Personal tax advisor in Auckland - recommendations/advice?

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#306021 21-Jun-2023 11:34

Hey Geeks.

So we have some personal tax issues to untangle - my wife has share options as a bonus on top of her salary, which we have been selling off in batches over the last few years and putting aside 50% off the cash out value to cover all taxes (and then some, just in case!)

This year, we have been presented with a really big provisional tax bill based on her "potential" cash up this year which we want to work through as we don't know how much we will cash out - if any! - and therefore don't want our money held hostage by the IRD until they deign to return it at the end of the tax year!

I am sure there is a better way to approach this, so

1) Any recommendations for a good personal tax advisor in Auckland (preferably West and not on the shore, but any port in a storm eh)

2) Anyone got any direct experience on managing this situation and advice to give?

heavenlywild

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#3093020 21-Jun-2023 13:37

Hey mate,

Unfortunately provisional tax is always calculated based on your last year's income +5%. There isn't anything you can do unless you choose to pay via estimated tax instead of provisional tax. You can have a chat with an accountant to estimate your income instead.

I paid a crazy amount of provisional tax last year as I sold an investment property the year prior.

heavenlywild

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#3093021 21-Jun-2023 13:52

And I should add, if your estimate of tax is too low, you will be charged 7-8% interest on the amount owing.

Either way, it's going to be painful.

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#3093034 21-Jun-2023 14:39

heavenlywild:

Hey mate,

Unfortunately provisional tax is always calculated based on your last year's income +5%. There isn't anything you can do unless you choose to pay via estimated tax instead of provisional tax. You can have a chat with an accountant to estimate your income instead.

I paid a crazy amount of provisional tax last year as I sold an investment property the year prior.

Ugh. It's insane that the IRD is able to take your money hostage for the financial year like this based on (incorrect) theoretical earnings.

I have no issue at all in paying our dues, but we don't know how much (if any) of these shares we will cash up and we would want to pay as and when we actually receive that cash.

Assume you had no issues getting your refund afterwards?

Shindig

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#3093051 21-Jun-2023 15:03

Give John Norton a call

https://www.nortonca.co.nz

Brilliant.

The little things make the biggest difference.

heavenlywild

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#3093111 21-Jun-2023 16:50

No issues getting refunds.

They only give you about 2% interest for any overpaid taxes.

It's a horrible system for those that have a fantastic year prior but have the suffer the consequences next year.

ascroft

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#3093145 21-Jun-2023 19:05

You can use the estimate option and make it $0 if you want to……. Its your call to make.

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heavenlywild

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#3093150 21-Jun-2023 19:20

ascroft:
You can use the estimate option and make it $0 if you want to……. Its your call to make.

It's not that simple.

If you estimate income as 0 and end up making just minimum wage you'll be paying whatever is owed at the end of the FY + 7-8% interest + penalties.

Don't do it unless you are literally going to earn 0.

ascroft

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#3093198 21-Jun-2023 20:01

Correct - thats how it works…..

Basically you have choices to make.

If you are worried about penalties go with a conservative estimate and then accept you might have overpaid and get a refund at the end of the year.

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mkissin

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#3093199 21-Jun-2023 20:15

If you have an accountant (and perhaps if not, I'm not certain) and you somehow manage to really underpay your provisional tax, you can make it up by purchasing tax pool credits with what amount to a very minor penalty (actually every dollar in tax that you buy costs you an additional couple of cents). There's tons of options, it's very worth talking to an accountant.

heavenlywild

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#3093200 21-Jun-2023 20:15

Either way the banker aka IRD will always win!

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#3093201 21-Jun-2023 20:16

heavenlywild: Either way the banker aka IRD will always win!

Probably sounds naive, but I am amazed you can be taxed on money you haven't earned and may in fact, never earn...

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mkissin

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#3093202 21-Jun-2023 20:16

Well, they'll never lose. It's a subtle difference.

mkissin

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#3093203 21-Jun-2023 20:20

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heavenlywild: Either way the banker aka IRD will always win!

Probably sounds naive, but I am amazed you can be taxed on money you haven't earned and may in fact, never earn...

In most cases it probably works out better for people, rather than having to put aside a random-ish amount to pay at the end of the tax year. Tons of people still manage to get in trouble over GST returns, which is much simpler conceptually.

Still ,a pay-as-you-go type thing would be possibly even better.

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#3093254 21-Jun-2023 20:59

mkissin:

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Probably sounds naive, but I am amazed you can be taxed on money you haven't earned and may in fact, never earn...

In most cases it probably works out better for people, rather than having to put aside a random-ish amount to pay at the end of the tax year. Tons of people still manage to get in trouble over GST returns, which is much simpler conceptually.

Still ,a pay-as-you-go type thing would be possibly even better.

My assumption is the system exists to minimise defaults and to force people to actually plan for tax.

Businesses are quite different to employees in that their income can be highly variable through the year. Most people earn roughly the same amount through the year so PAYE is pretty easy to administer.

There's no perfect answer.

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#3093256 21-Jun-2023 21:04

mkissin:

Well, they'll never lose. It's a subtle difference.

Except that's not really true. A large number of businesses (around 800 in June 2020-June 2022) are put into liquidation by IRD due to unpaid tax.

It's a sad and common tale.

Edit: Last year it was reported that IRD was owed $4.7 billion in overdue tax

https://businessdesk.co.nz/article/finance/insolvency-expert-ird-turned-a-corner-on-liquidations