People who qualify for the new 39% tax rate should not try and avoid it, the New Zealand Inland Revenue (IRD) Department has warned. The new tax bracket applies to people who are making more than $180,000.
A statement from Tony Morris, the Inland Revenue customer segment leader, made it clear that the IRD will be keeping a close watch on people who appear to be taking actions that will help them avoid the new tax rate. He went on to say that necessary action will be taken against people who are found trying to avoid the tax.
In the statement, the IRD mentioned that some high-income earners will be taking actions to help reduce their exposure to the new rate. He stated that the IRD are in discussions with tax agents and have effectively sent a warning against such actions. The department has also highlighted some activities that will attract their attention and have given tax agents a guide on what types of activity will be a cause for concern for the IRD. He added that further statements on the matter are available on the IRD’s website.
Morris also added that an alert that was first issued in 2011 is to be reissued. That particular alert is intended for people who might try and avoid the tax by diverting revenue between business to try and keep below the $180,000 threshold. The context of the initial alert will remain the same but it has been updated to reflect the new rate.
He also said that anybody considering taking any actions that involve the new rate should get up to date with the available information before doing anything. Morris went on to add that the best choice of action if you are unsure about the rules is to get advice first. He also added that the IRD can provide rulings on whether or not a certain move will break the law.
The warnings are quite stark and unambiguous, meaning there’s no excuse for anybody who might try and avoid the tax. There is also plenty of information available so there is no reason for anybody to not be fully aware of the law. Although the statement doesn’t mention which penalties will be applied is it quite clear that the IRD are taking the matter very seriously. Any business or tax agent should ensure they don’t fall foul of the law lest they risk potentially serious consequences.