Tax assessments have started rolling out for 1.4 million New Zealanders, with refunds under $1 held until they accumulate and debts under $50 written off entirely.
Tax assessments have begun arriving in New Zealand mailboxes and MyIR inboxes, with Inland Revenue sending out 1.4 million assessments in the first batch alone — and a reminder that very small refunds and debts are treated differently than most people might expect.
How auto-assessment works
Inland Revenue runs an automatic assessment process for people whose income comes primarily from salary and wages via PAYE, as well as benefits, taxable pensions, interest, and distributions from KiwiSaver and portfolio investment entity (PIE) funds. The system compares reported income against tax paid across the year and issues a refund or a bill based on the difference.
Assessments started going out in recent weeks. According to IR, the MyIR website saw nearly 4.4 million attempted login sessions over King's Birthday weekend — the first weekend assessments were sent — compared to about 95,000 sessions the weekend before. The surge caused access issues for some users but IR said there were no platform problems.
Last year, 87 percent of customers received a credit (a refund), and 13 percent had a debt owing. The average refund was $466 and the average amount to pay was $786.
The very small refund problem
Of the assessments sent in the first tranche this year, 2,424 were for less than $1. Inland Revenue confirmed no money is paid out if the refund amount is below that threshold — it simply accumulates until it reaches $1 before being released.
On the other side, debts under $50 are written off entirely. IR said there was no additional cost in processing assessments that resulted in very small refunds or bills, since the automatic process runs regardless.
"While we don't know it will be a 12-cent refund assessment until that work is done, the automatic process has to be done anyway so we know the tax position of salary and wage earners," an IR spokesperson said.
Where the system has gaps
Angus Ogilvie, managing director of Generate Accounting Group and chair of CPA Australia's New Zealand tax committee, said auto-assessment was generally working well for people with straightforward tax affairs.
"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," Ogilvie said.
The complications arise when people have income not captured by the automatic system — rental income, self-employment earnings, or income from overseas. Those taxpayers still need to file a full return and may not realise their auto-assessment is not complete.
Errors can also occur when employers submit incorrect payroll information or financial institutions provide wrong investment income details. The good news is corrections can be made before the terminal tax date without penalties or, in most cases, use-of-money interest.
"The end-of-year process is now seamless for most. However, individuals should never assume the auto-assessment is final if they have other income," Ogilvie said.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.