New Zealand: Technical Decision Summary No. 22/06 – Careful recording and clear documentation are required for GST input tax deductions

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The New Zealand Inland Revenue published Technical Decision Summary No. 22/06 online on April 14, clarifying tax deductions and understated income on a company’s tax filings.  




The Taxpayer was a consulting firm that filed GST and income tax returns, both of which were questioned by the tax authorities. The Taxpayer claimed that its sole director and shareholder (the Director) were also directors of Company A, which is part of a group of companies. During the income tax period in question, Company A went into voluntary liquidation. The Director submitted the Taxpayer’s two 6-monthly GST filings, as well as an income tax return, which was the subject of the dispute. 


The issues were whether the taxpayer: 


  • was entitled to the GST and income tax deductions it requested, 
  • disclosed his full income on his tax return, and 
  • owed penalties for noncompliance. 


According to Customer and Compliance Services (CCS), the Taxpayer may have claimed unauthorized input tax deductions and income tax deductions and may have understated its income in its tax return. 




The tax counsel determined that: 


1.The taxpayer was not qualified for the input tax deduction or the income tax deductions claimed since he or she failed to retain the requisite documentation, specifically tax invoices; 

2.The taxpayer concealed income sources such as bank account deposits and differentiated sales returns from its tax returns; and 

3.The taxpayer is liable for noncompliance penalties. 


The case shows the significance of: 


  • exercising reasonable diligence to assess the accuracy of a return,  
  • maintaining appropriate documents to properly support a return, and  
  • generally, complying with tax law. 



Source: taxtechnical.ird.govt.nz 

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