By Gina Gatchell,
Director
It has come as no surprise that Inland Revenue has started a new campaign to review the taxable income being declared by real estate agents.
The campaign was announced on 11 May 2021. It was triggered by information falling into the hands of the IRD, indicating that some real estate salespeople might be claiming personal expenses and/or not keeping log books for vehicle mileage to support deductions.
Under New Zealand’s Income Tax Act 2007, the Private Limitation is a widely-known limitation which does not allow a deduction from gross income for private expenditure.
The combination of the increase in New Zealand’s top individual tax rate to 39% from 1 April 2021, and the increase in gross income being derived by real estate salespeople due to New Zealand’s post-COVID real estate boom are likely to be two factors providing an incentive to find deductions to offset against gross income derived by real estate salespeople.
Any affected New Zealand taxpayers should consider seeking tax advice and making a voluntary disclosure to IRD should there be any overclaimed or unjustifiable expenses in recent tax returns filed with IRD.