To make it easier for people to meet their tax obligations, the Government proposes that individuals receive income tax returns pre-populated with information that Inland Revenue holds or sources from reliable third-parties.Â
Pre-population offers a more personalised tax return process as Inland Revenue will be able to tailor the return to fit the individualâ€™s circumstances, with pre-populated information or personalised prompts.
Tax returns would also be more accurate, as the opportunity for taxpayer error would be reduced where information is matched against internal records. This in turn would, for both taxpayers and Inland Revenue, reduce the resources currently required to correct return errors.
Taxpayer self-assessment is a key feature of New Zealandâ€™s tax administration. Self-assessment means that the taxpayer carries the primary responsibility for determining the final amount of tax payable, assisted by a tax agent and Inland Revenue who can provide advice and guidance on managing compliance and applying tax laws.Â The self-assessment model reflects the fact that a taxpayer is often in the best position to determine their own tax liability as they have full information about their own affairs.Â
Once an assessment is made, Inland Revenue plays a part in processing and checking it, carrying out audits and providing general help to taxpayers to meet their continuing obligations. The Government considers that the self-assessment model provides an efficient basis for tax collection and should continue.Â Â
Filing a tax return and making an assessment are key parts of a taxpayerâ€™s obligation to pay the correct amount of tax on time. However, not all individuals are currently required to file tax returns with many taxpayers â€“ those who earn income only from salaries wages, interest or dividends â€“able to simply confirm their earnings in a personal tax summary (PTS) prepared by Inland Revenue. By pre-populating tax returns the Government wants to ensure that more individuals can have a simpler streamlined annual income compliance process currently available only to the PTS filers.
For a taxpayer who receives a pre-populated tax return it is proposed that the following obligations arise:
- they must respond to that return within a prescribed period of time;Â
- the required response would be to either confirm the return is complete and accurate or provide further adjustment information;
- once the response is received, the taxpayer would be treated as having completed their self-assessment;Â Â
- if no response is received from the taxpayer, Inland Revenue would be able to make a default assessment to progress the return processing until one is received;Â Â Â
- finally, following the response (or default assessment), the remainder of the return process would follow with no proposed change (for example, payment of a remaining liability by the due date, setting of applicable interest or penalties etc.).