Why wage and salary earners should be checking their tax information

NZ tax and financial services leader John Cuthbertson said it's taxpayers' responsibility to ensure the information Inland Revenue has is correct.
NZ tax and financial services leader John Cuthbertson said it's taxpayers' responsibility to ensure the information Inland Revenue has is correct. Photo credit: Getty Images.

Wage and salary earners who don't need to file a tax return may assume Inland Revenue's information is correct, but it's still a good idea to check it at the end of the tax year, an expert says.

And for some, an extra pay period for the income year just ended may result in tax to pay. If this is the case, the tax amount can be written off.  

The income tax year runs from April 1 to March 31. Income tax assessments are sent to taxpayers from late May to the end of July, telling them if they have a refund - or if there's tax to pay. Inland Revenue may ask them to provide or confirm income information - or to complete an individual tax return (IR3).

Confirming this is the third year of automatic assessments, an Inland Revenue spokesperson said it's "continually working to improve the process".

New Zealand tax and financial services leader John Cuthbertson said Inland Revenue's system requires taxpayers to be more involved than they've had to be in the past. 

Taxpayers whose only income is from salary or wages don't have to file a tax return. But it's still in their best interests to check the information held by Inland Revenue is correct. 

As a first step, he suggests wage and salary earners get a copy of their income summary or payslip from their employer and check it against their earnings in myIR. This needs to be done by July 7.

And anyone who hasn't yet registered for myIR can set up an account online.  

"While Inland Revenue’s system is good, it’s not perfect so taxpayers should be actively checking this information," Cuthbertson said. 

It's also a good idea for taxpayers to check with their KiwiSaver provider and bank that their Prescribed Investor (PIR) rate or Resident Withholding Tax (RWT) rate is correct, by either contacting them or checking in their online customer portal.

The information is held in myIR, under accounts/income tax (income) and 'View your PIR'. 

"Checking your bank [and KiwiSaver provider] has the correct PIR and RWT rates is key, as this could result in you being over-taxed (or under-taxed) on your investment income," Cuthbertson said.

"Your PIR and RWT rate are dependent on your income, so you should be checking every year that the rate is still accurate," Cuthbertson added.

He said those who receive Working for Families tax credits or other support income should also check their information is accurate in myIR. And those who donate to a registered charity throughout the year (more than $5) are reminded to save their receipts. They can be sent to Inland Revenue to claim a donation tax rebate.

"You can claim back 33 percent of your total donations and use this to offset any tax you may have to pay," Cuthbertson said.

Tax write-offs for extra pay period

Unexpectedly slapped with a $353.71 tax bill, in a post on TikTok earlier in June, Maihera Te Hei wanted answers on how IRD calculates whether a person has to pay more tax - or gets a refund.

"This is the first time I've ever had to pay money back...in the past, I got a tax return - now I got this," Te Hei said.

PAYE (tax) tables are based on a standard year (52 weekly or 26 fortnightly payments). An Inland Revenue spokesperson confirmed that depending on the day they're paid, employees who are paid weekly, fortnightly or monthly may receive an extra pay. 

From the start of 2020, when a new tax policy and system were introduced, these amounts, which are based on information received by employers, are written off.

"Inland Revenue writes off tax bills triggered by an extra pay in the last tax year," the Inland Revenue spokesperson said.

The write-off applies automatically once a tax assessment is finalised. If taxpayers receive an email request for more information, it usually happens the day after they confirm their income details.

"Once an assessment is finalised, a write-off will be applied if the amount to pay is solely because of an extra pay period: for example, 27 fortnightly pays or 53 weekly pays received in one year," the Inland Revenue spokesperson said.

Anyone entitled to a write-off who pays the bill before it's finalised will receive a refund.

Aside from the extra pay period, Inland Revenue says other reasons people may have tax to pay include changes to their income through the year, a change in job and an incorrect tax code applied.

More information about tax codes can be found here. Information about income tax assessments can found here.

 "Each person’s tax situation is different, and we’d encourage anyone who has concerns to contact us through myIR, and ask for more details," Inland Revenue said.