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How it could work

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No need for many people to provide information to Inland Revenue

The main proposal is that people with straightforward tax affairs would not need to provide information to Inland Revenue.

If an individual’s only source or sources of income have already had tax deducted, that person would not need to file a tax return or provide any information to Inland Revenue.  This includes people with straightforward tax affairs who receive Working for Families Tax Credits, pay child support, or have a student loan.  They won’t have to provide income information as Inland Revenue would already hold that, but will still need to tell Inland Revenue if they begin receiving income that has not had tax deducted at source).

Inland Revenue would calculate tax owing or refunds due

Inland Revenue would consider all the information it holds about that person – such as information from the employer about wages paid or information from a bank about income from savings or investments. 

If it thinks it has a complete picture of the individual’s tax affairs, Inland Revenue would go ahead and calculate the individual’s position and send a notice of tax to pay, or issue a refund.  It would be Inland Revenue’s responsibility, not the individual’s, to make sure the amounts were correct. 

There would be a threshold for debts or refunds

The resulting refund or debt would need to be paid only if it was over a certain threshold. 

The threshold is currently $5 for refunds, and $20 for debt. 

The Government wants to know where the thresholds should be under this proposed new approach, or if there should be a $0 threshold for refunds. See Refunds or tax bills for more information.

Some taxpayers would still have to file a return

Taxpayers with income that did not have tax deducted or who held other information necessary to determine their tax position would still have to file a tax return.  For example, a person who received income from running a business would still need to file a tax return. If Inland Revenue had reason to believe someone had derived income from a source that was not subject to withholding tax or if Inland Revenue had questions about some information it held about that person, it would ask the individual for more information.

This flowchart summarises the new approach and what Inland Revenue would do:

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