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NZ Issues Guidance On Fixing Errors In Tax Submissions

by Mary Swire,, Hong Kong

25 July 2019

New Zealand's Inland Revenue Department has released a new standard practice statement to explain when and how the Commissioner will exercise discretion in amending a taxpayer's assessment to ensure correctness.

The statement is intended both to provide direction to those Inland Revenue staff delegated to use the discretion, contained in Section 113 of the Tax Administration Act 1994, and to give guidance to taxpayers and their advisors in formulating requests for amendments.

The statement says: "The Commissioner acknowledges that in a self-assessment regime, taxpayers will occasionally take an incorrect tax position and that correcting these positions is an integral part of tax administration. Section 113 contains a broad discretion allowing the Commissioner to amend assessments to ensure their correctness. The Commissioner's practice is generally to use the discretion to correct a tax position, subject to the criteria described in the practice statement."

The statement sets out that, in considering Section 113 requests, the Commissioner must be assured that the amendment the taxpayer seeks will ensure the assessment is correct when amended, even if it was also correct beforehand. Where the Commissioner is not initially convinced that the amendment requested will result in a correct assessment, a decision must be made whether to commit Inland Revenue's limited resources to considering the request further.

Where there are very obvious errors that require little consideration, the correction will be made without further consideration. When exercising the Section 113 discretion in more complex cases, the Commissioner will evaluate any amendment request using the care and management principles. To best inform this care and management decision, the Commissioner will objectively consider the relevant factors discussed in the Practice Statement (as required on a case-by-case basis), the Guidelines state.

They add that the more easily verifiable the correctness of the proposed amendment is, the more likely it will be that the Commissioner will allocate resources to making the requested amendment. Where the proposed adjustment is merely arguable or involves disputed facts or statutory interpretation, it is less likely that the Commissioner will devote resources to processing the request further.

The guidelines state that "requesting an amendment under Section 113 cannot be used as an alternative means of considering the merits of the assessment by circumventing the statutory disputes procedure. Further, the Commissioner does not consider it appropriate to use Section 113 to amend assessments when the facts of a case or the interpretation of the law to those facts is at issue."

"Disputed facts and statutory interpretation, or instances where the facts or law is unclear, should properly be considered using the disputes resolution process. If a taxpayer is aware that they had the disputes resolution procedure available to them and did not engage with that process within the available time period, but then attempts to use Section 113 to challenge an assessment outside the disputes resolution timeframe, the Commissioner will take this into account in deciding whether to decline the amendment request."

How to submit a request

Requests to correct obvious errors, such as arithmetic, transposition, and keying errors, may be made to Inland Revenue by telephone or in writing. The term "in writing" includes a taxpayer modifying their tax return by using myIR, as well as other communication with the Commissioner by electronic means.

Requests to amend returns where the tax effect of the amendment requested is NZD10,000 or less may generally be made by telephone or in writing.

Requests to amend returns where the tax effect of the amendment requested is greater than NZD10,000 must be made in writing.

Taxpayers or their agents making amendment requests must supply the Commissioner with all relevant information to substantiate the merits of the amendment requested.

TAGS: tax | law | goods and services tax (GST) | New Zealand | services | Tax

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