Extra tax bills posted

Thousands of New Zealanders face surprise tax bills this year after a glitch in PAYE calculations.

The Inland Revenue Department (IRD) has started sending out the bills to workers across the country, saying many employers had failed to properly account for the fact that people had received an extra week's pay during the last financial year.

For example, some workers had 53 pay weeks in the last financial year, rather than the normal 52.

The additional week means workers underpaid tax or student loan repayments and the IRD is now chasing people for the arrears.

However, not all people will be billed – just those who receive Personal Tax Summaries.

IRD senior media adviser Catherine Delore could not put a figure on how many people had been caught up in the tax-sting, but did confirm that 261,000 people had received an extra pay day.

Of those, 24,000 people had received a bill.

The amount charged depended on income, but IRD estimated an employee earning $70,000 per annum would be stung with a $400 bill.

Ms Delore said it was the responsibility of employers and workers to ensure tax was paid correctly, and that the IRD was unable to fix the problem.

"It is not possible to predict the impact ahead of time due to the changing nature of people's circumstances, such as a new job or different family circumstances," she said.

However, Opposition revenue spokesman Stuart Nash said IRD needed to take responsibility for the glitch. "I don't buy that it's not their problem – it is their problem," he said. "I would have thought with IRD spending $40 million to $50 million on a new computer they would have worked this out."

Many Kiwi families would not be able to afford a surprise tax bill, especially with the looming GST rise.

"A couple of hundred bucks for a lot of families is a significant amount of money," he said.

He believed many workers also faced a losing battle with IRD over the tax bill issues. "You can jump up and down and say a whole lot of stuff, but if you owe tax, they will just pursue you," he said.

Revenue Minister Peter Dunne could not be reached yesterday, but a spokesman said that it was a fact that in any given year, some workers would have extra pay periods.

"The Minister has instructed officials to look at the information that can be given to businesses in advance so they can be better prepared," he said.

Neither Mr Dunne, nor his spokesman, responded to a question on why the problem hadn't been fixed in the past.

BDO director and Palmerston North tax accountant Ross Hadwin said workers could be charged the difference in tax, if the extra pay week pushed them into a higher tax bracket. However, he said this problem was uncommon.

Mr Hadwin was unsure how IRD calculated a $400 bill for an employee earning $70,000, as his calculations put it at $290 if they were paid weekly.

- © Fairfax NZ News