OMG my tax return is wrong

Tax Alert - April 2021

Having just been through the taxing lead up to 31 March, the flurry of tax returns completed and filed by the tax agents deadline inevitably means that some mistakes will have been made; whether that is a transposition error, a more substantial error or omission, or a position which was taken prior to retrospective legislation being enacted which is now incorrect.

Given the New Zealand tax system is based on a concept of voluntary compliance and self-assessment, if it is subsequently discovered that a tax return contains an error there are options available to get it fixed.

Contact Inland Revenue

Simple errors, such as the wrong number in the wrong box can usually be fixed by calling Inland Revenue or sending a SecureMail message through myIR.

Small errors

Errors at the smaller end of the scale don’t need to be fixed immediately. Taxpayers have the option under section 113A of the Tax Administration Act 1994 to self-correct total errors of up to $10,000 in the next return.

Notice of Proposed Adjustment

If a taxpayer becomes aware of a problem with a tax return it is possible to lodge a “notice of proposed adjustment” with the Inland Revenue. Adopting this approach puts a formal procedure in motion; most notably there are time periods within which Inland Revenue need to respond, meaning that it can be a quicker way to resolve problems. A taxpayer generally has four months from the date of lodging a tax return to file a notice of proposed adjustment.

Voluntary Disclosure or Section 113 Request

Once outside the notice of proposed adjustment period, mistakes can still be corrected. The process to be adopted generally depends on whether the mistake means that the taxpayer has underpaid tax (a voluntary disclosure is made) or the taxpayer has overpaid tax (a section 113 request is made).
The benefit of adopting any of these processes is that it demonstrates to the Inland Revenue that you’re taking your tax obligations seriously and undertaking some degree of self-review of tax positions. Front-footing mistakes with Inland Revenue provides some protection from penalties.

Contact your usual Deloitte advisor for more information.

Wage Subsidy and Transfer Pricing Specific Adjustments

These amendment processes could also be useful for amending an incorrect transfer pricing position on government support subsidies. There is a developing international consensus in respect of outcomes arising from such subsidies for COVID-19 relief, and intercompany transactions that may shift the economic benefit. This was covered in our February 2021 article on transfer pricing. In light of the cross-border nature of the issue the Inland Revenue have initiated a short form process that allows taxpayers to adjust both the New Zealand and Australian entities’ tax position without undue compliance cost or audit risk.

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