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16 Feb 2017
You may or may not recall that GST celebrated its 30th birthday last October…. well that was roughly the same age as the IRD computer systems! If you can try and recall what computer systems looked like back in the 1980s, you won’t be surprised that a major overhaul of the IRD’s systems was long overdue.
The IRD are phasing in the new system and the first to be introduced is the GST module. Last week the new GST filing system became operational. The first GST returns due to be filed on the new system will be for the period ended 31 January, which are due by 28 February.
When you first log into your IRD account, you will now be directed to a separate GST section. This now allows you to do much more than simply file your GST return, enabling you to make payments, amend a return or request a payment plan if you cannot afford to pay your GST bill. This is just the first step: IRD will be phasing this system into other tax types such as PAYE, income tax, working for families, etc over the coming months.
For those of you who currently prepare GST returns manually, you can still do this, but you may consider registering with the IRD to take advantage of the new proactive system.
It is likely that the other tax types will all be built on the same system, which will enable the different tax types to ‘communicate’ with each other and ensure that the information is consistent from one type to another.
As well as speeding up the process for paying GST, the IRD are going to speed up the refund process. This will be done quite simply by no longer issuing cheque refunds. Instead all GST refunds will only be direct credited to a bank account. When completing your GST return, if a refund is due, the system will not allow you to file the return unless you enter bank details for the refund. This of course takes out some of the postal delays in receiving your GST refund cheque (but obviously not good news for NZ post!)
Do be aware that once the IRD have a bank account listed on their system for you, this is the account they will use for all refunds. Therefore if you change bank accounts, make sure you advise the IRD. Also, if you have in the past used one of the tax refund companies for personal income tax refunds, the IRD will continue to refund to this account unless you update your details.
Updating IT systems is obviously not a cheap exercise. The cost of overhauling the IRD systems is budgeted to cost just under a billion dollars.
However the IRD’s new IT system is expected to generate an extra $280 million of tax revenue from existing taxpayers. Additionally the new system is expected to deliver cost saving of $284 million, meaning that the system would pay for itself in less than two years.
The extra tax revenue is expected to be generated from greater compliance. I expect the new IT systems will enable the IRD to compare and contrast businesses in the same industries. For example, this could enable them to compare gross profit margins, percentage spent on say repairs or staff costs. This then enables IRD to focus on those returns which appear to fall outside the industry norms and ask much more targeted questions.
I expect over the next few years we will see an increase in tax return enquiries, which could be triggered from results which fall outside the average for your industry.
So now is the time to ensure that your accounting system, be it manual or computerised, correctly analyses income and expenditure. You would not want to receive an enquiry from the IRD just because something was miscoded. If you need any further advice or assistance, feel free to contact me.
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