Previously, tax pooling could not be used where there was no existing assessment, except for voluntary disclosures for income tax or RWT, with leave from (and subject to the discretion of) the Commissioner of Inland Revenue (Commissioner).
Taxpayers are now able to use tax pooling for voluntary disclosures related to tax types other than income tax and RWT (i.e. ESCT, FBT, GST, NRWT, PAYE, RSCT, AIL, further income tax, imputation penalty tax) where there is no existing assessment.
Criteria
Broadly, using tax pooling in these circumstances is subject to the following criteria:
- The taxpayer makes a voluntary disclosure of a new liability (not being a liability that arose from a return by the taxpayer or an assessment of the taxpayer);
- The voluntary disclosure is made before Inland Revenue has contacted the taxpayer;
- The taxpayer notifies the Commissioner of the details of the new liability and the notification results in an assessment of the new liability or in an obligation to pay the new liability;
- The voluntary disclosure is made within a reasonable time after the taxpayer becomes aware of the new liability, and before the date in (c) (with a reasonable time generally being around three months after knowledge of any such new liability (although what is a reasonable time will be determined on a case-by-case-basis)); and
- The Commissioner must be satisfied the new liability did not arise as a result of a choice by the taxpayer not to comply with their obligations under the Inland Revenue Acts or as a result of a failure by the taxpayer to take reasonable care to comply with those obligations.
The 'reasonable care' test in (e) above is similar to that used when applying shortfall penalties – this involves establishing what a reasonable person would do in the same circumstances, considering the taxpayer’s age, health, and background.