John, forget Mighty River, float irdCorp
Now this is a business that would sell itself. Invest $6.65 million for an annual return of $45 million. How about privatising 49% of the IRD property investment audit division and call it irdCorp.
Budget 2013 provides a permanent $6.65 million increase in annual funding for Inland Revenue to pursue property investment tax compliance, which is expected to return about $45 million a year, Revenue Minister Peter Dunne says.
The extra funding will begin in the 2014/15 financial year. "This continues the Government's focus on ensuring that everyone pays their fair share of tax," Mr Dunne says.
"The Government has been very satisfied with the work that Inland Revenue has done in this area over the past few years. Since July
2010, about $110 million has been raised from additional property audit funding - that is a healthy return of $6.60 for each dollar invested." Mr Dunne says.
What does this mean for anyone who has a property investment caught in the tax net?
In a word, think "control".
The proven approach to dealing with any tax risk is to take control. Timing is everything. Act before the business is tapped on the shoulder by the IRD.
The moment the initiative is lost the tax, interest and penalty will skyrocket. This concept is recognised in tax law because the NZ tax system is based on self assessed income where the taxpayer tells the IRD what the taxpayer will pay, going forward, through a document called a tax return (but don't get it wrong because the IRD reserves the right to take the shirt off your back).
Fortunately there is a well established less painful approach to dealing with, let's say, "issues" in past tax returns sent to the IRD. The outcome is usually no penalty, little interest and a reasonable tax outcome all round. We know it's the IRD preferred approach.
The trick is to take control by getting the best advice and acting before the IRD does.
Dust off your tax plan, get the best advice, and agree on a plan of attack.
Tax advice is what we do best at TvA. Give us a call.