Here's what to watch out for with this year's tax returns

3:43 pm today

Tax assessments have started to go out in recent weeks, with 1.4 million sent in the first batch.

Photo: RNZ

Tax refunds - and bills - are rolling out, but there is a warning that people should make sure the information used in the calculations is correct.

Inland Revenue now runs an automatic assessment process for people who are earning salary and wage income via the PAYE system. It also covers income that comes from benefits and taxable pensions, interest and income from KiwiSaver and other portfolio investment entity funds.

Assessments have started to go out in recent weeks. Inland Revenue said 1.4 million were sent in the first batch.

The MyIR site was overwhelmed with traffic on King's Birthday weekend, the first weekend of assessments being sent.

IR said there were nearly 4.4 million attempted sessions over the Sunday and Monday, compared to 95,000 sessions the weekend before.

"While this is not the number of individual customers, it shows the scale of increase in the number of login attempts. There were no issues with the myIR platform, the issue was with the number of people trying to log in and the security settings in place around the login process."

Last year, 87 percent of customers were assessed as having a credit owing, and 13 percent had a debt. The average refund was $466 and the average tax to pay was $786.

Some are very small.

Of the assessments sent in the first tranche this year, 2424 of those were for less than $1.

But no money is paid if the amount to be refunded is less than $1. It will be paid once the amount owing reaches that threshold.

Debt under $50 is written off.

Inland Revenue said there was no additional cost in assessing returns that resulted in very small refunds or bills.

"The automatic process has to be done anyway so we know the tax position of salary and wage earners, so no waste of time there. We don't know it will be a 12c refund assessment until that work is done."

Angus Ogilvie, managing director of Generate Accounting Gorup and chair of CPA Australia's New Zealand tax committee, said auto-assessment was generally working well.

"IR have done a good job of this area of tax administration. For many individuals with straightforward tax affairs, the end-of-year process is now seamless.

"The issues that arise issues come from the system only accounting for 'reportable income' such as PAYE or Interest."

He said people who earned other income, such as rental income, money from self-employemt or from overseas, still had to file a return.

"There is a risk that taxpayers may not realise this obligation, assuming their auto-assessment is final and complete.

"It's rare but errors in payroll information submitted by employers or investment income details from financial institutions can lead to incorrect assessments. The good news is that individuals can make corrections to their auto-assessment before their terminal tax date without being charged penalties or, in most cases, use-of-money interest.

"For the vast bulk of taxpayers, it's a real gamechanger in reducing compliance. However, individuals should never assume the information is accurate and always check it in MyIR."

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