[Toolbox] The Tax Files
Thursday 12 February 2009
Tax is a monster at the best of times. Diana Clement checks out the IRD’s website, and online forms and tools for their usefulness for property investors.
By The LandlordProduct: Inland Revenue Department website
Strapline: A behemoth of tax information
Overall rating: 2 out of 5
The IRD's website is a mine of information. It has virtually every form the department produces, as well as tools, calculators and an online filing system for some straightforward tax matters.
It's also possible to log in and change your personal contact details as well as send and receive secure emails. The department promises to reply within 15 working days.
For more specialist issues the IRD website contains thousands of tax determinations, product rulings, alerts, bulletins and more.
The IRD makes no bones that it's hot on the heels of property investors who avoid tax. You’d think therefore that there would be a portal page directing investors to the information they need to know; how property investments are taxed, which forms you need to use, calculators for depreciation and more, along with basic introductions to concepts such as the loss attributing qualifying company (LAQC) and trading trusts.
Yet neither the Individuals & families, nor the Business & employers main drop down menus had property-related links, and the Forms and guides menu didn't have "property" as one of its keywords.
Nor did the site map have anything about property. Sadly, the only way to find what you want is to use the site’s search engine. But unless you know exactly what you're looking for, you're on your own mate.
A search on the word property returns 740 results, which is too many to cope with. Most of the links appeared to be repetitive and the vast majority in the early pages related only to the capital gains tax question – a tiny fraction of what a property investor needs to know.
It's a shame that there is no advanced search allowing investors to refine what they're searching for, such as forms, guides, tax determinations or calculators. Currently the search returns the whole shebang including things like legislative information and annual reports that are of peripheral interest to investors.
Using the needle in haystack search approach, bit by bit over a period of hours, I found some very useful content indeed.
If you just happen to know the number of the related tax form or guide you can short-circuit the process. Who but accountants knows this?
For the record, the tools and calculators section www.ird.govt.nz/calculators, which can be found on the right-hand side of the homepage has some useful stuff for investors, including:
• A tax due date calculator
• Tax on annual income calculator
• A transfer date calculator for qualifying companies
• Home-based boarding services calculator
To be honest, this wasn't first tier information that an investor would need. So I searched the term LAQC, which returned 53 results over five pages but failed to produce the IR435 document, which explained what LAQCs are and how they work.
By pure luck another unrelated search returned this document. From there, the right-hand navigation bar opened up with plenty of links to forms, guides and calculators, such as the online IR4 company tax income return (albeit not the current one) and other forms such as the IR436 form for electing between a qualifying company or loss attributing qualifying company (LAQC).
Going back to the original LAQC search I found buried a tantalising link to an "alert" about people selling their family homes into LAQCs. A small link at the bottom of that page led me to the IR280 Putting your tax returns right form, which more than a few readers should take a look at.
If you're doing quick flicks or have bought and sold property in short succession there's plenty of information about your tax obligations, starting with the decision tree at: www.ird.govt.nz/toii/property/prop-tax-decision-tree-house.html.
One of the few completely successful searches I undertook as for trading trusts, which turned up an introductory page. It opened with a list of links to forms and guides that could be downloaded such as the IR6 for estate or trust income, and the IR288 trusts and estates incomes tax rules.
Some information was completely unavailable. For example I tried baches then holiday homes in the search engine, and the site returned nothing at all – which isn't helpful if you own one of these and you need to know how they're taxed.
Searches for serviced apartment and hotel apartment an area where new investors are often tripped up by GST, returned nothing. When I tried apartment GST, I did get a legal decision about an obscure case not what I was looking for, which was a broad brush explanation of serviced apartments and GST. The IRD tells me there will be more about this uploaded later this year.
A search on withholding tax mortgage interest and a number of similar permutations failed to return anything that explained what this was all about. This at a time in the cycle when investors are falling over themselves to get into the Australian market.
Having spent about two hours on the website by this time, I saw the word "depreciation" for the first time. But a search of depreciation on property brought back obscure results, not relevant to the majority of property investors. This however sent me scurrying to the calculators and tools section where I did find a depreciation rate finder and tax deduction calculator.
Pity the poor commercial property investor. The first three links from my search commercial property investment tax, returned an article on corporate migration, amortisation rates for landfill cell construction, and allocation of research and development tax deductions.
In summary the IRD's website is packed full of useful stuff for investors. I just pray to the tax god that the navigation system gets an overhaul in the near future.
In all fairness, I checked out the UK's Hmrc.govt.uk website and the US: Irs.gov websites and they weren't any better, although the US one at least had an advanced search.
Contact: 0800 473 249 (helpdesk)
System requirements: Internet access and PDF viewer
Verdict: Investors need to know exactly what they're looking for if they want to find any relevant content.
Pros: The site is huge.
Cons: Poor navigation.
Commenting is closed
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