Extension of time applications from taxpayers without tax agents (Dec 97) (WITHDRAWN)

Introduction

Legislation provides that any taxpayer who is unable to file their income tax return by the due date may apply for an extension of time. This policy outlines how Inland Revenue will consider extension of time applications from taxpayers without tax agents.

Legislation

The legislative references are to the Tax Administration Act 1994 unless otherwise stated. The legislation relating to extensions of time is -

Section 37(3) Extension of Time
"Subject to subsection (5) where any taxpayer satisfies the Commissioner that the taxpayer is unable to furnish the required return by the due date required under this section, the Commissioner, upon application by or on behalf of the taxpayer on or before that date, or within such further period as the Commissioner may allow in any case or class of cases, may extend the time for furnishing the required return to such date as the Commissioner thinks proper in the circumstances."

Section 37(5) Final Dates
"For the purposes of subsections (3) and (4), -

1. Where the return required to be furnished by any taxpayer is a return for a year ended on 31 March, the time for furnishing that return shall not be extended or further extended to a time later than the 31 March that immediately succeeds that 31 March:
2. Where the return required to be furnished by any taxpayer is, by consent of the Commissioner under section 38, a return for a year ending with the date of the annual balance of the accounts of the taxpayer, the time for furnishing that return shall -
   1. Where that date is between 30 September and the next succeeding 31 March, not be extended or further extended to a time later than the 31 March next succeeding the 31 March that immediately succeeds that date:
   2. Where that date is between 31 March and the next succeeding 1 October, not be extended or further extended to a time later than the 31 March that immediately succeeds that date."

Section 38 (2) Balance dates up to 30 September
"For the purposes of this section and section 39, 30 September in any year shall be deemed to be nearer to the last preceding 31 March than to the next succeeding 31 March."

Comments on the Legislation

These sections of the legislation clearly provide that any taxpayer may apply (verbally or in writing) for an extension of time for their annual income tax return, provided they satisfy the Commissioner that they are unable to furnish the return by the due date.

The period of the extension cannot be extended beyond the following 31 March. If a taxpayer has a balance date of 31 March, the date for filing an income tax return may not be extended beyond the following 31 March. For example, an IR 3 income tax return for the year ended 31 March 1997 is due on 7 July 1997. The time for filing this return can not be extended beyond 31 March 1998.

Policy Issues

The legislation clearly provides that any taxpayer may apply for an extension of time for their income tax return. To ensure all taxpayers who are not represented by a tax agent are treated fairly, applications for an extension of time will be considered on a case by case basis.

Application verbally or in writing
The legislation has recently been changed to allow for an application to be made verbally as well as in writing. However taxpayers should ensure that they are requesting “an extension of time arrangement” for clarity.

Reasons for requesting an extension
The following are examples of reasons that Inland Revenue considers appropriate for extending the filing date:

• Taxpayer/entity is unable to obtain the necessary information to file the return e.g., awaiting IR 12/13s from an employer
• Taxpayer has been overseas and time is needed to prepare a return (dependent on dates of leaving and returning)
• Ill health, hospitalisation or injury of the taxpayer or taxpayer's family member (partner or dependant)
• Awaiting the finalisation of accounts for a related taxpayer/entity with a different balance date.

Return filing history
Inland Revenue will also take the taxpayer's return filing history into account. If the previous two years' returns have not been filed then it is unlikely that an extension of time will be granted for the current year. However, we will also consider whether the current year's reason for requesting an extension of time could apply to the previous years' returns.

Period of the extension
The maximum period for an extension of time for the current year's income tax return is to 31 March. However, most individuals would probably only require an extension for a few weeks or months.

Confirmation - extension of time granted or declined
Inland Revenue will send the taxpayer a letter confirming the granting or declining of the extension of time arrangement, and update details on our computer system.

Timing
The legislation states that an application should be made on or before the due date for filing. However, there is room for discretion. Inland Revenue will consider extension of time requests for 1998 income tax returns after the due date to encourage taxpayers to seek a formal arrangement with us. For 1999 and future years, approval after the due date will be on a case by case basis, depending on the reasons given.

If a late filing penalty has been imposed before the approval of an extension of time arrangement the penalty will not be cancelled. The penalty may be remitted in certain circumstances; once the return has been filed the taxpayer will then be able to apply for a remission of the late filing penalty. (The same applies to taxpayers who become a client of a tax agent after the late filing penalty has been imposed.) The criteria for remission of the late filing penalty in this instance are outlined in section 183A.

If a default assessment has been imposed before the approval of an extension of time arrangement the default assessment will be reversed. A new default assessment will be scheduled for action after the extension of time has expired.

Summary

• Applications for an extension of time will be considered from those taxpayers/entities who are not represented by a tax agent.
• Applications can be in writing or verbal.
• Examples of granting reasons for an extension of time include:
  • ill health, hospitalisation or injury of the taxpayer and/or a taxpayer's close family member
  • awaiting information/lost records, eg IR 12/13 details from an employer
  • ill awaiting finalisation of a related taxpayer/entity with a different balance date.
• The period given for an extension will be set at the discretion of the officer reviewing the case. When agreeing to an extension of time Inland Revenue will give reasonable regard to the facts of the case. The maximum period is from the due date of the return until the following 31 March.
• A letter confirming the extension of time arrangement will be issued to each applicant.