Thousands of Kiwis will be hit with tax bills after paying the incorrect amount of tax on their Kiwisaver accounts.
A new automated IRD system - implemented over the past month - has picked up on underpayments affecting around 450,000 people with the IRD now to asking for repayments from the past year. They've already contacted 120,000 people who owe money.
"For a lot of people that could be a few hundred dollars, or 600 dollars," Financial advisor Hannah McQueen told 1 NEWS.
"So it's quite a big amount. And because you've never seen the dividend, you're having to fund it from your cash. That's the tricky part, you can't offset it against your Kiwisaver fund."
You and your employer both make contributions to Kiwisaver, before the Kiwisaver fund manager invests those both locally and overseas. Any returns are then taxed by the IRD.
"The tax gets deducted on your Kiwisaver investments and you don't have anything to do with it," Ms McQueen continued.
"It's just magical right? So you just assume that it's fine and then you realise well hold on, what tax rate are you deducting at? And if there's a difference then that's the problem."
The IRD though will just look to seek repayments from only the last 12 months, letting a large number of people off the hook for previous years of underpayment.
As for advice to stop it happening in the future?
"Work out what your income is likely to be, and that will tell you what your PIR rate is likely to be.
"Then contact your fund manager and say "what PIR rate [prescribed investor rate] do you have for me? and is there a difference?" If you're at a higher PIR rate, then you might be due a tax refund."
SHARE ME