Inland Revenue is turning its spotlight onto insurance advisers who aren’t paying enough GST.

The tax department says it’s aware that there are insurance agents who don’t know they have to pay GST if they earn more than $40,000 from selling non-life insurance products, such as health and disability and income protection insurance.

Commissions earned on the sale of life insurance business, such as whole-of-life and term insurance, are exempt from GST.

IRD group manager assurance Martin Scott says the department knows some agents may not realise this requirement or may have overlooked it as their sales of non-life insurance products has increased.

“While we do not believe it is a widespread problem, we are aware this is an issue,” he says.

IRD is developing a programme, centred mainly on education initiatives, to make sure agents know their tax obligations.

It met with the Institute of Financial Advisors and the Professional Advisors’ Association late last year and provided information for their publications to raise the awareness of members about the issue.

President of the IFA, Lyn McMorran, says advisers should take advantage of the IRD’s disclosure programme based on earnings for the 2008 calendar year.

“Some insurance advisers might not have registered for GST when they have been required to. As such they should be taking advantage of the opportunity that the IRD has presented to them by declaring their earnings, without having to incur heavy penalties.”

Ms McMorran says IRD has agreed to provide a period to allow advisers to get their records up to date prior to the IRD investigating insurance advisers.