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How to get a tax refund

Forget about using a tax agent. The IRD makes finding out if you have a tax refund extremely easy so you get the maximum payout possible.

Millions of dollars go unclaimed each year by individuals that didn’t know they were eligible for a tax refund or how to go about getting what they were owed. This could be due to the fact that it was difficult to sort out your tax matters in the past, or that most people believe they are paying the right amount of tax.

In this guide we’ll take a look at who is eligible for a tax refund and what you need to do at the end of each tax year.

Does everyone need to manually claim a refund?

Most people that earn salary or wages, or are on a benefit will not be eligible for a refund as the right amount of tax would have been paid during the year. However, you may have been on the wrong tax code, meaning that you could have paid too much tax.

The IRD automatically calculates tax refunds if you:

  • Are employed by a company and are earning wages or a salary
  • Have bank deposits or savings with interest or dividends under $200
  • Are receiving New Zealand Super
  • Are on an income-tested benefit
  • Receive schedular payments
  • Have taxable Maori authority distributions
  • Have tax deducted through an employee share-scheme benefit

The IRD will work out if you have a tax refund, but you will still need to log onto myIR and make sure that your contact information is correct and that you have a nominated bank account for the funds to be deposited.

If you already have a nominated account, your refund will be automatically deposited.

You will need to complete an IR3 if you receive any income not listed above, have complicated financial affairs or if you are self employed.

Am I eligible for a tax refund?

While the IRD will work out if you are owed any money automatically if you fall into any of the categories listed above, those who need to complete an IR3 will need to lodge their tax return to know if any money is owed to you.

You could be entitled if you:

  • Have paid donations
  • Are a low wage earner
  • Have more than one job
  • Received a lump sum payment from your employer such as commission or a bonus
  • You earn interest or dividends from investments
  • Didn’t claim the independent earner tax credit
  • Only work a few months of the year or stopped working during the year
  • Changed jobs during the tax year
  • Left your job to move overseas
  • Need to claim tax-deductible expenses
  • Are still in school and have a part-time job

If you fall into one or more of these categories, you may be pleasantly surprised with a refund if too much tax has been paid.

When are tax refunds paid out?

With automated systems and the ability to file your tax returns online, you won’t need to wait a long time to get your refund. Here’s how the process works:

  • April/May: Your employer provides the IRD with your income information
  • May/June/July: Calculations are made and income tax assessments are sent in batches. You need to check the details and let the IRD know of any changes
  • May/June/July: Refunds are paid into bank accounts

If you are completing an IR3 and have a more complex tax situation, or you are delayed in filing your return, your refund may take longer to be processed. If you have earned a form of income that is on top of your regular salary or you have multiple income streams, you’ll need to complete an IR3 anyway.

Finding out that you are owed money certainly softens the deal of filling in forms and the IRD makes the process as simple as possible.

How to check if you are owed a tax refund

If you earn a salary or wages with no additional streams of income, you can check if you are due a refund by logging into myIR.

This portal shows your tax summary information, payments that are due and refunds to be paid. In the ‘Where’s my refund’ section, you can see the refund status and amount.

It’s possible that you may be owed a tax refund for previous years. For example, you left to live overseas during a tax year and became a non tax resident for a period of time. You will need to request a personal tax summary for any years that have not been completed.

You will also need to answer some questions about your tax status and any forms of income earnt in that tax year. If your personal tax summary shows that you have tax to pay, then you’ll need to do so. Otherwise, you may end up with a refund.

I usually get a tax agent to do my refund – should I continue?

Tax agents such as MyTaxRefund and KiwiTaxRefund became common a number of years ago when there was a stigma around difficulties with dealing with the IRD and a lengthy process. These kinds of companies advertise that their customers get back on average between $400 and $550 a year.

If you have appointed a tax agent, they are able to manage your tax affairs for you. They can find out the tax that you’ve paid and assess whether you’re owed a refund. If you are, they’ll pay this money to you and take off a fee for their service. This service fee varies but could mean losing as much as 20% of your total refund.

Once you have a tax agent in place, they can continue to claim tax refunds on your behalf until you remove them officially.

However, now that systems are automated for many people, there is no need to engage your tax agent unless you really want to pay someone to do a few minutes of work.

To remove a tax refund company from your file, you can call the IRD and ask that they remove the agent. Alternatively, you can log into myIR and remove them under ‘My Details’.

You should then make sure that your bank account number is listed so that you receive any future refunds. While not always necessary, you can contact the tax refund company by email to let them know you will no longer be using their services.

Is there any way to increase the refund I get?

Things are pretty black and white when it comes to tax matters, but there are ways that you might get a little more if you know what to do.

1. Work out if you are entitled to receive the Independent Earner Tax Credit. You’ll need to be:

  • Employed
  • Single
  • Earn between $24,000 and $48,000 a year after expenses and losses

If you meet this criteria, you can accumulate $10 for every week you are eligible on your income between $24,000 and $44,000.

For any income between $44,001 and $48,000, the $10 will reduce by 13c for every dollar.

If the Independent Earner Tax Credit hasn’t already been paid, you can let the IRD know that you are entitled to it after you receive your personal tax summary. If it hasn’t been included in your tax summary, then it will be refunded to you.

2. If you’ve made a donation to a registered charity during the tax year, you might be eligible for the charity donations tax credit.

For every dollar you donate to approved organisations, you can claim back 33.33c. So if you donated $500, you can claim $166.65.

You can learn more about registering for donation tax credits in this short video from the IRD.

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