Automatic transfer of business income details on the way

Tax Alert - December 2022

By Robyn Walker

The Inland Revenue’s new computer system has the capacity and functionality to receive and process vast amounts of data and from April 2023, more data will be collected about businesses.

In November 2022, the Government finalised an Order In Council (OIC) which sets out the details of data that ‘payment service providers’ (PSP) will need to collect and provide to Inland Revenue on a six-monthly basis. The approach in the OIC will replace the ad hoc requests for data that Inland Revenue currently make with routine reporting.

Those who satisfy the definition to be a PSP are likely to be contacted shortly by Inland Revenue to provide further practical details about the data required and how it should be provided. To be subject to reporting under the rules, a business must meet the following payment service provider definition in the OIC:

(a) means a business that participates in a payment system by facilitating payments; and

(b) includes an acquirer (this is an entity (for example, a bank) that provides access by a merchant to a payments system that enables the clearing and settling of funds used to conduct a transaction, irrespective of whether the entity also provides other services (for example, lending); and

(c) includes an entity that provides any of the following services:

(i) switch services:
(ii) settlement services:
(iii) online payment gateways:
(iv) alternative payment methods; but

(d) does not include the following, except to the extent that the business also provides a service referred to in paragraph (b) or (c):

(i) an issuer (for example, the customer’s bank that issues a payment card):
(ii) a business that provides payment service hardware.

It may be possible for a PSP to be exempted from the rules on application if it is clear to the Commissioner of Inland Revenue that another PSP holds the same or more information. The approach of providing exemptions will help eliminate double-ups of data being supplied about businesses.

The data to be supplied is set out in the OIC, so businesses should be on notice that Inland Revenue will have baseline data about the minimum levels of income they might expect to see included in tax returns.

Ultimately the purpose of these rules is to help ensure that taxpayers are complying with their tax obligations. While the vast majority of taxpayers fully comply with tax laws, there will always be a segment of society that tries to operate outside of the law or who understate income levels. The size of the black economy, by its nature, is difficult to estimate, but it is likely to be billions of dollars of uncollected tax on an annual basis. Hopefully, the ongoing reduction in cash transactions will not reverse as a consequence of these new rules.

These rules will help Inland Revenue focus its resources on those taxpayers who need help complying with their tax obligations. For compliant taxpayers, time will tell if the collection of this information will lead to questions from time to time; for example, if there is a mismatch between incoming payments which have been reported by PSPs and income reported because of a sale of a capital asset or sales being exempted from GST.

For more information about these rules, please contact your usual Deloitte advisor.

Type of information to be collected

The information that may be collected from a PSP is information of all or any of the following types about a business (referred to as a ‘merchant’) on behalf of whom the payment service provider processes payments:

(a) the name of the merchant, including legal and trading names:

(b) contact information for the merchant, including physical and postal addresses and telephone numbers:

(c) the name of any individual who acts as a contact person for the merchant in relation to the payment service provider:

(d) contact information for an individual referred to in paragraph (c)

(e) the unique identifier for the merchant in the payment service provider’s system:

(f) other identity information about the merchant, including—

(i) the merchant’s date of birth (if the merchant is an individual); and
(ii) if held by the payment systems provider, the merchant’s IRD number, GST number, New Zealand Business Number, and Companies Office company registration number:

(g) bank account numbers used by the merchant:

(h) information about payments processed on behalf of the merchant:

(i) any other information that is incidental to the information specified in paragraphs (a) to (h).

The payment information in (h), must break down on a month-by-month basis:

(a) the total value of all payments processed; and

(b) the total value of all payments processed in each transaction
category, including the following categories: debits, credits, cash-outs, reversals, refunds.

(c) the total number of all payments processed; and

(d) the total number of all payments processed in each transaction category.

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