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We have previously reported that Inland Revenue are responding to the impact that Covid-19 is having on New Zealand businesses by allowing deferrals of tax that would ordinarily be payable but is proving a challenge as a result of current business conditions. Click here to read our article on this.

Don’t Contact Inland Revenue Right Now

As we mentioned previously, Inland Revenue are asking New Zealand businesses adversely affected by the Coronavirus outbreak to simply get on with business and not be overly concerned with contacting them to put arrangements into place.

In fact, Inland Revenue simply don’t have the resources to deal with additional phone calls at the moment when most businesses are not in a position to enter into a proposal arrangement to pay off any taxes.

Instead, Inland Revenue suggest that business owners contact them once things recover and they are in a better position to enter into an instalment arrangement or pay the taxes in full.

There is general appreciation that forcing struggling businesses to meet tax obligations right now would be counter-productive when the New Zealand government is trying so hard to keep businesses afloat by way of various means of assistance.

You Must Continue To File Returns On Time

There have been a number of legislative changes made in recent times which gives Inland Revenue the ability to simply remit late payment penalties and interest.

This does not apply to late filing penalties and businesses should continue to file various Income Tax, GST, FBT, employment information and other returns by the due filing date.

The New Zealand government considers it essential that businesses continue to file returns as that is providing information with regard to the difficulties faced by businesses and the general economic outlook. Therefore the areas of relief relate to late payment penalties rather than late filing penalties.

The opportunity to defer tax payments relates to payments that were due on or after 14 February 2020. Payments due prior to that date are not necessarily covered by this arrangement.

Inland Revenue’s ability to remit any interest charges for late payment applies until 25 March 2022.

Any relief from penalties or interest will only be given once the core tax has been paid in full. It won’t be possible for you to apply for a remission of penalties or interest until the tax has been paid.

Nor is it a carte blanche approach. Any deferments are only available to businesses that can demonstrate that they have been adversely impacted by the Covid-19 pandemic. Businesses that are able to pay their tax will be expected to do so.

When Will Inland Revenue Agree To Remit Penalties And Interest?

Inland Revenue will regard a business as being eligible for remittance of penalties and interest providing:

  • The tax was due for payment on or after 14 February 2020;
  • The ability for the business to pay by the due date has been significantly affected as a result of the Covid – 19 outbreak between January and 9 June 2020
  • The business contacts Inland Revenue as soon as practicable to request relief and will be expected to pay the core tax

Inland Revenue will be sympathetic to a request for remission of penalties and interest where the business has suffered financial hardship as a result of the Covid-19 outbreak and that is the reason why they cannot pay their taxes in full and on time.

“As soon as practicable” requires the business to apply for relief at the earliest opportunity but only once they are in a position to enter into, and stick to, a repayment arrangement.

Inland Revenue has confirmed that they understand that circumstances might change which may require a renegotiation. That will not necessarily be regarded as a default and the remission of penalties and interest will continue.

Penalties And Interest Will Continue To Accrue On Unpaid Tax

Even once an instalment arrangement has been agreed, interest and penalties will continue to accrue until the core tax has been paid. At that point, providing the terms of the agreement has been met, the remission of the penalties and interest will occur.

Information To Be Required When Requesting Relief From Paying Tax

Inland Revenue will need to be satisfied that the business has been adversely impacted as a result of Covid – 19, and it is the result of this which has caused the business to fail to meet its tax obligations in a timely manner.

The filing of GST returns will be a key indicator. However you may also be asked to provide:

  • At least 3 months of bank statements and credit card statements
  • Any management accounting information
  • A list of aged creditors (Accounts Payable) and debtors (Accounts Receivable)

Types Of Tax Relief Available

Inland Revenue will consider different types of relief with regard to payments that were due to be made on or after 14 February 2020 but can’t be made because of the adverse impact of Covid-19. These types of relief include:

  • An instalment arrangement
  • An instalment arrangement with a deferred payment start date
  • Partial write-off due to serious hardship and payment of the remaining tax by instalment or a lump sum
  • Partial payment and write off the balance if considered necessary to maximise the recovery of outstanding tax
  • Write-off due to serious hardship

With regard to taxes that were due for payment prior to 14 February 2020 and which may have already been part of an instalment arrangement, Inland Revenue has indicated that they will be sympathetic to businesses who can prove they are unable to keep to the instalment arrangement as a result of adverse business conditions as a result of Covid-19.

These businesses should contact Inland Revenue if they are going to default from an existing arrangement.

 

The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.