Home' New Zealand Printer Magazine : Autumn 2016 Contents 42
Understanding where you sit in
relation to taxes can save you time,
money and heartache
HE preparation of tax
returns, an activity
which requires a lot of
care and caution, can
become an expensive
exercise if you get it
Inland Revenue has all sorts of
tests which they apply to tax returns.
This happens as soon as they are
filed or a short time later. They have
returns from a large number of tax
payers from a wide range of activities.
They therefore have heaps of returns
to use to estimate likely figures for
For some years, I was a member
of the accountants National Ta xation
Committee. We used to meet
regularly with the Commissioner
and I was always impressed by
their k nowledge of what was going
on. Individual cases were never
The rules apply to GST as well
as income tax returns. Refunds are
made immediately if there is nothing
Recently, we saw a great
deal of publicity about a couple
of accountants, not Chartered
Accountants, who were making
up figures for their returns so that
they could get refunds. This activity
continued for some time before they
were caught. They obviously thought
they were more skilled than most so
received some ver y large refunds.
They are now serving jail terms,
so will have lots of time for thinking
about their stupidity and what they
If yours is a small enterprise
with a level of activity below the
GST application limits then there is
actually no liability for GST for you.
If you are being charged GST by a
supplier of goods or serv ices you will
be able to get a refund of the GST you
have been charged.
I trust that what becomes
obvious is the need to keep clear and
accurate records of your income and
expenditure. This applies whether you
file your own returns or have them
done for you.
If they are being done for you
do not be surprised if you are
presented with a two or three page
letter for your signature. This is
usually to exempt the filer from any
responsibility for the contents of the
documents and acceptance by you
that you are responsible.
If you are buying goods or ser vices
it is most likely you will be charged
GST. You should insist on an invoice
showing that GST is being paid. Keep
the invoice so that you can document
the pay ment.
It is your choice as to how often
you file the returns. It could be
monthly or six monthly. There are
filing requirements which depend on
the level of your income but your tax
advisor or accountant will be able to
ensure that you file when you should.
These days I do not file my own
returns. However I keep all inward
invoices in a separate file so that all
the relevant information is there. That
is the safest way and it means that the
information is readily available.
You have an obligation to keep
all your ta x records for some years.
It is essential to do so firstly to
comply with IRD requirements and
secondly, for your own protection,
in case you have made an error. It is
not acceptable to claim ignorance of
the record retention time and be able
to protect your interests by showing
what you have done.
The retention of records will
protect you if your supplier later
claims not to have been paid.
This often happens if a receiver is
appointed or they go into liquidation.
Their job is to collect all unpaid debts.
If you do not have the records to prove
you have paid, then you may be forced
to pay again. This can be the case if
your supplier has been pocketing the
money. You must therefore be able to
show you have paid.
I used to do a lot of insolvency
work and often came across unpaid
accounts which I was obliged to
collect. It was not acceptable for the
insolvent firm to say they have been
paid as they have to prove it.
They are left exposed if they have
no receipt and there is no record of
payment having been received. Firms
in that situation often ask for pay ment
in cash which is then left out of the
system by the individual recipient.
The outcome of all this is quite
clear. Pay your taxes.
Underwood says you have an obligation to keep all your tax records for some years.
Preparing tax files
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