IRD to start chasing tax

IRD E1456792792689

 

  • The IRD estimate 70% of NZ residents who have transferred a pension after 1 January 2000 have a tax liability
  • There is a limited window left to declare under an amnesty to potentially reduce your tax bill on the transfers
  • If you don’t declare under the amnesty the IRD are about to ask you why – and they have been building a list of all transferees

 

The IRD estimate that 70% of people that transferred their pensions from overseas to New Zealand since 1 January 2000 have not complied with their tax obligations. The probable reason that so many did not comply is because of very complicated rules at the time.
 
The most complex factor was that even if you were not receiving your pension you still potentially had a tax liability. That’s right – if your pension grew in value then that growth could have created a tax liability, even though you could not access the pension to pay the tax. And the IRD did not discriminate between final salary pensions or contributory pensions, it was your job to get a valuation each year, determine your tax liability, declare and pay it.
 
Many of the wrinkles in this system got smoothed out with simplified changes on the 1st of April 2014, but to make up for the massive non-compliance during the 14 or so years prior the IRD gave those that that had already transferred their pensions to New Zealand the opportunity to take a one off tax hit on their previous transfers.
 
This concession came to an end in the tax year ending 31 March 2015 and states that if you have transferred your pension to New Zealand at any time after 1 January 2000 then you need only declare 15% of that transfer as income and pay tax on it if you had not applied the previous tax rules.
 
Now the IRD are preparing to check for prior non compliance as people are filing their own tax returns will now only have until 7 July 2015 to declare their pension transfers and receive this concessional tax rate. If people do not the IRD can go back and work out their previous tax position and order them to pay penalties and interest. The IRD will chase tax on pension transfers and they are preparing lists of people to go after right now.
 
Given there are a only small number of New Zealand Superannuation schemes that qualify to receive pension transfers, it will not be hard for the IRD to ascertain who has transferred their pensions and when. This will provide an excellent starting point for the IRD to compare your personal tax position with what should have been returned under the concession or previous rules. It may well be that anyone not matching up as having paid under the concession or declared under the previous rules will receive a ‘please explain’ notice from the IRD.
 
If you transferred your pension after 1 January 2000 we strongly recommend that you contact us immediately. Again the IRD will chase tax on pension transfers – ensure that yours is not one of them.

Leave a Reply

get started free assessment

NZ free phone:0800 102 599 / OZ Free Phone:1800 857 410 / Email:info@qropsnz.com

/* ]]> */