Following recent publicity about what attracts the attention of the Australian Taxation Office and what can be expected to be challenged in an audit, the Inland Revenue Department (IRD) was asked if New Zealand had a similar list.
The department has responded with this checklist of ten major items that you may find helpful in completing a 2003 IR 4 income tax return.
Is the company's effective tax rate substantially less than 33%?
Has the company been involved in any material transactions involving tax haven jurisdictions?
Does the company have documentation to substantiate transfer prices where there are significant cross-border associated party transactions?
Are you confident with the tax treatment of major items where this differs markedly from the financial accounting treatment?
Has the company participated in any transactions where the anticipated net return is predominantly due to projected tax benefits?
If the company has been involved in any complicated arrangements (such as complex restructures, use of special purpose vehicles or innovative financial arrangements) and if so, are there strong business reasons for the complexity?
Has the company participated in a transaction where either a tax indemnity has been provided, should Inland Revenue successfully challenge the tax treatment, or professional fees charged are dependent on tax savings being achieved?
Are there any unusually high or excess credits (foreign tax or imputation) or capital gains returned?
Have there been any major changes of ownership (loss of continuity) experienced?
Are there any major variances in line items in the company's financial
statements between years?
Source: Corporates Contact (September 2003)
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This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.