IRD Penalties

IRD Shortfall Penalties

The IRD charges shortfall penalties on top of any normal tax. The shortfall penalty is a percentage of the tax shortfall (deficit or understatement of tax).

There are five types of penalties:

  • lack of reasonable care  (20%)
  • unacceptable tax position  (20%)
  • gross carelessness  (40%)
  • abusive tax position  (100%)
  • evasion  (150%).

The rate of shortfall penalty may be reduced for previous good behaviour.

IRD Late Payment Penalties

All initial late payment penalties are applied in two stages:

  • an initial 1% late payment penalty will be charged on the day after the due date
  • a further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.

Every month the amount owing remains unpaid, a further 1% incremental penalty will be added.

IRD Late Filing Penalties

Late filing penalties will apply to the following returns:

  • Income Tax $50 to $500 depending on net income levels
  • Employer monthly schedule $250
  • GST return:  payments basis $50 or invoice/hybrid basis $250.

Use of Money Interest Rates

From 8 May 2012, the IRD use of money interest rates are as follows:

  • 8.4% on underpayments of tax
  • 1.75% on overpayments of tax