Date posted: 05/12/2022

Recent Government changes a reason to expect increased compliance costs, survey finds

Increased compliance costs and taxpayer uncertainty brought about by the Government’s recent changes in property taxation rules and domestic trust disclosure are noticeable findings in a survey of CA ANZ and Tax Management NZ released in November.

In brief

  • Increased compliance costs and taxpayer uncertainty brought about by the Government’s recent changes in property taxation rules and domestic trust disclosure.
  • Declined perceptions of IR’s responsiveness.
  • Respondents’ limited awareness of the extension or variation of tax measures.

Increased compliance costs and taxpayer uncertainty brought about by the Government’s recent changes in property taxation rules and domestic trust disclosure requirements are noticeable findings in Chartered Accountants ANZ and Tax Management NZ’s survey released in November.

The survey this year receiving a record number of respondents focused on Inland Revenue’s services, COVID-19 support measures, recent property tax changes, and the new trust disclosure requirements. Approximately 90 per cent of respondents believe recent changes to the bright-line test and new financial reporting and disclosure rules for trusts will increase compliance costs. Moreover, 80 per cent of respondents rated the increase as “significant” or “somewhat significant”.

Chartered Accountants ANZ and Tax Management NZ’s survey results

Source: Chartered Accountants Australia and New Zealand

CA ANZ NZ Tax Leader John Cuthbertson FCA says the responses backed up CA ANZ’s consistent submissions which detailed that the relevant tax legislation will add to increased taxpayer uncertainty and compliance costs with little time to educate and advise taxpayers of the new rules.

Taxpayer certainty is a critical element of our tax system. Certainty is enhanced when the legislation is written as simply as possible and accords with the stated policy intent, says Cuthbertson.

Recent bright-line changes and residential property interest limitation rules announced by Government immediately prior to the applicable income year were provided as examples where the process resulted in a period of uncertainty for taxpayers and their advisors. Final legislation was not passed until late March 2022.

When it came to rating IR's services, perception of their responsiveness has declined since last year while somewhat paradoxically, the average time to receive information has improved.

Inland Revenue agent account managers and the service they provided was rated highly by respondents. Survey findings also show that respondents are highly engaged digitally, self-serving their needs through My IR.

It will come as no surprise however that the quality of Inland Revenue’s phone service was singled out as needing improvement. Negative sentiment will likely not have been helped with the removal of the dedicated tax agents’ line through the COVID response period and the reallocation of IR staff to assist with calls. Respondents stated that IR need to upskill the technical knowledge of staff to improve responsiveness.

The phone service has an important on-going minimum role to play in terms of overall interaction and engagement with IR. Interactions will cascade to the phone service when other channels are unavailable or a fast response time is required.

Encouragingly the survey found that the key (non-tax) COVID-19 response measures (COVID-19 support payment, Resurgence support payment, and the small business cashflow loan) were well-used and well-rated. Most respondents also found that it was much easier to get a tax deferral arrangement in place as compared to the prior year. This likely reflects the introduction of a digital application channel and greater familiarity with the application process and supporting information required.

Respondents’ limited awareness of the extension or variation of tax measures was more concerning. It is likely however, that respondents benefited from the impact of relevant variations without being aware that they provided the basis for the favourable treatment or timing concession utilised. Those respondents who were aware, agreed that the measures were useful in alleviating the impact of COVID-19.

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