We are sometimes contacted by clients who advise that in finalising their Australian financial statements and income tax returns they have come across a transaction that should have been included in the financial statements and income tax return of the New Zealand entity.
The question often arises, “do we need to file an amended income tax return”?
New Zealand income tax laws do not give much room for carrying over adjustments into future tax returns.
In fact, until recently, the amount you could get away with was less than NZ$500.
Obviously being in a gracious mood, Inland Revenue has recently advised that they will increase that threshold to NZ$1000.
This adjustment came into effect 1 April 2017. Consequently, any adjustments to tax returns relating to periods before 1 April 2017 will be subject to the old threshold of NZ $500.
You should be aware that the threshold relates to each adjustment. It is not a matter of netting off several adjustments to see what the net effect is.
A $1200 adjustment one way is not offset by a $400 adjustment the other way. The fact that an individual error exceeded the $1000 adjustment (or $500 relating to periods before 1 April 2017) triggers the need to file an adjusted return rather than carrying forward the error and making an adjustment in your next tax return.
You should also be wary that shortfall penalties can be imposed in certain situations so you should always make sure you get professional advice before “making good” on previous mistakes. Nor should you procrastinate! Remember that we are always here to help.
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.