If you run your New Zealand business from Australia, you might prefer to store your records here in Australia. But NZ tax law requires all taxpayers to keep their business records in New Zealand. The good news is there are some situations where Inland Revenue may authorise you to keep your New Zealand tax records in Australia.
These comments apply whether your tax information is kept on paper or in the cloud.
Approval isn’t retrospective – you need to apply beforehand and it is a mistake to take it for granted that you will be approved.
What Inland Revenue Considers
Inland Revenue may agree to you storing your business records in Australia if they are satisfied that the offshore storage would not impede their compliance activities. In particular, the information stored offshore must remain accessible (we think for obvious reasons) by Inland Revenue in the case of an investigation or audit.
There are inherent risks in accessing information stored offshore (eg jurisdictional limitations on New Zealand laws or lack of a presence in New Zealand of the third party who is providing the storage services – particularly when the records are stored in the cloud). So, to ensure that the records held offshore by a third party remain accessible by Inland Revenue, they will have regard to the following issues when considering an application by a third party:
- Whether the third party has a place of business in New Zealand or carries on its business through an establishment in New Zealand; and
- How the clients’ data will be dealt with should the third party no longer hold records for clients or for a particular client (eg, the contractual relationship ends between a client and the third party or the third party ceases to exist).
Each application will be considered on its own merits. The compliance history of the applicant may also be considered.
In addition to authorising the third party to hold records for taxpayers outside New Zealand, Inland Revenue has the discretion to require the records to be kept in a particular form and to be accessible by Inland Revenue in a way approved by Inland Revenue.
An application to store records offshore needs to address those factors. If the storage of records offshore is by electronic means, then the applicant may be required to provide information (such as those items listed below) that demonstrates that the manner in which the records are to be stored will meet the requirements:
- Documentation that describes the operation of the systems in which the records are stored;
- Explanation as to how the records are stored offshore and how they can be accessed by the Inland Revenue when required;
- Standard terms and conditions for services of data storage provided by the third party to their customers;
- Any Code of Practice disclosure statements applicable to a third party (eg, the New Zealand Code of Practice for cloud computing which a New Zealand-based cloud provider can voluntarily adhere to. Certain information about the cloud provider and its services are disclosed under that Code of Practice.
Conditions Of An Authorisation
All authorisations to store records offshore would be subject to the taxpayer providing an undertaking that the records would be provided to Inland Revenue on request, in a usable format and at no cost to Inland Revenue in obtaining the information.
For more information on this or any New Zealand tax matter, give Mike a call on 1300 791 600. New Zealand tax is all we do.
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.