Dividend information to go straight to Inland Revenue

Overhaul could simplify tax returns says Revenue Minister Michael Woodhouse.
123RF

Overhaul could simplify tax returns says Revenue Minister Michael Woodhouse.

Taxpayers may find it harder to dodge child support and student loan repayments by hiding investment income, under changes proposed by the Government.

Revenue Minister Michael Woodhouse has proposed that companies and Maori authorities should directly inform Inland Revenue of the dividend distributions they make to individuals.

Woodhouse said that would make it easier for people to fill out tax returns, as they could be "pre-populated" with information on the investment income people had received and the tax they had paid on it.

"It is possible that these simpler and clearer processes will mean more revenue is collected as a consequence of more people complying with their tax obligations," spokesman Pete van Schaardenburg said.

READ MORE: Tax changes to affect 'everyone'

Inland Revenue said there was an additional reason for the changes, suggesting they could also reduce the overpayment of social assistance.

Inland Revenue has proposed introducing a penalty rate of 45 per cent tax on interest and PIE payments in cases where people hadn't provided their IRD number to banks and PIE scheme operators.

Its reasoning was that a failure to disclose an IRD number might mean investment income was not taken into account when people's social policy entitlements were calculated.

"This may mean they receive more social assistance or pay less in child support and student loan repayments than they should," Inland Revenue stated. 

Assuming those people later declared the income in their tax return, that would mean they would have a debt to pay back at the end of the tax year.

Ad Feedback

Inland Revenue said it would not change the 33 per cent default tax rate on dividends and taxable distributions from Maori authorities because that would involve "costly changes to companies' systems".

Inland Revenue has yet to decide how it would pre-populate people's tax returns in cases where people wanted to split their investment income with a partner who was in a lower tax bracket.

But it said there were a variety of options, including sticking with the current system which leaves taxpayers response for allocating income between themselves on their tax returns.

New Zealand's aging population meant people's investment income was increasing as a proportion of total taxable income and it had therefore become more important for Inland Revenue to collect tax on it as efficiently as possible, the department said.

Submissions on the discussion document, which Inland Revenue said would affect tens of thousands of organisations, closes on August 19.

 - Stuff

Comments

Ad Feedback
special offers
Ad Feedback