Tax refund calculator - Why include interest earned?

[Molly]

Just used the IRD's tax refund calculator but noticed it wanted to know about interest earned on savings. Surely I've already paid tax on that money at source.

Why do they need to know this? Is the whole lot going to be added to my earnings for tax purposes?

[James Deuce]

You're supposed to pay (I think) 22% on interest earned.

[Molly]

The bank have our tax codes and deduct the tax before we see the interest. I don't know how the IRD can factor this in. Don't want to pay tax on the same money twice.

[James Deuce]

They want to make sure you know you're supposed to be paying it, and that what you declare matches what the bank pays them.

Yes, people are dumb enough to drop themselves in it.

[justsomeguy]

Income tax = tax on all income including that gained from interest payments, etc, etc, etc and every other little bit you have including that 5c coin you found on the road that day.

[Molly]

James. That makes sense I suppose.

JSG. That's the truth but, as I said, I thought I already had.

Thanks.

Calculator says they owe me over $2k by the way. F'kin' hope so.

[James Deuce]

God, I wouldn't go there (yes that is a prayer).

They'll audit you back to babyhood.

[The Stranger]

You're supposed to pay (I think) 22% on interest earned.

Don't they only collect a withholding tax from the banks at a flat rate of about 20%, but it should be adjusted according to your income?

[p.dath]

Not all banks have their cusrtomers IRD number, and that affects the amount deducted.

Also the amount of tax you pay is based on your total income. As a result the bank may be deducting too much or too little tax on behalf of the IRD.

[Taz]

including that 5c coin you found on the road that day.

No longer legal tender so no tax owed on the 5 cents.

[James Deuce]

Don't they only collect a withholding tax from the banks at a flat rate of about 20%, but it should be adjusted according to your income?


I have income?

[p.dath]

Don't they only collect a withholding tax from the banks at a flat rate of about 20%, but it should be adjusted according to your income?

20% if they have your IRD number on file, 33% if they don't (from memory).

[Mully]

God, I wouldn't go there (yes that is a prayer).

They'll audit you back to babyhood.

Indeed. Be very wary about those "Tax Refund" places. (Plus, you can do it yourself for free anyway)

They managed to get me $300 back, and then Mr Taxman (may his lips fall off so his face frays) had a look and figured out that my previous employer had cocked up my final pay and I owed them $700-ish. So once I figured out what had happened I had to ring them:

IRD: Kia Ora. How may we screw you today?
Me: Uh, Hi. I have a tax bill. I need to set up a payment arrangement for $150 per month
I: Are you aware that you will continue to incur interest on the amount while you are paying it off? Could you sell some items to pay the bill, or borrow the money from somewhere else?
M: Hmm, what's the interest rate on that?
I: 12%
M: I couldn't borrow that money any cheaper from anywhere else, so lets just go with that
I: OK - (big speel about how if I miss or delay a payment, they'll send a mob out to hunt me down and break my legs)
M: Righto. Can you send me the forms please?
I: Certainly, just turn your head and cough for us while we squeeze.

[Hoon]

Don't want to pay tax on the same money twice.
No you've paid tax on your income. That income when banked then generates interest which is additional income. This also needs to be taxed.

The Govt couldn't let lotto winners or rich migrants get away with living off their interest tax free for the rest of their life could they :)

[Mully]

No you've paid tax on your income. That income when banked then generates interest which is additional income. This also needs to be taxed.

I think the bank pays tax on the interest as it's accrued.