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To make it easier for small businesses to comply with their tax obligations, the Government is considering various options, including designing Inland Revenue’s systems in ways that the system corresponds to other business/accounting software which meets specific standards.This approach could mean that tax returns in the traditional sense are no longer required for some businesses as business systems can automatically supply information to Inland Revenue throughout a period. By automating the supply of information the Government is hoping to reduce compliance costs by aligning Inland Revenue information requirements with a taxpayer’s normal business processes. This could also reduce the number of errors arising by assisting taxpayers to classify transactions correctly from the start.

While more thinking is needed about what system specifications would be required and what types of information would be supplied, further details on the proposal to automate the supply of information may form part of a further discussion document on making tax simpler for small businesses.

This consultation is focussed particularly on how the greater use of automated business interactions fit into the self-assessment model which underpins New Zealand’s tax administration.

It is proposed that where information is automatically supplied to Inland Revenue through interaction between Inland Revenue’s and taxpayers’ existing financial systems a return may not be required in the traditional sense. 

However, it is proposed that at a specific point in time a business that automatically supplies information is required to confirm the aggregate final figures. Confirming the aggregate final figures is a proxy for a business having interpreted and applied the law to the facts relating to their own financial affairs, and shows an intention that the amount of tax determined is final. It is at that time that the self-assessment can be treated as triggered, which allows for the remainder of the return process to follow - for example payments becoming due or the application of interest/penalties etc. It also would allow for corrections to the underlying figures where errors in the businesses’ systems exist/occur.

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