Repeal of the simplified filing requirements for individuals legislation

Clauses 225(4) and (8), 240, 243, and section 33AA of Tax Administration Act 1994

Submissions

(Chartered Accountants Australia and New Zealand, KPMG)

CAANZ understands the rationale for the repeal of the simplified filing requirements for individuals legislation and therefore supports it.  However, we are surprised that it was not foreseen in 2012 that the SFRI legislation would be “overtaken by events” and that the cost of developing and enacting the SFRI legislation could have been avoided.  (Chartered Accountants Australia and New Zealand)

KPMG supports the repeal of the recent changes to the tax return filing requirements for individuals which were intended to apply from the 2016–17 income year, in anticipation of Inland Revenue’s Business transformation changes.  (KPMG)

Comment

Officials welcome this support.  We also note at the time the SFRI legislation was enacted in 2012, Inland Revenue’s Business transformation programme was in its very early stages and it was not clear how it would address the problem that the SFRI legislation sought to address.

The SFRI legislation addressed concerns of fairness by removing the ability for people to “cherry pick”, and removing the requirement for others to file tax returns.  These initiatives were seen as a “back-end” solution (that is, stopping the practice of filing tax returns in those years in which an individual is due a refund and not filing when they have tax to pay) to a “front-end” problem of inaccurate PAYE deductions during the year, leading to the need to square-up and file a tax return at the end of the year.

Current Business transformation thinking is for more streamlined processes, with salary and wage earners’ information being provided by third parties such as employers and banks to Inland Revenue, and Inland Revenue undertaking the necessary calculations.  This should lead to a more accurate PAYE structure, which means fewer people in a refund or tax-debt position at the end of the year.  The problem of filing a tax return only in those years in which an individual is due a refund would be reduced.

Recommendation

That the submissions be noted.