The main proposal in the discussion document is that people with straightforward tax affairs would no longer need to file a tax return. Instead Inland Revenue would go ahead and send a tax refund, or a notice of tax to pay if the bill was over a certain threshold.
Inland Revenue currently has discretion around small amounts of tax to pay or refunds because of the disproportionate cost of managing these small sums. For example, it costs Inland Revenue to print a cheque and post it, and the individual has to take the cheque to the bank and deposit it. If an individual has tax to pay of less than $20, or a refund of less than $5, Inland Revenue can choose to take no further action.
Threshold for refunds – $5 or zero
The Government is seeking feedback on whether the threshold for refunds should stay at $5 or if there should be no threshold. With no threshold all refunds would be issued, no matter how small.
When issuing a refund electronically (by direct credit), there is no difference in cost between a large refund and a small refund, so the need for a threshold may not be valid for electronic refunds.
There may need to be a different threshold for a refund issued by cheque, given that the cost of processing a cheque could be more than the value of the refund.
Threshold for issuing a notice of tax to pay – currently $20
The Government wants your views on what the threshold should be for amounts of tax to pay.
Currently, an individual does not have to file a tax return if he or she has $200 or less of income that did not have tax deducted or tax was deducted at the wrong rate. This $200 of income could equate to up to $66 of tax (depending on the individual’s tax marginal tax rate).
Currently Inland Revenue can choose not to pursue tax to pay below $20.