Time Bars on Reassessment of Tax Returns 

Grange Associates Ltd - 27 September 2012

The IRD’s power to issue amended assessments increasing the liability of a taxpayer is subject to a four year time limit, known as a time bar.

Generally, the time bar begins four years from the end of the income year in which the return was filed.  For example, an income tax return for the year ended 31 March 2012, filed before 31 March 2013 will become time barred on 31 March 2017 (four years after 31 March 2013).

As you can see, time bars do not apply until after the return is filed, not four years from the income year of the return.  So if a return is not filed, no time bar can begin to apply to it until it is.  So the more prompt you are in filing returns, the sooner these returns will become time barred and therefore not subject to IRD reassessment and further tax liabilities.

As an example, a taxpayer files their 31 March 2007 income tax return late on 31 March 2011.  If they had filed it on time (prior to 31 March 2008) the return would have become time barred on 31 March 2012.  Since it was filed late, the time bar will not come into effect until 31 March 2015.

Non Standard Balance Date

In the case of a non standard balance date, the time bar begins on 1 April after the tax return is filed.  For example, a company with a balance date of 30 September 2011 files their income tax return on 20 January 2012, the time bar will start from 1 April 2012 and the return would become time barred on 31 March 2016.

GST Returns

GST Returns are also time barred beginning four years from the end of the GST return period in which the GST return was filed.  For example, a company files its two-monthly GST return for the period ending 31 July 2012 on 28 August 2012.  The return will become time barred on 30 September 2016 (four years from the end of the 30 September 2012 period in which the return was filed).

Exclusions to Time Bars

Time bars will not apply if the return is considered fraudulent or misleading or the return omits income of a particular nature or from a particular source.  So, although it is important to file returns promptly, it is also necessary to ensure returns are comprehensive and complete before filing.

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All information is correct at the date of article publication. Please note we provide the information as a service only. Accordingly, the contents are not intended as a substitute for specific professional advice and should not be relied upon for that purpose.   

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