Last chance for Penny and Hooper-style tax dodgers, says IRD
Fresh from its big win in the Court of Appeal on the use of Optional Convertible Notes to avoid corporate tax, the Inland Revenue Department is warning individual taxpayers who have reduced their tax through income diversion schemes to come forward by March 31.
By making a voluntary disclosure and reordering their tax liabilities within the concession period, taxpayers will avoid potential tax investigation for avoidance of the kind found to have been practiced by Christchurch orthopaedic surgeons.
Ian Penny and Gary Hooper restructured their affairs to pay income tax on far lower salaries than they had previously earned, after the top personal tax rate was raised to 39 percent in April 2000, but their families continued to operate on income derived through a family trust instead.
The court decision is believed to have affected potentially thousands of self-employed, high-earning professionals. So far, some 271 taxpayers have made declarations and paid an additional $7 million in tax since the grace period was announced after a landmark Supreme Court decision in 2011.
"There is still time for people who are in a similar situation to Penny and Hooper and have used a similar company or trust structure to artificially lower their incomes to discuss their arrangements," IRD group tax counsel Graham Tubb says in a statement.
People who make a voluntary disclosure before the end of this month will only be required make adjustments for the last two income years that the taxpayer filed before November 24, 2011.
"Those who do not come forward may not only incur penalties but Inland Revenue may reassess their tax position over four years," Mr Tubb says.