1 made following Release 3 in response to your feedback, and a look - - PDF document

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Business Transformation: Progress to date and what’s next

22 November 2019

Presented by: Tania Sellers and Corey Sinclair

Good morning. I’m Tania Sellers, Tax on Income Lead. And I’m Corey Sinclair, Community Compliance Lead.

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What we’re covering today

▪ Progress so far ▪ Release 3 review

your feedback

▪ Changes made

2020 automatic income tax assessment process

▪ What’s coming up next

There’ll be time for questions at the end Today, we’ll give you a brief overview of the progress we’ve made so far, the changes we made following Release 3 in response to your feedback, and a look ahead at Releases 4 and 5. We’re sure you’ll have questions, some of which may be answered as we go through our

• presentation. So, we’d like you to hold them until the end. Our presentation should take

about 40-45 minutes, so we’ll have 10-15 minutes for your questions at the end.

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We are now three releases in

2017 2018 2019 2020 2021

✓ ✓ ✓

Testing Design

Release

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Release

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Release

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Release

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Release

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Transformation has gone from being a high-level plan at the end of 2015 to a reality. We’re about half-way through. The systems, processes and legislative settings that support taxes and entitlements are being modernised in a series of releases. Major releases are occurring every year from 2017 to 2021, with all except the first aligning with the beginning of the tax year in April. This is now well underway and the first three releases have been successfully implemented. Although there have been challenges along the way, and not everything has worked as smoothly as expected, overall the releases have been implemented successfully. People are still filing their returns and paying their tax and receiving the payments they are entitled

• to. After every release, we make a number of enhancements to improve things that aren’t

working as well as they should. We are now in testing for Release 4.

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▪ We acknowledge the impact Release 3 had on you ▪ Transformation has been a steep learning curve ▪ We will grow our capability to better support you

2019 has been the peak period for change

The changes introduced in April 2019 were significant and represent the peak of transformation changes for intermediaries. Changes were made to legislation, systems and processes, and our website all at the same time. This meant you had to adapt to new requirements, new ways of doing things, and a new place to go for help and information. This is the only release that will involve such substantial changes for you. We put a lot of effort into helping ensure tax agents were ready for these changes:

• From mid-October 2018 to March 2019, more than 4,000 tax agents and bookkeepers

attended webinars we hosted. The webinars covered a variety of topics, including the proposed changes to end-of-year tax processes for individuals, payday filing and upcoming myIR changes.

• We made more than 1,800 visits.
• Between 1 and 16 April 2019, we ran more than 180 seminars (34 for bookkeepers and 155

for tax agents) in 61 locations across the country. These were attended by approximately 2,000 tax agents and 230 bookkeepers.

• After go-live, during April to June 2019 we made another 1,300 visits.

From research we did after go-live, we know that the agents we spoke to generally:

• understood the need for change, and what the change was accomplishing
• felt that they knew what changes were coming before they happened
• were happy with the volume and detail of information they received around the changes
• were able to get answers to their questions, and appreciated the volume of information

available to them

• received information through a range of education opportunities offered, and different

sources were used at different times, for different types of questions and needs.

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Transformation was always going to result in a steep learning curve for agents and Inland

• Revenue. We acknowledge this is a time loss for you as well impacting your business.

Our capability will grow so we can support you through these changes. We have plans to do things differently for Release 4 and we’ll talk to you more about that later.

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▪ Dedicated team ▪ Improved visibility ▪ Worked closely with professional bodies

We are working with you to ensure systems and processes work as intended

We have worked closely with the tax agent community to address the things you identified that are making it more difficult or time consuming for you after Release 3. Together with tax professional bodies we identified and agreed the top priorities so the right mix of support could be provided to you. A dedicated team worked on each of the 22 priority areas agreed with CA ANZ. In total, we made around 150 system enhancements. A variety of issues have been raised, including the automatically issued assessments process, how information is displayed in myIR, completing transactions in myIR, and the communications we send to customers. Not all the issues raised by you required us to make changes to our systems and processes. Some were addressed for example by the further education we provided about how new processes work. We have had very good feedback about the website as it is very transparent in letting you know what has been fixed and what is in progress. This will continue in future releases and we are still updating the website regularly. We are working with accounting sector representatives to maintain the level of support provided in the last few months and also to ensure that communication channels (like the new website) are in place for Release 4.

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The automatic assessment process for income tax ran successfully for the first time in 2019

Value $572,223,260 $70,161

• $95,542,379

$3,628,804

• $671,464,604

Number 1,330,484 354,015 319,304 270,952 528,667 95,054 2,898,476 Refund Refund – small not issued Request for more information Bill Bill written off Nil assessment Total

The new process for automatically issuing individual income tax assessments started in late May. The assessments were sent in batches via email and letter with around 2.9 million assessments sent in total over an eight-week period We finished issuing our automatically calculated income tax assessments on 25 July 2019. That's income tax assessments for 2.9 million customers. More than 1.3 million New Zealanders were automatically issued with tax refunds totalling $572 million at an average of $430. Compared to the year ending 31 March 2018, 557,000 more New Zealanders received a refund and$188 million more was paid out. 14% of refunds were less than $1 and not issued. The average refund not paid out was 20 cents. We issued 670,000 requests for more income information. At the end of July, around 50%, or 351,000 people, had already done this. That left around 320,000 to provide us with more information. Many of them are your clients and have an extension of time to file. You are in control of finalising your clients’ assessments by 31 March 2020. We sent out over 270,000 bills, totalling over $95 million at an average of $353. Customers have until 7 February 2020 to pay it. They now have more payment options and we have better ways to track payments to ensure they are made on time. 76% of bills were written off as they were less than $50. 528,000 customers had their bills written-off at $6.86 on average.

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What you told us

▪ Refunds issued in error ▪ No visibility ▪ More time needed ▪ Other income functionality

While successful, we acknowledge it didn’t run quite as you expected it to and made some changes

How we have responded

▪ Publicised functionality ▪ Clarifying wording ▪ Enhanced client list report ▪ More time to provide information

While the automatic assessment process worked very well for a large number of people, we acknowledge that you expected it to work differently for clients of tax agents. As a reminder the groups were:

• 1. Automatic assessment issued
• 2. More information required withing 45 days
• 3. IR3 filed
• 4. No assessment required

We categorised customers based on income and other information we knew about. Clients of tax agents were initially scheduled at the start of the select runs but were moved to later runs to allow time for you to update your client’s income sources so we could place them into the right group. Once the automatic assessment process started, we received immediate feedback from agents:

• We issued refunds in error. You knew some of your clients had other income to include

and didn’t get a chance to do it before the refund went out. You then had to arrange for your clients to return their refunds to us.

• You had no visibility over which group your clients were in.
• You couldn’t understand how we put your clients into an assessment group.
• 45 days wasn’t long enough to provide the additional information.
• The functionality to update “other income” wasn’t used as the wording gave the

impression it was a legal declaration and you were concerned you would be taking a legal position on what was essentially a record of potential income.

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We responded immediately and made changes to the process. We clarified how to provide more information:

• To give you more control, we have tried to encourage you to update your clients’ income

sources in myIR if they have more income we don’t know about. This functionality wasn’t widely known about and there wasn’t much time between go-live and the start of the automatic assessment process to use it.

• We have raised a request to clarify the wording when other income sources are added so it

is clear they are only potential income sources. The wording changes will be made before 31 March 2020. This is intended to make you feel more comfortable using this option. We enhanced the client list report:

• To give you visibility of which groups your clients were in, we added the assessment group

to the client list report. This helped you to identify which clients should be in a different group based on potential income sources you knew about.

• However, the list doesn’t provide information about when the automatic assessment will be

issued. We extended the deadline for providing information:

• To align with the extension of time for clients who must file an IR3. Instead of 45 days, your

clients now have until 31 March 2020 to provide more information.

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We have made further changes for 2020

▪ No automatic assessments for your clients ▪ Requests for more information sent to you ▪ You can finalise assessments in myIR or

Gateway All clients of tax agents will be in group 2 next year – the group we request more information from before finalising their assessment. You will have until 31 March 2021 to provide this information. This means we will not automatically finalise any assessments for customers linked to a tax agent. You will be notified through the usual channels when requests for more information for the clients you are linked to are available. Your clients can go into myIR and complete the process themselves. If you want a client to automatically receive a finalised assessment, you will need to de-link them or encourage to complete their assessment themselves in myIR to speed up the process. Based on this year’s data, we estimate this will affect approximately 183,000 customers (those who engaged an agent to fully manage their tax affairs and have their mail redirected to an agent) who were in group 1 this year and had an automatic assessment issued to them. We have made this decision as we believe that if a customer has chosen to engage a tax agent, then they are likely to have more complicated tax affairs and it is more likely that Commissioner will be not be able to be satisfied that she has all the information needed to issue an assessment.

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This gives you full control, however it does mean more work

Implications for tax agents

▪ No automatic assessments ▪ Need to review all clients ▪ Queries directed to you

Implications for customers

▪ You are the first point of contact ▪ Clients only assessed after you

complete your review What this means for tax agents:

• 325,000 clients of tax agents were part of income tax assessment process this year
• 183,000 received automatic assessments
• 142,000 were in the request for more information group.

That 183,000 will now no longer receive an automatic assessment, they will be in the request for more information group.

• You have full control as none of your clients will ever be automatically issued with an

income tax assessment.

• You will not have to spend time returning incorrect refunds or amending assessments.
• You can arrange for transfers of any refunds to other accounts, rather than your clients

receiving them.

• While this change responds to the issues with automatic assessments you have raised

with us, the trade-off is that it creates additional work for you.

• You will have to review all your clients, even where no additional information is
• required. You will need to review each screen and declare whether there are

income/expenses or not on each page. This is about 6 screens in total, however it will be faster if your software package picks up the gateway service for income tax.

• We will direct any queries we receive from your clients about the automatic

assessment process to you.

• The only way to put your clients back in group 1 so they receive an automatic

assessment will be to de-link them.

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What this means for your clients:

• To get their refund, a client will either wait for you to update their information saying

there was nothing else to provide and we would release the refund, or they could do this in myIR themselves.

• Working for Families refunds cannot be finalised until a client’s income has been finalised

by you. Here are a couple of examples to illustrate how this will work in practice. Example 1: Graham is an accountant who knows that none of his clients will be automatically assessed. Throughout the year as he manages his clients, he adds in other income sources to some of their information- the ones he definitely knows about. When we run the select process and notify Graham through the usual channels that notices for his clients are available, he can now sort them based what he needs to do:

• If no action from him is required, he needs to go through each client, clicking through

each return to submit the generated assessment in myIR without additional information, and the refund is immediately released.

• If he is waiting on other calculations or information, he doesn’t have to rush to do this and

completes the return when he can. He could let his clients know that even though they are linked to him, as they have no other income, they could update their own information on myIR to receive their refund without him being involved. Example 2: In August 2020, Jane calls us asking where her Working for Families refund is. Last year she received her refund in June and because of her circumstances it is usually quite large. We inform her that we have initiated the assessment and sent it to her accountant in June 2020. We recommend she get in touch with her accountant to speed things up.

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▪ Any time up until 7 February, or 7 April for clients of a tax agent ▪ Treated as a new assessment ▪ No penalties or interest ▪ Doesn’t apply to income return filers (IR3)

Customers can update their income tax assessments

Customers we can automatically assess, i.e. those who don’t have to tell us about other income they have earned, can correct or amend their assessment any time up until 7

• February. Customers with tax agents have until 7 April to update their assessment.

This is a much simpler process for customers in group 2, who just have to update and/or confirm information, and have up until the payment due date to make amendments with no implications. Now that’s all they have to tell us about. Customers who receive schedular income previously also had to file an IR3. Now they can be part of the new assessment process. They will always be in group 2 so they can tell us about any expenses they want to claim. In most cases, when customers correct their assessment, we treat it as a new assessment. This means they will not be charged penalties or interest as a result of us having incomplete

• information. If we initially think a customer is in group 2 and need to update and/or confirm

information and they then report additional information which means they become an IR3 filer, when they first report this additional income it is treated as a new assessment. There is no change in approach for customers who do have to tell us about other sources of income, such as IR3 filers. We will look at any changes these customers make before deciding whether penalties or interest should apply.

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We have also made other changes in response to your feedback

Credits transferred to amounts coming due Incorrect amounts displayed Small amounts or no bank account meant no transfer All fixed, except for the no bank account issue – a fix for this is underway

Transfers

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What happened:

• Credits were transferred to amounts coming due.
• Incorrect transfer amounts were displayed in returns.
• Small amounts weren't being transferred.
• Transfer requests were ignored if we didn't hold a bank account.

What we've done:

• Fixed all of the above issues.
• Provided an explanation on the Top Solutions website of how new transfer rules work in

START. What intermediaries need to know:

• How the new transfer rules work in START.

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We have also made other changes in response to your feedback

Credits transferred to amounts coming due Incorrect amounts displayed Small amounts or no bank account meant no transfer All fixed, except for the no bank account issue – a fix for this is underway

Transfers

Unexpected refunding of clients’ payments Provisional tax payments returned Rules amended If we don’t know where money is going to, we will refund it immediately

Misdirected payments

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What happened:

• Money was showing up in clients' bank accounts unexpectedly.
• Provisional tax paid was returned back to clients.

What we've done:

• Amended the rules to identify misdirected payments for Provisional Tax on or after the

instalment due date. We’ll talk more about the work we’re doing in provisional tax shortly.

• Communicated that if any customer pays money into an account where we can’t see the

debt or don’t know where it is going to, we will refund it immediately. What intermediaries need to know:

• When making a payment, you must make sure your clients have the right details.
• If you make a payment before you file a return, the credit is held until the return is

processed.

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We have also made other changes in response to your feedback

Credits transferred to amounts coming due Incorrect amounts displayed Small amounts or no bank account meant no transfer All fixed, except for the no bank account issue – a fix for this is underway

Transfers

Unexpected refunding of clients’ payments Provisional tax payments returned Rules amended If we don’t know where money is going to, we will refund it immediately

Misdirected payments

Clients receiving letters directly Being progressively fixed SOA now redirecting Double checking direction rules for all letters

Letters

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What happened:

• Clients were receiving letters that were previously redirected to agents, which caused

confusion. What we've done: Examples of these letters and they date they were resolved are as follows:

• Prescribed Investor Rate (PIR) letters, advising that the rate being used is incorrect –

resolved 22 May 2019.

• The income tax return reminder web message, which advised clients that they have a

return available to file – resolved 6 June 2019.

• Donation tax credit letters, asking for an income tax return to be filed - resolved 18 June

2019.

• Resident Withholding Tax (RWT) certificate of exemption letters asking for more information

– resolved 28 June 2019.

• Company dissolution letters, advising whether Inland Revenue has an objection – resolved

28 June 2019.

• IR67S – Non-resident withholding tax reconciliation returns – resolved 28 June 2019.
• Working for families Tax Credits letter, asking for the customer’s partner to file a return –

resolved 28 June 2019.

• Donation tax credit letters, advising that a donation exceeds taxable income – resolved 4

July 2019.

• Letters requesting a customer add a bank account number to their account – resolved 27

August 2019.

• Summary of account for provisional tax assessments – resolved 5 September 2019.

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As at 20 November 2019, we had fixed all the letters we identified that were incorrectly going to clients instead of tax agents:

• Once we identified that some letters were going out incorrectly following Release 3, we

immediately fixed the top 10 (letters that went out the most) as part of the priority work agreed with CAANZ.

• At the same time we kicked off a review of all letters issued out of START. From this we

identified 73 others that would have gone incorrectly as well (not all of them had even been triggered yet). These have now also been fixed.

• From Release 4, all new letters built in START will, by default, automatically be sent to the

tax agent and can only be sent to an individual by exception. Letters will have to be specifically excluded by exception for security or integrity reasons, such as the notification

• f bank account changes.

You are able to view mail for your clients in the All client mail report in myIR in accordance with their linking level. You have two levels of linking and depending on what your client authorises, the Customer Master level or at Account level. Customer Master level: The Customer Master level provides you with visibility of all mail for a

• client. Generally, anything that contains multiple tax types, relates to the client themselves, or

anything that could be sensitive is set at the Customer Master level. Account level: Linking at Account level gives tax agents access to mail for a specific account, (e.g. GST). Depending on the mail subscriptions you selected, you may receive an email alert to let you know you have received a message or letter regarding a client which you can read in your client’s account in your own time. What intermediaries need to know: Some letters will always go to clients now. These are:

• Linking/delinking letters.
• Bank account changes.
• Certificate of exemption letters.
• Letters asking a client to provide information to their agent.
• The second notification of an outstanding amount (with the first notification going to their

agent.

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We have also made other changes in response to your feedback

Credits transferred to amounts coming due Incorrect amounts displayed Small amounts or no bank account meant no transfer All fixed, except for the no bank account issue – a fix for this is underway

Transfers

Unexpected refunding of clients’ payments Provisional tax payments returned Rules amended If we don’t know where money is going to, we will refund it immediately

Misdirected payments

Clients receiving letters directly Being progressively fixed SOA now redirecting Double checking direction rules for all letters

Letters

More detail needed on salary and wages /schedular payments Payments shown separately with a summary of deductions Better PDFs of income details

Income summary

What happened:

• More details were needed on salary and wages and schedular payments.
• There was not enough detail on deductions.

What we've done:

• Income information in a customer's account now separates out schedular payments from

wages and salary, and shows more details on deductions including earnings not liable for ACC, student loan, and PAYE deductions.

• Two separate exports are now available to provide customers a simpler version for proof
• f income and a more detailed version of return filing.

What intermediaries need to know:

• This information is published on the Top Solutions website.

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And we continue to work with you

As at 8 November 2019:

▪ Letters ▪ Provisional tax ▪ Transfers ▪ Printing return attachments ▪ Splitting interest and portfolio investment entity income

Please keep providing feedback and we’ll keep listening Many of you send us feedback on an ongoing basis and we will continue to look for ways to address your key concerns. We continuously prioritise issues to ensure that we address those that have the most significant impact on customers and tax agents first. The issues we’re still working on addressing as a priority are:

• We have now undertaken a review of all letters in our new system that were programmed

to ‘never redirect’ to a tax agent. This review has identified additional letters that need to be corrected. Development and testing are underway to correct the code on each of these letters and we will provide updates on the Top Solutions page once resolved. We also have some changes to the wording on the Summary of Account in the pipeline, to make it clearer what amounts are and due when.

• We have now changed provisional tax instalments and the total provisional tax payable to

truncate instead of rounding as this was creating use of money interest implications for some clients. We are still working on correcting impacted customer’s accounts and anticipate this will be completed by early December. Other provisional tax changes we are currently working on are:

• Implementing a $20 tolerance before use of money interest is calculated for short

paid provisional tax.

• Correcting scenarios where interest is incorrectly charging.
• Correcting scenarios where exempt customers are being treated as liable for

provisional tax.

• Stopping multiple letters issuing for new provisional tax customers.
• Amending the income tax balance display in myIR to separate terminal tax and

provisional tax by due date and no longer show these as overdue unless the due date has passed.

• Retaining history of provisional tax method and changes to the provisional tax

annual assessment in myIR.

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• Return attachments are now able to be printed for all non-individual tax returns in myIR.

Printing of individual income tax return attachments have finished being developed and almost finished testing. This should be available in the next few weeks. Check before

• conference. We are still working on the display of all options for CFC/FIF disclosures for

the ‘unauthenticated’ IR3NR, IR4 and IR7 Look through company returns.

• We had previously reported that we had fixed an issue affecting customers requesting

transfers without a bank account on file. We’ve made changes to our system in order to resolve this, but some tax agents have let us know the issue has not been completely

• fixed. We are currently looking into solutions for this issue.
• Splitting interest and PIE income - System changes have been partially implemented to

allow all customers to indicate a joint account percentage split in myIR for interest income. Further changes are being tested. As issues are resolved and moved off the priority list, we move on to the next priority to be resolved, which means we are steadily working through everything that is raised. We are committed to keeping you informed along the way and to keep listening to what you are saying. With more change ahead, we want to ensure you have the support you need and stay

• informed. We are working closely with many of you, and with software developers, to test and

work through upcoming changes to minimise the impact on you and your clients.

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There are still two big releases ahead

▪ KiwiSaver ▪ Student Loans ▪ End-to-end PAYE ▪ Mandatory investment income filing ▪ Research & development incentive ▪ Short process rulings ▪ Enhanced online services

2020

Release

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▪ Child Support ▪ Paid Parental Leave ▪ Unclaimed monies ▪ Levies and duties ▪ Decommissioning

2021

Release

5

While overall it is expected to have a smaller impact than Release 3, Release 4 is still large and complex especially given the range of social policy products. From a data perspective, two components – KiwiSaver and student loans – will require the migration of all open records since inception, not just the past five years. Some of the key aspects of Release 4 are:

• Changes to the way we administer KiwiSaver and student loans.
• Full end-to-end digital service where customers can make deposits and withdrawal

requests for KiwiSaver online and see their balance.

• Student loan customers will be able to set their preferences in myIR for any overpayments
• keep against the loan, apply to other tax type debt, refund or add to their KiwiSaver.
• All payments will be digital.
• More frequent reporting of investment income information becomes mandatory.
• implementing the Government’s new research and development incentives and write-off

rules.

• Offering businesses easier and more cost-effective access to binding rulings (short

process rulings).

• A number of changes for employers including moving the end-to-end processing of

employer obligations into the new system bringing PAYE, student loans, Child Support, KiwiSaver and tax withheld on KiwiSaver contributions into a single consolidated employer

• nline account, and coordinating our approach to notifications.
• Enhancements to Working for Families Tax Credits.
• Changes to payment options.
• Providing new gateway services to software providers and intermediaries for filing tax on

income and associated data exchange.

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• Completing the migration of www.ird.govt.nz to the new web content management

system.

• Further improvements to myIR for customers.

Release 5 will be a 2020-21 and beyond proposition, Child Support will move to our new tax system, along with other smaller services – unclaimed monies, problem gambling levy, totalisator duty, lottery duty, and casino duty. This will be a milestone event that will mean that tax, entitlement and social policy products and information will be administered in the one place. As is to be expected at this stage of transformation, we are increasing our focus on retiring heritage systems and processes. By December 2021, we will have a simpler and more stable technology landscape. This involves:

• Significantly reducing our data centre footprint. We will exit the two data centres

supporting our old workplace technology and the two Unisys data centres which support FIRST.

• Mitigating security or compatibility risks. Intrusion detection remains a challenge. While
• ur systems are now more secure, we cannot detect all intrusions, particularly given

constantly emerging new threats. We will continue to invest in maintaining the security of

• ur systems.
• Modernising some of our capabilities, for example identity and access management

services, to reduce risk and improve the vendor support models.

• Removing co-existence built for transformation.
• Improving how quickly we identify and resolve faults.
• Improving how we manage and monitor delivery of services.

We have established a technology landscape optimisation programme to complete this work as part of Release 5.

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Changes are going live at different times

Already in effect

▪ Research & development tax incentive ▪ Short process rulings ▪ Ring fencing of loss on rental income ▪ Expanded gateway services

Coming soon

▪ Cheques will be phased out

While the majority of Release 4 will go-live in April 2020, some changes have earlier start dates. Research and Development Tax Incentives. The research and development tax incentive scheme commenced from 1 April 2019 for most businesses. It is available to eligible businesses from the 2019/20 income year. An eligibility tool is available on our website to help businesses work out whether they might be eligible. The tool doesn’t provide a yes or no answer but does tell businesses whether they may be eligible or if it is unlikely they will be eligible. The new Short Process Rulings service has been live since 1 October 2019. This service will provide more certainty for any individual or business with an annual gross income below $20 million and a question involving tax below $1 million. Customers can apply and pay for a ruling, and track its progress, online. Short-process rulings will take about six weeks to

• process. If a situation we are asked to rule on is as complex as for larger customers, we

will need more time to consider the issues properly. Short-process rulings are limited to a single tax type and will cost customers $2,000 (including GST). We have received four applications to date. Ring Fencing of Loss on Rental Income applies from the beginning of the 2019-20 income

• year. This means residential property investors can no longer use losses from rental properties

to offset tax on other sources of income, such as salary and wages. From 2 October 2019, expanded Gateway Services for software providers and intermediaries has enabled income tax to be filed through software. There is a staggered approach for software providers to take up the service. A new Investment Income Gateway Service also enables investment income information to be filed through software.

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From March 2020, we will no longer accept payments by cheque from customers who are able to use alternative payment options. We’re also not accepting post-dated cheques dated 1 March or later.

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Some significant changes will go-live in April 2020

▪ KiwiSaver

Enhanced administration

Straight through processing of employer contributions

Improvements for scheme providers and fund administrators

▪ Student Loans

Improved online services

Simplified and more automated administration

▪ Mandatory reporting of investment income ▪ PAYE will be fully administered in our new system

Consolidated account and notices for employers

Transactions and payments visible sooner

Improved validations

The key changes being introduced in April 2020 include: KiwiSaver administration functions will be enhanced:

• The provisional period will be reduced from three months to two months for new

enrolments.

• KiwiSaver scheme providers will have digital access to membership information.
• We'll send a lot less paper to members.

KiwiSaver employer contributions will be passed straight through to scheme providers on the basis of information received from employers in anticipation of payment. We're making improvements to the way we work with KiwiSaver scheme providers and their fund administrators. Improved transparency and efficiency will assist scheme providers with member transfers between scheme providers. Student loans customers will have improved e-services which address current customer pain

• points. There will be improved processes when a customer pays off their loan, which will

significantly reduce the volume and size of overpayments, and the length of time it takes to refund these. Administration will be simplified and more automated - with improved use of analytics - and it will deliver better customer and administrative outcomes. More frequent, and electronic, reporting of investment income becomes mandatory and the requirement for annual reconciliation returns and withholding certificates will be removed. A resident withholding tax electronic exemption register will also be introduced, replacing certificates. PAYE will be fully administered in the new system, including contributions and deductions,

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as a single consolidated account. This includes payroll giving and the ACC earner's premium component of PAYE. We will simplify and streamline employer obligations across deductions. There will be a single employer account. In out heritage system, there are six employer related accounts to manage the components of employers withhold from employees' pay. One for each of:

• PAYE deductions
• student loans deductions
• child support deductions
• employee KiwiSaver deductions
• employer KiwiSaver deductions
• employer superannuation contribution tax deductions.

Transactions from payday filing and payments made will show up a lot sooner as we will no longer have co-existence. There will be new fields for hours paid (for digital channels only). We will consolidate notifications to employers:

• Where possible, we will provide employers with a single list of actions for employees;

rather than separate notices.

• We will take a co-ordinated approach to correspondence by combining information about

multiple employees requiring the same changes, or a single employee with multiple changes, into one letter, notification, report, or contract.

• We will also combine multiple return errors, compliance obligations, and balance

information into one contact where possible. There will be improved PAYE validations for online submissions of employment information. This will still allow the employer to file and will instead send an error message back. We want to look at a data and validations approach end-to-end. We certainly don’t want to say to employers “no, you can’t send us that piece of information”. In the early days we’ll use warnings, so if employers are sending us information that’s not valid we’ll warn them and then

• ver time we’ll increase the validations upfront. We also want to understand if we can accept

the information through the front door what can we do to prevent it stopping the returns/ payments processing so we don’t have so much manual intervention. There will also be improvements to new employee on-boarding:

• New services will improve new employee on-boarding for employers - reducing mistakes

during payday submission(s).

• The duplication between employee on-boarding and KiwiSaver opt-in/opt-out will be

removed.

• Improvements to managing employee details will not just be for new and departing

employees, it will also be easier for employers to maintain details for all their employees.

What's not changing:

• The way employers submit employment information and update customer account details.
• How employers communicate with us through voice, paper, and electronic channels.
• Customers will still be able to file on paper by exception.

We will also improve and redesign exchanges with other government agencies, including processing and sharing of information more quickly and efficiently. Largely, this is simply improving the technology between us and the Ministry of Social Development, and us and Customs.

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▪ Prepare for further process changes ▪ Access information in a way that suits you ▪ Use new gateway services ▪ Update client information ▪ Understand new features

What you can do to get ready

What we need Tax Intermediaries to know ahead of Release 4. There will be changes on both sides. You will also need to change your processes to manage new ways of working with us as we continue with our business transformation. We will again provide you with information in a variety of ways to meet your needs:

• seminars
• webinars
• Account Managers
• a prioritised 0800 line
• secure mail
• Top Solutions/Issues website
• e-mail updates
• Agents Answers newsletter
• website

We know from our research these worked. New channels will be available. New functionality will be available in Gateway Services to manage Employer Information, Student Loans and KiwiSaver. New approaches will be required to manage individuals with income tax in group 1 (automatic assessment) and group 3 (more information required). As part of the planning for next year’s income tax period, we are reviewing the processes and timing from this year to identify any changes we may need to make. At this stage we are not planning to make any changes to stop automatically issuing income tax assessments for those customers that only have reportable income and where we don’t believe we require any additional information (e.g. expenses). We

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encourage you, where you believe there may be more income information that we don’t know about, to update your clients’ income sources in myIR. This will allow your clients to have their income tax automatically calculated but held until the income information is provided. The assessment will then complete overnight. You have until 31 March to provide this information. More features will be available to help you and your clients manage employer information, KiwiSaver and student loans.

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How we will work with you

▪ Focus on tax agents, intermediaries and software developers ▪ Tax agent cohort ▪ Prioritisation and escalation of issues ▪ Account Manager support ▪ Top issues and solutions page

Over the last three years we’ve asked you to deal with a lot of change. We know that takes work and effort. Releases 4 and 5 will bring additional changes. To ensure they are implemented successfully we need your support, engagement and leadership. We know we need to do some things differently to achieve that. In July and August 2019, we interviewed 44 tax agents in Dunedin, Napier, New Plymouth, Wellington, and Whangarei to inform our approach to supporting you through future changes. We also included some questions in our August 2019 tax agent survey so we could establish which of the support activities we had in place for Release 3 were the most effective and preferred, and why. You told us the three things you most needed were:

• Clarity - what is changing and why.
• Reassurance – being kept in the loop about what’s coming up.
• Advance, staged notification – to stay informed along the way.

While the agents we spoke to were generally happy with the support they received for Release 3, they also highlighted areas they thought we could improve on. For Releases 4 and 5 we are building on what you told us worked well and addressing the gaps you told us about. Focus on tax agents, intermediaries, and software developers A networked team from across Inland Revenue will work to ensure we have the right support in

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place to work alongside tax agents, intermediaries and software developers to prepare for Release 4 and beyond. The team will include people you may already be familiar with, such as your Account Manager, as well as those who work more in the background, such as our marketing team and the team working on our transformation. The network will provide clear lines of sight and accountability for working with tax agents, intermediaries and software developers. It will help people across Inland Revenue understand that you are a key to delivering Releases 4 and 5 successfully and be clear about exactly what’s required to achieve that. We want to build a partnership culture with you and gain your feedback early to support successful delivery. Our networked approach will also provide visibility of any issues to our executive leadership team so that we can seek their guidance and support to resolve them. Creating this network will help to ensure strong co-ordination and collaboration within Inland

• Revenue. This will help you to have confidence your views are being heard and responded to

in a cohesive way. Tax agent cohort We propose to establish what we’re calling a tax agent cohort with a representative cross- section of tax agents. We envisage the cohort as a touchstone group we can work with to:

• develop roadmaps and strategies for the future
• test concepts and ideas with
• seek detailed feedback on the solutions being designed, and
• ask for direct feedback from after go-live on how things are going and ensure the right

issues are being prioritised for fixes. The cohort will provide us with first-hand insights and feedback, and the cohort will have an early view of design, with opportunities to influence it and provide direct feedback. Our initial thinking is that the group would consist of:

• a representative from the big four
• a mixture of CAANZ, ATAINZ, CPA, and ICBNZ members
• ne or two smaller tax agents
• ne or two medium-sized tax agents
• tax agents who have been involved in previous releases – we are looking for a range of

views and experiences, both positive and negative. We want a range of views from different sized firms. The types of activities we could engage on include:

• design validation
• customer interaction testing
• early life support feedback
• feedback on future release changes

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We propose to have an initial meeting, which would be face-to-face, in early 2020. Prioritisation and escalation of issues While many Release 3 issues have been resolved, many remain on priority lists for fixing. We know these outstanding issues result in a loss of efficiency and time for you, which creates challenges in your relationships with our mutual customers. Monitoring and resolving issues is key. We are building on the experiences of Release 3 to ensure we have a clear escalation path so we can link multiple, smaller issues that may not be large individually, but when combined have a larger impact. This is being built into our prioritisation and production support approach, which is how things that need to be fixed get fixed. Account Manager support In general, we receive very positive feedback about our Account Management team. We have heard your feedback about the need to invest in them so they can better support you. The agents who took part in the research we did in July and August made it very clear that

• ur Account Managers are key as they are a trusted source of information.

We will provide more training to the Account Managers in Community Compliance, ahead of go-live of Releases 4 and 5. This will enable them to better help you prepare for the changes being implemented and better provide you with support after go-live We’re also working on building our overall capability to ensure the level of service we provide is consistent across New Zealand. In some areas, we will increase the number of Account Managers we have. Top issues and solutions page We will continue to update the Top Solutions web page regularly. We’ve had great feedback about the site and usage is very high. We are looking to streamline the look and feel of the site and archive older content to make it easier to use and easier to find information. This is something the agents we spoke to as part of our research commented on. Getting through to us Finally, we acknowledge we have had some challenges responding to calls recently. We have a lot of activity underway which will set our customers up for success for next year. The high demand on our contact centres is the result of a number of things. We’ve sent letters to more than 200,000 people to make sure they’re on the right tax

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• code. If people check what code they should be on and change it if necessary, it reduces

the risk of them receiving a large tax bill at the end of the tax year. We’ve also sent more than 930,000 letters to people who are using the wrong Prescribed Investor Rate (or PIR) on their KiwiSaver and other investments. The mailout started in May and finished this month. We are receiving calls about this even though customers need to change their PIR through their fund manager, not through us. Changing to the correct rate reduces the risk of a tax bill at the end of the tax year. And we’ve sent out 75,000 Working for Families letters asking customers to update their income estimates to make sure we have the right information to work out their correct entitlements. We ran a marketing campaign encouraging customers who received an automatic refund and did not have a myIR account to sign up to myIR. And we know some banks have been sending communications to customers with investments asking them to get their IRD numbers (if they don’t already know them). We actively monitor call volumes and wait times so we know what’s happening. We will continue to divert resources to minimise wait times and help customers as quickly as we can.

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Thanks for your time Feel free to ask us questions

Thank you very much for your attention. We’re happy to take your questions now.

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