Income tax – don’t pay more than you need to

Most people work for wages in New Zealand, and their income tax is paid directly by their employer to the Inland Revenue Department (IRD) under the Pay As You Earn (PAYE) scheme.

In most cases, the correct amount of tax is paid and you will not need to do anything at the end of the tax year (31 March). However, you can end up paying too much tax if you aren’t careful. For example, many people are not aware that donations of five dollars or more can be tax deductible, and that school fees are usually by donation which are therefore deductible. If you have worked in more than one job during the year, or if you haven’t worked the full year, you will probably be entitled to a tax refund because you may have paid too much tax during the year.

There are a range of deductions available to parents under the working for families tax credit scheme, and you need to be aware of these if you want to make the most of them.

If you own a business, you will probably pay provisional tax, which means you pay your tax for the current year during that year, in three installments throughout the year. Provisional tax is great because you don’t get caught with a large tax bill at the end of the year, however as it is based on your earnings from the previous year, you need to ensure that you haven’t paid too much (or too little) at the end of your tax year, and that you have received all your benefits and tax rebates. For instance, if you work from home, there are a number of costs that you can claim, from some of your telephone and internet charges to rent, mortgage interest and power costs.

If your business is registered for GST, you can claim the GST amount back on work related expenses, effectively saving you a lot of money over a year.

Whatever your situation, be sure that you are not paying more than you need to in New Zealand income tax. Talk to a registered tax agent, an accountant or IRD to make sure you are getting a fair deal.


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