18, not the terminal tax due date of 7/4/19. Although a late payment penalty was not charged, use of money interest of more than $500 was.
The second example was even worse. The taxpayer paid their first instalment of provisional tax one day late. An additional 1% was paid to cover the late payment penalty. But when the balance of the 2018 tax was paid, UOMI of more than $3000 was charged.
Sometimes taxpayers will miss payment dates or pay insufficient tax, but their accountant can help minimise any UOMI cost. Tax can be purchased through tax pool intermediaries (e.g. TMNZ & Tax Traders). In example one, the shortpaid tax could have been purchased and backdated to 28/8/17. In example two, the taxpayer should have advised his accountant that he missed the payment date. The backdated tax could have been purchased immediately at a minimal additional cost.
In summary, communicate with your accountant as soon as you realise there is a problem with your tax payments - they may be able to ease the pain.
A final note - IRD now only refund to bank accounts, not by cheque. Ensure that IRD have your correct bank account details.
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