INDEPENDENT NEWS

Update On Hidden Economy Real Estate Campaign

Published: Wed 22 Jun 2022 11:39 AM
The Inland Revenue campaign focussing on the real estate sector has resulted in a drop in the amount of private expenses claims being made.
IR expanded its hidden economy focus to include the real estate sector last year, concerned at both the under reporting of income and the overstating of expenses.
IRs Hidden Economy Lead, Trevor Jeffries, says with more than 90% of the expected returns filed for 2021, IR has run its data analytics and compared the results to earlier tax years.
"What the analysis tells us is that the trend we identified of increasing private expenses being claimed has been reversed and we are now seeing less private expenditure being claimed," Trevor Jeffries says.
Inland Revenue started the campaign because a number of real estate agents appeared to be:claiming private expenses against their business income and/or claiming expenses without supporting business recordsusing net versus gross values when reporting GSTnot including wage subsidy payments received within their annual income tax return.
"IR has monitored and reviewed 2021 tax returns that fell outside industry norms. Common errors include claims for gifts, personal clothing and grooming, meals, and entertainment expenses, alongside issues such as calculation of home office and vehicle expenses.
"Another common error was the underreporting of income for GST purposes, where customers incorrectly used the net amount deposited to their bank account as income for GST purposes.
"If we are concerned that someone has overclaimed expenses, they will receive a letter from us requesting they prove the expenses claimed. That 'proof' can include things like bank statements, invoices, a logbook, and any other information to confirm the expense is deductible.
"Only a small number have been referred for audit action. Prosecution is an option of last resort."
Mr Jeffries says he has no doubt real estate agents are well aware of our campaign and have had the opportunity to see our marketing and educational materials to make it easier for them to file correct returns.
"We have had tremendous support from real estate firms and continue to work with them to support their agents. Our online and live webinars have proved a hit and we have been encouraged by the engagement and questions that flow from these sessions.
"Our expectation is that agents should now be well aware of the common errors and how to file correct return. However, we will continue to use our data analytics to monitor 2022 returns as they are filed, and where necessary we will take the take appropriate enforcement action.
"Our approach is to raise awareness and self-help materials first. We would far rather encourage customers to do the right thing from the start. So, we recommend people approach us before we contact them."

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