Tax season can be stressful for many individuals, especially when it comes to understanding all the paperwork and processes involved. If you’re living in New Zealand and you’re not familiar with the tax system, you might have come across the term IRD auto assessment returns. But what exactly are they, and how do they affect you? This blog post will break it down in simple terms so you can better understand how auto assessments work and whether you need to take any action.

What is an IRD Auto Assessment Return?

In New Zealand, the Inland Revenue Department (IRD) is the government agency responsible for tax collection. Every year, individuals must file their tax returns, reporting their income, expenses, and other relevant financial details to calculate how much tax they owe or are owed as a refund.

For many people, this process can seem confusing and time-consuming. That’s where the auto assessment comes in. Instead of individuals manually completing their tax returns, the IRD can automatically assess your tax situation based on the information they already have.

How Does the IRD Auto Assessment Work?

The IRD auto assessment process is designed to make things easier for individuals who have straightforward tax situations. Here’s how it works:

1. Information Gathering: The IRD collects data from various sources. This includes your employer (via Pay As You Earn or PAYE), bank interest details, and any other relevant financial institutions that report to the IRD.
2. Automatic Calculation: The IRD then uses this information to calculate your tax liability. If the data they have is complete and accurate, they’ll determine whether you owe additional taxes, are due a refund, or your tax balance is zero.
3. Notice of Assessment: Once the IRD has completed the assessment, they’ll send you an IR3 Notice of Assessment. This is a summary of the tax you owe or the refund you are entitled to. The notice will also provide instructions on what to do next, including how to pay any taxes owed or claim your refund.
4. No Action Needed (for Some): In many cases, you don’t need to do anything if the auto assessment shows that everything is correct. If the IRD has all the information it needs and everything is up to date, the process is straightforward.

Who Is Eligible for Auto Assessment?

Not everyone is automatically eligible for an auto assessment. Typically, auto assessments are issued to individuals who:

• Have a simple tax situation (such as employees with only one job, no additional income sources, or other complexities like rental income).
• Are already part of the PAYE system, where taxes are deducted automatically by their employer.
• Have already provided the necessary information to the IRD (like bank interest or investment earnings).

If your tax situation is more complicated (for example, if you have multiple sources of income, run a business, or claim complex deductions), you may need to file your return manually rather than rely on the auto assessment process.

Do You Need to Do Anything After Receiving Your IRD Auto Assessment?

The key thing to understand is that once the IRD sends you an auto assessment, you should carefully review it. Here’s what to do next:

1. Check for Accuracy: Verify that all the information is correct. Ensure that the income figures, deductions, and any tax credits are accurate. If you notice any discrepancies or missing information, you may need to contact the IRD to get things corrected.
2. Pay Taxes (if applicable): If the assessment shows that you owe taxes, you’ll need to pay by the specified due date. The IRD will provide details on how to make payments.
3. Claim Your Refund: If the assessment indicates that you are owed a refund, the IRD will send this to you directly through the bank account registered on your MyIR account so make sure to check your bank account details are still correct..
4. File a Manual Return (if needed): If you disagree with the auto assessment or if your financial situation is more complex than the IRD’s automatic calculations, you may need to submit a manual tax return (IR3) for further review. 

If you need help filing or checking your Income Tax return please contact us through the website or at support@berntsentax.co.nz

When Do You Receive Your Auto Assessment?

The timing of your auto assessment depends on the date the IRD receives all necessary data from the various sources, such as employers, banks, and other financial institutions. Typically, auto assessments are issued between May to July, after the end of the tax year on March 31. The IRD usually does the returns in batches so you may receive your refund later than others

Key Benefits of IRD Auto Assessments

• Convenience: The auto assessment system simplifies the process for individuals who don’t have a complicated tax situation. You don’t need to fill out a tax return unless something is wrong or complex.
• Time-Saving: You don’t have to worry about figuring out how to file your taxes manually. The IRD does the heavy lifting, making it easier for you to focus on other tasks.
• Accuracy: The IRD uses official data from employers and financial institutions, so the likelihood of errors is minimized. This makes the process more accurate and reliable.

Things to Keep in Mind

While auto assessments make things simpler, it’s important to remember that they are not perfect for everyone. If you have any doubts about your assessment or think that something is missing, don’t hesitate to reach out to the IRD. Keeping track of your financial documents (like your payslips, bank statements, and investment details) will also help ensure that the assessment is as accurate as possible.

If you receive an auto assessment but your tax situation is more complex, you can always file a manual return. It’s important to file the correct return to avoid penalties or interest.

Final Thoughts

In conclusion, the IRD auto assessment process is a great way for individuals with simple tax situations to have their taxes filed automatically. However, it’s essential to stay informed, review your assessment carefully, and know what actions to take if necessary. If you’re ever unsure, don’t hesitate to reach out to the IRD or consult a tax professional to make sure you’re on track.

Understanding how IRD auto assessments work can help make tax season less stressful and give you peace of mind knowing that you’re meeting your tax obligations accurately and efficiently.