Chapter 6 - After the end of the tax year

The Government proposes to clarify that a return filed following the issue of an electronic default assessment will be treated as a request for Inland Revenue to use the discretion to amend the assessment to ensure that the assessment is correct.

As noted in Making Tax Simpler – Proposals for Modernising the Tax Administration Act, there are inevitably going to be situations when either the individual or Inland Revenue will seek to amend or correct the initial assessment. Correcting tax positions is an integral part of tax administration, and will continue to be so under the modernised tax administration system.

That discussion document outlined the assessment and amended assessment rules and how they apply generally. Those rules will apply in relation to the proposals in this discussion document.

Under current law, Inland Revenue is able to issue an electronic default assessment when a person has not filed a return. The assessment should be based on the information Inland Revenue holds and reflect what Inland Revenue thinks the person’s liability is.

When an electronic default assessment is issued, the liability is subject to use-of-money interest and late payment penalties from the original due date. When the person files a return in response, seeking to amend the electronic default assessment, the current practice is to accept the request for amendment, and make an amended assessment based on the return filed. The person is given a new due date for the payment of the tax assessed under section 142A of the Tax Administration Act before late payment penalties are imposed.[27]

The Government proposes to clarify that a return filed following the issue of an electronic default assessment will be treated as a request for Inland Revenue to use the discretion to amend the assessment to ensure that the assessment is correct.

If a person wishes to issue a notice of proposed adjustment (NOPA) in response to an electronic default assessment, they will continue to be able to do so but not simply through filing a return.

27 The Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill proposes a change to the setting of a new due date for amendments to electronic default assessments. The change proposes that the due date for all default assessments and any amendments to a default assessment will be the original due date for the tax that is subject to the default assessment.