Purchasing tax for a reassessment

Can I purchase tax as part of a reassessment? 

Inland Revenue (IR) allows taxpayers to use a tax pool to address additional tax to pay due to audits, notice of proposed adjustments, and voluntary disclosures within certain criteria. Through Tax Traders, a taxpayer can purchase tax to meet any tax shortfall as a result of an IR reassessment – reducing the cost of debit use of money interest (UOMI) incurred if settled directly with IR.

You have 60 days from the date your notice of reassessment was issued to pay using tax pooling. 

How it works

Tax in the Tax Traders pool covers liabilities from the 2006 income year onwards and can be used for reassessments of the following tax types: 

• Income tax 
• GST 
• Withholding taxes (RWT, NRWT) 
• Employment-related taxes (PAYE, FBT, ESCT, RSCT)  
• Further income tax 
• Imputation penalty tax 

To qualify as a reassessment, a return for that tax type and period must have previously been filed. Qualifying taxpayers will have 60 days from the notice of reassessment being issued to book and pay for a tax pool solution through Tax Traders.

We will work with you to identify the best strategy to help minimise risk and exposure. Using existing deposits first is not always the most beneficial solution. We consider the optimal application of existing payments, taking into account:

• The timing of existing payments at IR vs the terminal tax date.
• The size of payments vs accrued interest.
• Any tax pool credits available to supplement existing payments.

If you are under audit, have a notice of proposed adjustment, or are contemplating a voluntary disclosure, feel free to contact us for a no obligation quote or to discuss strategies.

Credit assessments, refunds and tax-pooling

Where the tax-type is not income tax (i.e. GST, DWT etc.) and a credit assessment has been refunded prior to the standard payment due date, interest is charged from the date of refund.

However, the earliest effective date that tax can be purchased is the standard/original due date for the tax type/period - not the refund date. 

You can utilise tax pooling in this instance to clear the increased assessment amount under the reassessment. There may be a small amount of interest that has been charged between the refund date and earliest effective date, which needs to be cleared via a direct payment to IRD.

Benefits

• Reduced interest cost compared to settling with IR directly.
• Can be a helpful cost-mitigation strategy as you work through the audit process.

Criteria

• A return for the tax type and period for which the taxpayer is being reassessed must have been previously filed, unless Commissioner’s discretion has been granted.  
• Only the difference between the original and reassessed amount can be purchased. 

💡TIP: auto-assessments do NOT automatically qualify to utilise tax-pooling. However, if a return has previously been filed (IR3 or IR4) and there has been an amendment filed, tax-pooling can automatically be used.

• IR has discretion to allow a taxpayer to use Tax Traders if a voluntary disclosure has been made, but no previous return has been filed. There are specific criteria that a taxpayer needs to meet. You should seek leave from IR early in the process. Tax Traders can assist with this – please contact a member of our team and we will be more than happy to help.

A good starting point for this discretion request can be seen here.