Tax returns and tax refunds – what’s the difference?

Whether you are in paid employment, running a business or on a benefit, you will need to pay taxes and the more you know it, the better equipped you will be to get the best out of your tax return.

First of all, it helps to know why we have to pay taxes. Every person who earns money in New Zealand pays tax to the government each year. The amount you pay depends on how much you earn – the lower your income, the lower your tax. The government uses tax money to pay for public services which are accessible to all of us – health services, education, heritage and environmental care, recreation and transport. The fact that we have free education for our children, recreation facilities and a social welfare system that ensures everyone has a living income is due to our taxes.

People who are employed or are on a benefit will usually have Pay As You Earn (PAYE) tax deducted from their income before they receive it. . Business owners must pay Goods and Services Tax (GST), Accident Compensation (ACC) and PAYE for any employees, as well as company tax on the profits from your business. They can also claim various expenses against their taxes. This can get quite complicated and many business owners prefer to use an accountant to do this for them.

So what do you need to do? If you are earning wages or salary, nothing till the end of the tax year – just let the PAYE system take care of it all for you. If you are a business owner, talk to a tax agent, an accountant or IRD about your tax requirements. IRD also offer short training courses on different types of tax for businesses, and your bank may be able to assist you. Be sure to do this early as you don’t want a large tax bill at the end of the year.

Tax returns in New Zealand: are forms which are filled out at the end of the financial year (generally 31 March) to show how much money you have earned and how much tax you need to pay.

Tax refunds in New Zealand: this is the amount of money owed to you if you have paid too much tax during the year. If you are employed or on a benefit, you may or may not have paid the correct amount of tax during the year through PAYE. You should speak to IR or a registered tax agent such as MyRefund to find out if you are due a refund – if you worked while still at school, only worked part of the year, earned less than $9,880 or changed jobs during the year, you are probably entitled to a refund.

Tax to pay: Sometimes you will have to pay tax. Generally, wage earners and beneficiaries will not have tax to pay. You need to calculate your taxes correctly and make sure you are not paying tax you don’t need to pay. A good tax agent or IR can assist you with this, and will ensure you receive any entitlements you are eligible for.

If you are unsure about whether you are owed a refund, or have tax to pay, speak to a registered tax agent and find out where you stand – you may be in for a pleasant surprise!


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