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Have You Paid Too Much Tax?

Categories   News & Updates

Few people enjoy paying taxes and certainly no one wants to pay a cent more in tax than they should! But many New Zealanders unwittingly pay more tax than is necessary, often due to payment errors or by not claiming the deductions to which they are entitled.

Do you suspect that you might have overpaid your tax last year? Not sure? How do you find out? Let’s take a look at some of the ways you may qualify for a refund.

Did You Make Any Charitable Donations?

Many forms of donation can be claimed.

Donations can include voluntary school fees and unconditional gifts. If your donation doesn’t entitle you to receive anything in return, then it’s an unconditional gift. So, door-to-door appeals and street collections would be examples of unconditional gifts.

Donations aren’t unconditional gifts if you receive something in return. Examples would include subscriptions, advertising and any income from trading activities.
You can claim donation tax credits within a period of four years following the year in which the gift was made. To claim a tax credit you need to file a tax credit claim form (IR526) for the relevant tax year.

Has Your Employer Overpaid You?

You may have been overpaid if your employer has made an error or if you have multiple revenue streams.
Whilst being overpaid sounds good, your employer may have collected too much tax off you!  Overpayments of wages are often the result of an oversight and usually corrected in the next pay period, however there are cases where incorrect payments attract an additional tax liability.

If you received any bonuses, payments in error or unscheduled payments in the last tax year, it pays to check that you weren’t overtaxed in these instances. If you don’t have your records, check with your employer in the first instance.

Are You Paying Off A Student Loan?

If you have a student loan, you repay 12% of every dollar earned over the repayment threshold.
The repayment threshold is $368 weekly, $736 fortnightly, $1,472 four weekly and $1,595 monthly. If you were paid less than this, then you shouldn’t incur any student loan deductions. You also shouldn’t have deductions made if you are studying full-time. If there were deductions made, then it is likely you qualify for a refund.

If you’ve paid too much, the IRD class this as a significant over-deduction. The threshold for significant over-deductions is $60 per month. If you think you’ve overpaid your student loan obligations, talk to your employer in the first instance. If the IRD decide you have paid more than you need to from your pay, and that amount is significant, then they may refund you or credit other tax obligations that you may have.


Have You Changed Jobs?

If you change jobs, or stop and start work, you may need to change your tax code. An incorrect tax code can often result in over or under taxation.

The IRD advise:
You may need to update your tax code when you:

  • start a new job, or have more than one job
  • start or stop being eligible for the independent earner tax credit (IETC)
  • have a student loan, or you’ve recently paid one off and need to stop repayments
  • start earning schedular payments
  • are a casual agricultural worker, recognised seasonal worker, or election day worker. 

How do you decide if you’re on the right tax code? Check out the this tool on the IRD site.

Have You Been Overseas? 

Going away can have tax implications, depending how long you’re away from New Zealand and what you do when you’re overseas.

For example, if you have a student loan and you travel outside New Zealand for more than six months the IRD no longer base repayments on your income. They base repayments on your student loan balance and charge interest to the balance owing. You can find out more about student loan repayment issues when travelling here.

Depending on how long you’re away, you may no longer be a New Zealand tax resident. In this case, it’s possible you could have been overcharged if you spent part of the tax year in New Zealand.

The IRD do advise that you contact them if you spend a considerable amount of time out of New Zealand. You may recall horror stories of people with outstanding student loans being arrested at the border:

“Former students in serious default can be arrested while trying to leave the country or returning from overseas. New figures showed eight warrants for arrest had been issued as at June 30 and four people had been arrested at the border – one more than previously reported.”

There are obviously no penalties for overpayment, but you certainly don’t want to get caught underpaying tax!

What Happens To My Overpaid Tax If I Don’t Claim It?

The taxman will keep it! It’s up to you to check to see if you have paid the right amount of tax.

Or get in contact with MyTax and we’ll work it all out for you.  If we calculate that you don’t have a refund owing, and instead you owe the IRD tax, we will stop the process so you can be sure they won’t hear from us!

How Do I Claim My Overpaid Tax?

The IRD provide a tax calculator here to help you determine if you have overpaid tax. Click the “Start” link at the top right of the page. If you think you’ve overpaid, then you need to contact the IRD.

Alternatively, we can take care of it all for you. MyTax can find out if you’ve overpaid not just last year, but anytime over the last five years. We have low fees and if you’re not owed a refund, MyTax won’t charge you a cent.