Personal tax will become simpler, ministers promise

There should be less need for tax returns after Inland Revenue's Business Transformation project is complete.
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There should be less need for tax returns after Inland Revenue's Business Transformation project is complete.

Taxpayers won't be forced to check an annual statement to ensure the taxman hasn't missed any of their taxable income, the Government has decided.

There should also be no need in future to file away receipts for donations to charities and schools until the end of the year in order to claim tax refunds.

Proposed changes to the personal tax system should mean there will be less need for people to deal with Inland Revenue, Finance Minister Steven Joyce and Revenue Minister Judith Collins said.

Inland Revenue will have better information about people's incomes, Revenue Minister Judith Collins says.
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Inland Revenue will have better information about people's incomes, Revenue Minister Judith Collins says.

People whose only income is from a salary, wages or investments would no longer need to file a tax return to receive tax refunds or to calculate any additional tax, a discussion paper released on Monday has proposed.


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A "green paper" issued by Inland Revenue in 2015 had suggested introducing a controversial new mandatory requirement for all taxpayers to check an end-of-year tax statement produced for them by Inland Revenue.

That would have brought to an end a situation where many wage earners have not had to have any contact with the tax department since the 1990s.

But the Government said in its new discussion document that Inland Revenue's suggestion had been put forward when the proposed overhaul of the personal tax system was at "an early stage".

"Having considered the submissions received on the green paper and carrying out further work, the Government is not proposing that all individuals should have an obligation to interact with Inland Revenue on an end-of-year basis," the discussion document said.

The Taxpayers Union had warned mandatory statement checks would have been a "step backwards to the 1970s".

Executive director Jordan Williams said he believed Inland Revenue had always wanted them.

"But it looks like ministers have overruled officials in a very good way."

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The overhaul of the personal tax system is being driven by Inland Revenue's Business Transformation project, which will see it replace its aging computer systems and axe 1500 jobs.

It should mean people are taxed more accurately through the year, for example if they move in and out of employment or change between tax bands.

"Under this new system people will be much less likely to end up with large tax bills at the end of the year," Joyce said.

"They'll be paying a more accurate amount through the year and receive any refunds automatically. This is good news for about three million taxpayers."

People would be able to view an account online, showing where they stood with Inland Revenue.

Suggested changes mean taxpayers would be able to electronically upload copies of tax-deductible donations they had made at any time, instead of having to store and submit them all together, once a year, for a refund.

The existing $5 threshold under which tax refunds are ignored could be eliminated. The threshold under which people can get away without filing a tax return for up to $200 of unreported income – avoiding up to $66 of tax – could also be revised.

Submissions on the discussion document are due by July 28.

 - Stuff

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