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Financial Hardship Provisions do not apply when Inland Revenue bankrupt taxpayer for the recovery of Tax Debt.

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In the recent tax case of Singh v The commissioner of Inland Revenue [2017] NZCA 506, the court of appeal held the Commissioner can ignore sections 176, 177, 177c of the Tax Administration Act 1994 when pursuing bankruptcy due to non-payment of tax.

 

Facts of the case.

Mr. and Mrs Singh financial relief application was declined by the IRD. On several occasions they tried to enter into payment arrangement and seeking financial relief. However, the settlement and write off was not accepted by the IRD. Taxpayer decided to seek judicial review and challenged the commissioner decision.

Issue

The principal issue in the case was can the commissioner still pursue bankruptcy when the recovery of tax can cause serious financial hardship.

Court decision

The Hight court held the decision in favour of the commissioner. The court of appeal upheld the decision.

It was discussed the taxpayer did not have sufficient and supportive documents to prove the source of income. Their living expense and general household expenditure were missing from bank statements. Hence this issue raised a red flag that there must be an undisclosed source of income.

The request for financial relief did not involve any arrangement of payment. The commissioner was faced with an option of either write off everything of purse bankruptcy. The commissioner was entitled to pursue bankruptcy which will give control to official assignee over assets of taxpayer.

Court mentioned, it is unlikely for court to say that once financial hardship is established then the commissioner must grant relief as the two-step approach still stands intact (P v Commissioner of inland Revenue, [2015], which states:

  • would payment of tax result in serious hardship

Outcome

  • Compliance history of taxpayer is paramount in seeking financial relief. It shows taxpayer commitment to sort out the tax debt. The two-step approach clearly states the commissioner can consider the previous non-compliance before granting any relief.
  • When seeking financial relief, your case must be genuine. All information must be presented to the commissioner.
  • You need to act in good faith and disclose the required information. You need to ensure maximum recovery is offered to the commissioner.

For any assistance required in setting up the payment arrangement for tax debt, get in touch with IBBZ Accounting.

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Saurav Wadhwa is a Principal Accountant at IBBZ Accounting Limited


M Bus (TAX) PG Cert (LAW) CA CPA


Membership and Qualification:


- Masters in Professional Business Studies (Taxation) with Distinction from Auckland University of Technology


- Post Graduate Certificate in LAW, Law School at Auckland University of Technology


- Chartered Accountant(CA), New Zealand Institute of Chartered Accountants (NZICA)


- Certified Practicing Accountant(CPA), CPA Australia


- Bachelor of Commerce, Grad. Cert. in Business from Auckland University of Technology


Saurav Wadhwa


Saurav has many years of practical experience in tax & accounting services and is the co-founder of IBBZ Accounting Limited.  He is qualified both in law and accounting. Saurav has worked in various tax & accounting specialist roles for large corporates in New Zealand. He loves to work with Small Businesses.


His key focus is on:



  • Tax advisory for small and family operated businesses on a wide range of taxation issues.

  • Legitimate tax saving structures.

  • Advising on range of new business issues.

  • Ensuring business growth is attained.

  • Effective cash flow planning.


Saurav specialises in Tax Disputes resolution, Tax Relief applications, Tax Debt resolution/management, and representation in Tax Audit. Saurav can represent you in Taxation Review Authority,  in Tax Dispute Court Cases or he can represent you during Tax Audit Investigations.


Blend of skills in Tax laws and accounting, makes him perfect advisor for small businesses and individuals like you. Saurav understands how to safeguard your business from creditors risk, maximise the business growth and pay low taxes. He can be your good strategic and business partner. He is of a friendly nature and easily approachable.


Saurav understands the numbers very well. He is a qualified Chartered Accountant and registered with highest professional accounting bodies of Australia and New Zealand. He can help you to plan for the future to satisfy all your financial needs.



Consumed by a hunger for knowledge, Saurav has never stopped furthering his education or expanding his pool of knowledge. Nothing gives Saurav more satisfaction than assisting his clients to achieve their financial goals. His diligence, passion and accuracy has earned him a reputation as a reliable professional who strives to serve his clients above and beyond the call of his duties.



Saurav was nominated for the Best Accountant of the year and the Young Entrepreneur of the year, and his company IBBZ Accounting won the award of Best Small Business 2014. In 2015 Saurav won the award of Best Accountant of the Year.


In 2017 Saurav was appointed as a committee member to New Zealand Public Practice Board of CPA Australia. 



Saurav is a dedicated family man. Saurav is very fond of outdoor activities and enjoys pretty much all outdoor activities: running, bike, motorbike, snorkel, fishing, skiing etc. Saurav, is also a self-confessed workaholic, spends some of his free time thinking about his client’s affairs and forecasting their financial future.


He can be contacted on saurav@ibbz.co.nz  or 09 272 8050

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Guest Wednesday, 26 September 2018