Workers over-taxed over incorrect secondary tax codes set for relief after legislation passes through Parliament

March 13, 2019

Workers who are paying too much tax due to incorrect secondary tax codes are set for relief after legislation simplifying the process and tailored PAYE codes was passed through Parliament last night.

The Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill will come into effect on April 1 after passing its third reading, Minister of Revenue Stuart Nash announced in a statement.

"We promised to eliminate unnecessary secondary tax for workers with more than one job. We are delivering on that promise," Mr Nash said.

The changes will allow Inland Revenue (IRD) to "more closely monitor the tax paid by wage and salary earners through the year" and, if the worker appears to be overtaxed, Inland Revenue will "suggest a more suitable PAYE tax code tailored to that worker", he said.

IRD will also simplify the process for individuals applying for tailored tax codes which better match their earning circumstances, including an online process.

The legislation will also enable automatic tax refunds for around 750,000 New Zealanders every year when it comes into effect next month.

"Till now, the tax on the second job has often seemed too high. These changes ensure wage and salary earners are only paying the tax they should," he said.

"The simplified tax rules remove the need for people who only earn employment or investment income to file a personal tax summary (PTS) to get a tax refund. Till now, the only way to get a refund was to file a PTS. However 750,000 people failed to do so and miss out on their money as a result. We want refunds to flow automatically."

Among the changes allowed by the legislation is the addition of new KiwiSaver contributions of six per cent and 10 per cent; making the savings scheme accessible to those aged 65 and over; and allowing depreciation roll-over relief for properties affected by the Canterbury earthquakes in 2010-11, extending the deadline for obtaining the replacement property from the end of the 2018–19 income year to the end of the 2023–24 income year.

It will also allow new racehorse investors to claim tax deductions if they purchase a standout yearling; grant overseas donee status to the New Zealand Memorial Museum Trust, Le Quesnoy, to raise awareness of New Zealand's participation in and contribution to WWI; clarify how the IRD can collect, use and disclose taxpayer information; introduce a 'short process ruling' in which small businesses can more easily apply for a binding ruling from IRD on any tax matter; set the annual tax rates for the 2018-19 tax year, which remain unchanged from previous tax years; address unintended gaps in the current law governing the tax treatment of non-for-profit-entities; exempt directly-funded disability support payments from income tax; and ensure that the company demerger rules are effective in providing tax relief for New Zealanders who receive shares because of a demerger by an ASX listed Australian company.

"This Bill represents a significant step in the modernisation and simplification of New Zealand's tax system, supporting much of Inland Revenue's Business Transformation work," he said.

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