Extension of time applications from taxpayers without tax agents
SPS 09/03 sets out the CIR's practice when considering applications for time extensions from taxpayers without tax agents who are filing income tax returns.
This statement also appears in Tax Information Bulletin, Vol 21, No 9 (December 2009).
- This Standard Practice Statement ("SPS") sets out the practice that the Commissioner of Inland Revenue ("the Commissioner") will apply when considering applications for an extension of time to file an income tax return from taxpayers who are not represented by a tax agent.
- All references to legislation in this SPS are to the Tax Administration Act 1994 ("TAA") unless specified otherwise.
- This SPS applies from 13 October 2009 and replaces SPS RDC-1 Extension of time applications from taxpayers without tax agents originally published in December 1997.
- This SPS affects the following:
- A taxpayer who is not represented by a tax agent; or
- A taxpayer whose tax agent no longer qualifies as a tax agent.
- The following terms are used throughout this SPS:
- Tax agent: A person who is eligible to be a tax agent under section 34B(2) and who is listed by the Commissioner as a tax agent and not later removed by the Commissioner from the list of tax agents.
- A person is eligible to be a tax agent under section 34B(2) when they prepare income tax returns for 10 or more taxpayers, and is either one of the following:
- a practitioner carrying on a professional public practice; or
- a person carrying on a business or occupation in which returns of income are prepared; or
- the Maori Trustee.
Due date: The date by which an annual income tax return must be filed as prescribed by section 37(1).
Extension of time or extension of time arrangement: An arrangement by which the Commissioner extends the due date for filing an annual income tax return to a date set by the Commissioner.
- A taxpayer without a tax agent may request for an extension of time to file their annual income tax return. The request can be made by contacting Inland Revenue either by phone or in writing (including secure email).
- Taxpayers who do not file a return by the due date may be liable for a late filing penalty. Therefore any requests for an extension of time should be made before the due date for filing the return, or the expiry of an existing extension of time arrangement.
- In deciding whether to grant an extension of time, the Commissioner will take into account the following:
- The reasons for requesting an extension of time;
- The taxpayer's filing history; and
- If previous extension of time arrangements had been adhered to.
- An extension period that is appropriate to that particular taxpayer's circumstances may be granted.
- The taxpayer will be notified in writing of the Commissioner's decision whether or not an extension of time is granted.
- A taxpayer whose tax agent no longer qualifies as a tax agent is entitled to the same extension of time that previously applied to their tax agent.
- The relevant legislative provisions are sections 37, 183A, and 183D:
Section 37 - Dates by which annual returns to be furnished
- (1) Dates for furnishing annual returnsThe annual returns of income required under this Act shall be furnished to the Commissioner as follows:
(2) Public Notice
- In the case of any taxpayer with a late balance date, not later than the 7th of the month which is the 4th month after the end of the taxpayer's corresponding income year:
- In all other cases, not later than 7 July in each year.
...(3) Extension of timeSubject 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.(4) Extension of tax agent's time for furnishing return of incomeSubject to subsection (5), the Commissioner may extend a tax agent's time for furnishing a return of income for any taxpayer to a date the Commissioner thinks proper in the circumstances, if the Commissioner is satisfied that -
- The tax agent is unable to furnish the return of income on or before the date set by subsection (1); or
- It would be unreasonable, having regard to the circumstances of the tax agent preparing the return, to require the return to be furnished on or before the date set by subsection (1).
- (4A) Cancellation of extension of timeIf a tax agent has not furnished for a tax year the required number of tax returns by the dates specified by the Commissioner, the Commissioner may:
(4B) Date of extension of time for tax agentsIf the Commissioner extends under subsection (4) the time for a person listed as a tax agent to furnish a return of income for a taxpayer and the person ceases to be a tax agent before the extension of time would have expired, the Commissioner must extend the taxpayer's time for furnishing the return to a date of 31 March on or after the date that would have applied if the person had continued to be a tax agent.(5) Final datesFor the purposes of subsections (3) and (4), -
- Refuse to grant an extension of time under subsection (4) for furnishing one or more tax returns that are linked to the tax agent; and
- Cancel any existing extension of time arrangement granted under subsection (4) for the tax years for which the tax agent has not furnished the required number of tax returns by the dates specified by the Commissioner; and
- Cancel any existing extension of time arrangement granted under subsection (4) for one or more returns, but not necessarily all returns, for the tax years for which the tax agent has not furnished the required number of tax returns by the dates specified by the Commissioner.
- Where the return required to be furnished by any taxpayer is a return for a year ending 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:
- 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, -
- 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:
- 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 183A - Remission for reasonable cause
- (1) Application of sectionThis section applies to -
(1A) Grounds for remissionThe Commissioner may remit the penalty if the Commissioner is satisfied that -
- A late filing penalty:
- A non-electronic filing penalty:
- A late payment penalty:
- Imputation penalty tax imposed by section 140B:
- FDP penalty tax imposed by section 140C:
- Maori authority distribution penalty tax imposed by section 140CB:
- A shortfall penalty imposed by section 141AA.
- A civil penalty imposed under section 215 of the KiwiSaver Act 2006:
- A penalty for not paying employer monthly schedule amount imposed by section 141ED.
(2) Meaning of "event or circumstance"Without limiting the Commissioner's discretion under subsection (1), an event or circumstance may include -
- A penalty to which this section applies arises as a result of an event or circumstance beyond the control of a taxpayer; and
- As a consequence of that event or circumstance the taxpayer has a reasonable justification or excuse for not furnishing the tax return or an employer monthly schedule, or not furnishing an employer monthly schedule in a prescribed electronic format, or not paying the tax on time; and
- The taxpayer corrected the failure to comply as soon as practicable.
(3) Exclusions from "event or circumstance"An event or circumstance does not include -
- An accident or a disaster; or
- Illness or emotional or mental distress.
- An act or omission of an agent of a taxpayer, unless the Commissioner is satisfied that the act or omission was caused by an event or circumstance beyond the control of the agent -
- That could not have been anticipated; and
- The effect of which could not have been avoided by compliance with accepted standards of business organisation and professional conduct; or
- A taxpayer's financial position.
Section 183D - Remission consistent with collection of highest net revenue over time
- (1) Remission to be consistent with Commissioner's dutyThe Commissioner may remit -
a. A late filing penalty; and aa. A non-electronic filing penalty; and b. A late payment penalty; and bb. A shortfall penalty imposed by section 141AA; and bc. A civil penalty imposed under section 215 of the KiwiSaver Act 2006; and bd. A penalty for not paying employer monthly schedule amount imposed by section 141ED; and c. Interest under Part VII -payable by a taxpayer if the Commissioner is satisfied that the remission is consistent with the Commissioner's duty to collect over time the highest net revenue that is practicable within the law.(2) Importance of promoting complianceIn the application of this section, the Commissioner must have regard to the importance of the penalty, and interest under Part 7, in promoting compliance, especially voluntary compliance, by all taxpayers and other persons with the Inland Revenue Acts.(3) Remission not available on basis of taxpayer's financial positionThe Commissioner must not consider a taxpayer's financial position when applying this section.
- Taxpayers who are required to file an annual income tax return must file it by the due date as prescribed by section 37(1). For taxpayers who have a late balance date, the due date is on the 7th day of the 4th month after the end of the taxpayer's income year. For all other taxpayers, including those taxpayers with an early balance date, the due date is 7 July of each year.
- A taxpayer may apply for an extension of time to file their income tax return and the Commissioner may agree to extend the date for filing the return, where he is satisfied that the taxpayer is unable to file the return by the prescribed due date.
- Inland Revenue has recognised that it may be difficult for tax agents to prepare all of their clients' returns by the due date. Therefore tax agents are generally granted an extension of time. In most cases the clients of a tax agent will automatically acquire the same extension of time status as their tax agent.
- To ensure those taxpayers who are not represented by a tax agent are not disadvantaged, Inland Revenue will consider applications for an extension of time on a case by case basis. The particular circumstances of the taxpayer will be taken into consideration as far as the law permits.
- In 2007, section 37(4B) was inserted into the TAA. This section applies to those taxpayers who had an automatic extension of time through their tax agent, but their agent ceases to be a tax agent before the extension of time expires. The provision requires the Commissioner to extend those taxpayers' filing date to 31 March on or after the original extension date.
- The due date for filing an income tax return for all taxpayers, with or without a tax agent, cannot be extended beyond 31 March of the following year.
- Taxpayers who do not file a return by the due date may be liable to a late filing penalty. Therefore taxpayers are encouraged to request an extension of time before the due date, or before an existing extension of time arrangement expires.
Request for an extension of time arrangement
- Taxpayers can make a request for an extension of time in the following ways:
- By phoning Inland Revenue;
- In writing; or
- By secure email.
- Inland Revenue provides secure online services where taxpayers can complete a range of tasks online, including communicating with Inland Revenue electronically about their tax affairs via the Send and receive mail service.
- To use the secure email service, taxpayers must first register on the Inland Revenue website www.ird.govt.nz at the online services registration page. By registering on the Send and receive mail service, both taxpayers and Inland Revenue agree to correspond with each other electronically.
- Taxpayers may use this secure email service to request an extension of time.
- When making a request, taxpayers should state clearly that they are requesting an extension of time.
- To ensure that Inland Revenue is able to consider the request for an extension of time, the following information should be provided:
- The taxpayer's name and IRD number;
- The type of return required to be filed (e.g. IR3);
- The return period to which the extension applies;
- The length of the extension of time required; and
- The reasons for requesting an extension of time.
- A request for an extension of time should be made on or before the due date for filing the return. However the legislation confers a discretionary power to the Commissioner to accept applications after the due date in some cases, or class of cases.
The Commissioner's consideration
- An extension of time may be granted if the Commissioner is satisfied that the taxpayer will be unable to file a tax return by the due date. Each request for an extension of time will be considered on a case by case basis. Reasonable consideration will be given to the circumstances of the taxpayer and whether an extension of time is appropriate for that taxpayer.
- In determining whether it is appropriate to grant an extension of time, the Commissioner will consider the following:
- The reasons for requesting an extension;
- The taxpayer's return filing history; and
- If previous extension of time arrangements had been adhered to.
Reasons for requesting an extension
- Examples of circumstances that the Commissioner may consider appropriate for granting an extension of time include:
- The taxpayer is unable to obtain the necessary information to file the return. For example, the taxpayer is waiting to receive a Summary of Earnings from Inland Revenue.
- The taxpayer has been overseas and needs more time to prepare the return. This is dependent on the dates of departure and return to the country and whether the taxpayer was able to file the return before departure.
- Ill health, hospitalisation or injury of the taxpayer or a member of the taxpayer's family (e.g. partner or dependent).
- The taxpayer is awaiting the finalisation of accounts for a related taxpayer or entity.
- These are merely some examples of circumstances in which the Commissioner may grant an extension of time. There may be other situations under which an extension of time may be appropriate.
Return filing history
- The Commissioner will also take into account the taxpayer's return filing history in considering whether to grant an extension of time.
- If the taxpayer has other outstanding returns it is unlikely that an extension of time will be granted for the current year's return, unless there are legitimate reasons for not filing the outstanding returns for the previous years.
- It should be noted that any extension of time agreed to would only apply to the current year's return and not to the other outstanding returns. The prescribed maximum period for an extension relating to the previous years' returns would have elapsed in most cases and the Commissioner cannot grant an extension beyond that prescribed date. (Refer to "Period of Extension" in paragraphs 35 to 37.)
Previous extension of time arrangements
- Where a taxpayer has previously been granted an extension of time but has failed to adhere to that arrangement, it is unlikely that the Commissioner will agree to a further extension of time unless there are legitimate reasons for the taxpayer's failure to adhere to the earlier arrangement.
Period of Extension
- The maximum period for an extension of time that can be granted to any taxpayer is 31 March of the following year. This applies to taxpayers with a standard balance date and a non-standard balance date. For example, the final extension date that the Commissioner may grant to file a return relating to the 2009/10 income year is 31 March 2011.
- The Commissioner will not necessarily agree to the maximum extension period in every case. The period of extension will be set after giving reasonable consideration to the reasons for the delay and the circumstances of the taxpayer.
- Where an extension of time has been granted and the taxpayer is subsequently unable to meet the new due date, they should contact Inland Revenue before the expiry of the extension to request a further extension of time to avoid a late filing penalty. Again, there must be legitimate reasons for a further extension of time to be granted.
Taxpayers whose tax agent no longer qualifies as a tax agent
- In most cases taxpayers who are represented by a tax agent will automatically acquire the same extension of time given to their tax agent. However, if that tax agent ceases to be a tax agent before the extension of time expires, the Commissioner is required to extend the filing date for those taxpayers to 31 March on or after the original extension date.
- For example, a tax agent has an extension of time to file their client's tax returns by 31 March 2010. The tax agent is removed as a tax agent on 30 November 2009 and their clients are now required to file their own returns. Those taxpayers will be granted an extension of time to file their tax returns by 31 March 2010.
Notification and confirmation - extension of time granted or declined
- Taxpayers requesting an extension of time over the telephone will usually be notified immediately whether an extension is granted or declined.
- Requests made by secure email will receive a response via email.
- In all cases, once a decision has been made, Inland Revenue will write to the taxpayer confirming the granting or declining of an extension of time.
Late filing penalties
- A late filing penalty may be imposed if a return is not filed by the due date, or by the date agreed to in an extension of time arrangement.
- Should the taxpayer fail to file the return by the due date, or the agreed date, the Commissioner will first give the taxpayer 30 days notice of an intention to impose a late filing penalty.
- The late filing penalty will generally not be reversed if it has been imposed before an extension of time was granted.
- However, the late filing penalty may be remitted in certain circumstances. The criteria for remitting late filing penalties are contained in sections 183A and 183D.
- Remission applications under sections 183A and 183D will only be considered when the return relevant to the remission request has been filed and any tax due has been paid.
- For more information on late filing penalties and remission of penalties, see SPS 05/01 - Late Filing Penalty and SPS 05/10 - Remission of penalties and interest (or any subsequent replacements of these SPSs).
This Standard Practice Statement is signed on 13th day of October 2009.
LTS Manager, LTS Technical Standards