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Ten things you need to know about tax refunds

Taxes
When companies start jumping on the bandwagon it means there's easy money to be made. That's why there are so many companies selling heat pumps. Then there are tax refund companies. They're raking the money in from unsuspecting Kiwis.

Type "tax refund" into a search engine and the results go crazy. You'll find Kiwi Tax Refund, Taxbacknow, NZ Tax Refunds, TaxRefunds.co.nz, Recapture Refunds, mytaxrefund.co.nz, and more. Get the picture?

Talk privately to the people at the Inland Revenue Department and they'll roll their eyes back. That's because if you're a salary or wage earner you can do it yourself.

Here's what you need to know about tax refunds:

  • Don't even think of contacting one of these companies until you've tried to do it yourself. You could save tens or even hundreds of dollars for a few minutes 'work'. The IRD's website tells you what to do.

  • If you need to file an IR3 get it done ASAP. Every year a third aren't filed on time. Fines range from $50 to $500.

  • If you have any self-employed income or sizeable investments, get an accountant. They almost always save you the cost of their services and often more.

  • The tax rates for Pies (portfolio investment entities) have gone down. If you have this sort of investment, make sure you check out the new rates and let your bank or fund manager know if your prescribed investor rate (PIR) has changed.

  • If you have fund investments or savings accounts and they're not PIEs, then consider changing them to take advantage of the tax breaks. The maximum tax rate you pay on Pies and Kiwisaver investments is 30 percent. So if you're currently paying 33 percent of 38 percent tax on your investments you can save money. The lowest Pie rate is 12.5 percent, so even low earners should check they're on the right rate.

  • Get your charitable giving ducks in order. All donations to registered charities over $5 now entitle you to a third back as a tax rebate. Getting a chunk of your donations back isn't to be sniffed at. Even small charities know this and will send you relevant receipts. You can also get the money back immediately if you give through your company's payroll.

  • If you own a rental property make sure you're claiming everything you can — including mileage and any small incidentals you buy for the property. Keep the receipts.

  • If your spouse or other half earns way more or less than you, consider how you could channel some of your income to the lower earner to cut your overall tax bill.

  • If you've worked overseas in recent years, why not try to get a tax refund from the country in question. If you've left part way through a tax year you'll almost certainly be owed a refund — and you can probably sort it out over the Internet.

  • Start yourself a part-time business. You could save thousands of dollars in tax a year by doing so. Even if it's not making a profit you can claim car expenses, a percentage of your mortgage or rent.

It's easy to get lazy and put this stuff off. But it's money for nothing. Honestly. And the paperwork isn't difficult for most people.

Your say: Have you ever had a tax refund?

User comments
Just a word of warning. I inadvertently sought information from on of the websites offering assistance on Tax Refunds - got no helpful information and then forgot about it. What I had actually done, was given them the authority to me my 'tax agent' and my Summary of Earnings was sent to them. I only found this out when I went to do my Tax Return and found that this has not been sent to me. On enquiring to IRD, I was told that I had appointed an agent. I immediately 'un-appointed' said agent and ordered that any information had to be sent to me directly and personally. So beware of so-called 'free advice'.

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