Taxes are a nightmare, wherever you are in the world. If you are self-employed or own a business, then you will have to sort out and pay your own taxes. If you don’t do this then you can be arrested and charged with tax evasion. Tax evasion can result in very serious sentences, including hefty fines and prison time.
It’s absolutely essential that you manage your taxes properly, especially in New Zealand, where tax offenses aren’t taken lightly. This article will tell you exactly how you can manage your taxes in NZ:
While this article’s main focus will be income tax, it is important to briefly mention the Bright Line rule. The Bright Line rule is New Zealand’s answer to Capital Gains tax, meaning that if you sell a house (or have sold a house in the last 10 years), there’s a chance that you could have to pay tax on it. In order to determine whether or not you have to pay tax on your property’s sale, you need to conduct extensive research and potentially speak to a legal expert. As a general rule, however, the Brightline Test in New Zealand comes into play if you sell an investment property within five years of buying it. If you do not pay this tax, then you can get into a lot of trouble. It’s definitely worth asking a lawyer or property expert for advice if you are confused about whether or not you are required to pay tax on a property that you have sold in the last decade.
Moving away from property sales and onto income tax, it’s very important that you keep your tax details updated. This is so that when it comes time to file (or pay) your tax return, the relevant authorities have all of the information about you that they need. If you don’t keep your details updated, then it might be difficult for them to contact you or it could result in information being sent to the wrong place. Updating your details is a very important part of managing your taxes.
If you are a business owner, then it’s absolutely essential that you keep meticulous records. If you do not keep records and you end up being audited, you could get into a lot of trouble, or worse, could be fined. The best way to ensure that your business’s records are kept up to date is to hire an accountant. While accountants can be expensive to hire, the service that they offer is worthwhile. You can also outsource your business’s accounting needs to a third-party accounting provider, who always operates remotely but are much cheaper than traditional in-house accountants.
Once you have drafted your tax return at the end of the year, make sure that you go through it with a fine-toothed comb and look for any mistakes. If you find any, make sure that you go back and change them. If you knowingly submit a tax return that contains misleading or untrue information, you could get into a lot of trouble. At a very minimum, if your mistake is discovered, you could be fined. The reason that punishments are issued for even the smallest offenses when it comes to taxes is so that people do not think they can get away with misleading New Zealand’s tax authorities.
If you do receive a fine or penalty, then you need to make sure that you repay them immediately. In addition to paying your penalties and fines immediately, you also need to make sure that you pay your tax off in a timely fashion. If you fall behind on your repayments, then the tax authorities could add interest to your account, meaning that you have to pay more in tax than your bill reflects. The amount of interest that is added is calculated according to the amount of time that it is delayed and how much is outstanding. They will also take into consideration the number of repayments you have already made and whether or not you have made mistakes in the past.
Finally, audits are when New Zealand’s tax authorities get in touch and say that they want to check out your annual tax return and ensure that the information conveyed in it is accurate. Preparing for audits is a crucial part of managing your taxes. The best way to prepare is by record-keeping, as already mentioned. If you are audited, you should hire a lawyer or accountant to speak on your behalf. You should always expect audits, no matter how unlikely it is that you will receive one.
New Zealand is a country that makes paying taxes relatively easy. All of the information that you need to pay and manage your taxes can be found on the government’s official website. Make sure that you meticulously keep records and look after your taxes, so that you never end up getting into trouble or receiving a fine.