All forms of investment income will be subject to more stringent reporting requirements. Other measures are designed to encourage the provision of accurate information to Inland Revenue.
Most of the proposed changes are effective from 1 April 2020, although some apply from 1 April 2018 and 1 April 2019.
Payers of interest, dividends and taxable Maori authority distributions
Information must be provided to Inland Revenue by the 20th of the month following the month in which the income was paid. Those exempt from withholding tax must report information yearly by 20 April, or monthly if preferred.
Multi-rate portfolio investment entities (PIEs)
Prescribed investor rates must be reported six monthly. Detailed year-end information must be provided by 15 May, rather than 31 May, following the end of the income year. This requirement excludes superannuation funds and retirement savings schemes.
Where a taxpayer has not provided their IRD number, the “non-declaration rate” of withholding tax on interest is increased from 33% to 45%.
Mandatory electronic filing
Electronic filing of information will be mandatory for all payers of investment income, subject to exemption from the Commissioner.
Electronic register for RWT-exempt status
Resident withholding tax (“RWT”) exemption certificates will be replaced with an electronic register maintained by Inland Revenue. This change is long overdue and should remove issues for payers trying to determine whether a recipient is RWT exempt.
Correction of errors
Currently, errors where the payer has not deducted enough withholding tax from interest subject to RWT or non-resident passive income that is subject to NRWT can be corrected in the same tax year. However, where the errors are not discovered until the following tax year the correction must be made by amending a prior year return.
When a payer has not deducted enough withholding tax in a tax year, the changes make it easier to correct the error in the following tax year. The ability to make adjustments in the following tax year will be subject to a threshold, and the payer must notify Inland Revenue of the correction. Subject to meeting the requirements, penalties and interest will not apply.
Do you have concerns about the increased reporting requirements? Contact us for more information.