New Zealand tax year-end checklists 2023

This article was current at the time of publication.

As New Zealand’s Inland Revenue Department (IRD) scrutinises the accommodative stance it took during the COVID-19 pandemic, reasonable care and close attention to detail are more important than ever for practitioners preparing end-of-year tax returns.

With this in mind, Andrew Dickeson FCPA, Taxation Services Director at Auckland-based business advisory firm Baker Tilly Staples Rodway, has compiled a suite of checklists (see below) that all practitioners can use.

Dickeson has seen a recent increase in IRD audit activity.

“The likelihood of something being scrutinised is rising,” he warns.

“Practitioners should work through the questionnaires and checklists and freshen up their clients’ understanding of [their] businesses.”

Over recent years the IRD has augmented its data sources and data analysis capability, assisted by various legislative and tax policy initiatives aimed at ensuring the increasingly digital economy doesn’t outgrow the tax net.

“One thing that’s happened behind the scenes is that the IRD’s business transformation [program] has enabled it to drill down through multiple levels, putting things through the microscope,” Dickeson explains.

“For example, in the past, ‘brightline’ transactions involving the purchase and resale of property wouldn’t necessarily have been looked at.

“Now, even ‘mum and dad’ transactions might get attention.

“It’s a wider net being cast. It’s not just the top end of town. It could be individuals who get a ‘please explain’ letter.”

Among its other growing capabilities, the IRD is running data analysis over GST returns and catching up with taxpayers that have overseas bank accounts or assets.

The templates Dickeson has compiled for CPA Australia can be used to “tease out” information clients may have forgotten or simply escaped their attention, he says.

One of this year’s new resources is a transfer pricing guide.

It’s particularly useful for practitioners because as Dickeson says, tax authorities around the world are increasingly sharing information and putting a lot more emphasis on cross-border activities.

“Practitioners and taxpayers need to have an at least high-level understanding of how transfer pricing works,” he says, adding that the IRD also offers a good overview of the issue.

Indeed, many practitioners’ clients are associated with branches and subsidiaries of overseas-domiciled parents.

These will sometimes make loans to subsidiaries or sales of goods and services at “arms-length” or charge management fees or royalties. 

“It’s important that they’re recognised correctly for [IRD] tax purposes,” Dickeson emphasises.

Increasing international cooperation among tax authorities is also enabling greater scrutiny of e-commerce.

Again, many practitioners have overseas clients selling, for example, insurance or gambling services into New Zealand.

“Those can be GST-related transactions,” Dickeson notes.

He adds that even though New Zealand exports are zero-rated for New Zealand GST, “outbound” sales of goods and services might be subject to overseas tax such as VAT in Europe or sales tax in the United States.

Your essential 2023 tax resources suite

CPA Australia’s New Zealand suite of resources for practitioners includes a tax checklist designed to assist members attempting to identify material changes to tax legislation due to take effect from the 2023 income year.

There is also a GST checklist, a company tax return preparation checklist and a transfer pricing guide.

The New Zealand tax checklist covers changes to GST tax invoices from 1 April 2023.

Also covered are changes to GST apportionment and adjustment rules involving the treatment of assets for mainly private or exempt uses, and the introduction of a “principal purposes test” for goods and services acquired for business purposes from 1 April 2023.

A new FBT exemption from 1 April 2023 covers public transport fares paid or subsidised by an employer mainly for travel between home and work.

A new exemption from interest limitation applies for build-to-rent projects.