top of page

Self-Employed Individual's GST Reporting Mistake Leads to Investigation by IRD

Mr. Zhao is a self-employed person in Auckland. In addition to his full-time job, he operates a health product business online in New Zealand and is also engaged in real estate agency business. Mr. Zhao registered for GST and usually files his own GST and Income Tax.

Background
In October 2019, Mr. Zhao filed his own GST from April 1, 2019 to September 30, 2019. According to his calculations, he could claim back some GST during this period.


In November 2019, Mr. Zhao received a letter from IRD regarding Refund of GST, which inquired and requested relevant transaction vouchers for GST within the specified time. At that time, Mr. Zhao did not pay much attention and provided the documents and GST calculation files required by IRD, but IRD found errors in them. Therefore, IRD issued a Risk Review letter, requiring Mr. Zhao to provide all GST returns from September 30, 2015 to September 30, 2019, and all personal income tax files from 2015 to 2019 fiscal year within one month.

Solution
Our tax experts provided Mr. Zhao with a solution that involved requesting an extension for submitting all documents to the IRD, giving Mr. Zhao sufficient time to review five years' worth of bank statements and receipts. 


After a detailed review of the IRD documents, we immediately provided Mr. Zhao with a solution once we understood the situation. First, we successfully helped Mr. Zhao to extend the time to submit all documents to IRD, giving him enough time to review five years of bank statements and receipts. We found that Mr. Zhao not only made income calculation errors, but also deducted a lot of personal expenses, and did not declare rental income and real estate transaction income in the fiscal years from 2015 to 2019.


After calculation, Mr. Zhao needed to pay at least $150,000 in tax during these five years, which included income from the sale of one property and part of rental income, as well as penalties and interest that IRD may impose.
 

We helped Mr. Zhao to search and apply relevant tax laws, and proved to IRD that Mr. Zhao's property transaction did not need to be taxed. We also explained in detail to IRD the reasons for the financial reporting errors and re-did five years of GST returns and Income Tax reports in a short period of time.


After several communications, IRD agreed to our proposal, not only exempting Mr. Zhao from reporting income from property sales and part of rental income, but also not pursuing additional penalties. Finally, they agreed to let Mr. Zhao pay only $12,000 in taxes to close the case.

Mr. Zhao's case was resolved within six months, and at least $130,000 in tax was saved.


Conclusion

In conclusion, our team's knowledge of tax laws and regulations helped Mr. Zhao resolve a complex tax dispute with the IRD, resulting in significant savings. Our solution involved requesting an extension to review five years' worth of financial statements, identifying errors in Mr. Zhao's calculations and deductions, and providing evidence to the IRD that Mr. Zhao's property sales were exempt from taxes. This case study demonstrates the value of expert tax advice and the importance of timely and accurate financial reporting.


NoteEach client's situation is different. If you encounter a similar situation, please make an appointment with us for an evaluation meeting to obtain professional advice.

Chinese translation

bottom of page