Inland Revenue Urgently Fixes Tax Calculator That Gives “Incorrect Results”
The number of overpayments caused by a faulty Inland Revenue calculator may have been limited by the chance that few foreign stocks lost value last year.
Inland Revenue removed an online tax calculator from its website after an investor discovered it had a flaw that could cause people to pay too much tax.
The department said it was working on an “urgent solution” after Napier’s accountant Sarah Taylor described the fault to Thing.
The problem was discovered days before the annual tax filing deadline on Wednesday.
The calculator is designed to assist taxpayers who fall under the Fair Dividend Rate (FIF) tax system due to having invested at least $ 50,000 in stocks overseas and who have bought or sold stocks during the tax year.
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The calculator failed to subtract losses on these “quick sells” from all gains, calculating investors’ gross profits, instead of their net profits, potentially overestimating their taxable income.
An Inland Revenue spokeswoman said the calculator produced incorrect results and apologized to taxpayers who had been affected.
The spokeswoman said that Inland Revenue currently has no information on the extent of the problem.
Most people who have to file for the tax year have already done so.
Kristen Lunman, managing director of the Hatch stock brokerage department, was also aware of the issue. She said she expected the number of people who would have been disadvantaged by the calculator’s fault to be low.
That’s because it was used by a small group of taxpayers and relatively few stocks lost value during the bull market of the past fiscal year, she said.
But Lunman said some investors who had previously filed returns may have lost and that the blame highlighted a broader issue with the complexity of the FIF regime, which a growing number of retail investors are now falling into.
âIt is really difficult to find a standardized and transparent explanation of how to achieve these calculations,â she said.
âWe struggled. We spoke to five tax accountants who all had different methods of getting their calculations. “
Lunman feared that the complexities of the FIF regime had dissuaded some New Zealanders from investing in foreign stocks, and therefore enjoying the solid gains they had made.
âModern investors have access to the world. But investors choose not to invest overseas because of this limitation, which really limits New Zealanders’ wealth opportunities, âshe said.
The figure of $ 50,000 for the FIF scheme was “archaic” and it was probably time to reassess it, she said.
âIt doesn’t take long to reach $ 50,000 if you invest regularly. “
In the past, people falling under the FIF regime would likely have had their own accountant, she said.
âWhat we are seeing now is the modern retail investor who can quickly reach that level.
“They don’t want to spend thousands of dollars on tax accountants every year, when in reality that should be a pretty straightforward calculation.”
Lunman said she didn’t want to throw Inland Revenue under the bus. âThe rise of the retail investor caught everyone off guard,â she said.