Tax audits of wealthy widened

Peter Truman
Peter Truman
Wealthy individuals, particularly new immigrants, can expect some extra scrutiny from Inland Revenue in the current financial year to ensure they are meeting their New Zealand tax obligations.

As the criticism continues of wealthy overseas people buying New Zealand property, pushing prices up, Inland Revenue is extending the reach of its high wealth individuals unit to include high income individuals as well as the super rich.

Deloitte Dunedin tax partner Peter Truman told the Otago Daily Times the continuing focus by Inland Revenue on property speculation was likely to mean continued audit activity in the Queenstown Lakes area.

''Inland Revenue has direct access to databases that enable it to monitor property transactions. People buying and selling property in quick succession, or who undertake multiple property transactions, should expect Inland Revenue to contact them.''

Inland Revenue would want to understand the background to the transaction and to apply pressure where it appeared the property had been purchased for speculative purposes, he said.

Asked why Inland Revenue was targeting the super rich, Mr Truman said people with higher levels of income were sometimes more motivated to look to ways they could reduce the amount of tax they paid. It was logical Inland Revenue would increase its focus on that group.

The specialist unit had existed since 2003 and had targeted about 200 of New Zealand's wealthiest families, actively reviewing transactions undertaken and reviewing tax returns filed.

Because the dollars involved were greater than normal, the adjustment identified produced a higher return than tax audits in general, he said.

Now, Inland Revenue was turning its attention to immigrants, Mr Truman said.

One of the categories for entry into New Zealand was having money to invest. Those wealthy people were deemed not to be a drain on the New Zealand taxpayer.

There were ''very significant'' tax concessions available to new immigrants for four years after they first became a tax resident in New Zealand, Mr Truman said. They provided an exemption from New Zealand tax, for most earned passive income such as interest, dividends, rents, royalties and pensions.

''These rules provide significant advantages and it is important the new immigrants seek tax professional advice to ensure the concessions are correctly applied and that full advantage of the concessions is obtained.''

A paper released last week by the Treasury noted Inland Revenue was projecting a return of $8 for every dollar spent on the new projects - a return of $642million over five years as a result of $74million of extra funding granted over the same five years, he said.

However, Inland Revenue also projected $51.6million of the additional tax payable would not be collectable, resulting in a bad debt write off rate of 8% on tax shortfalls successfully assessed.

At a glance

• Inland Revenue to target wealthy immigrants through extra funding for its high wealth individuals unit
• An expected $642million of unpaid tax expected to be uncovered
• Property speculation in Queenstown Lakes one of the targets
• Super rich motivated to find ways of reducing tax obligations
• People buying and selling property in quick succession, or who undertake multiple property transactions, should expect Inland Revenue to contact them

Add a Comment