Recent cases from the IRD highlight the importance of complying with tax regulations. In the case of the Supreme Constructions Civil & Drainage Works Company Limited, the owners were sentenced to three years in prison for tax evasion in July 2024. The case of Ke Kia Lam, a painter from Papatoetoe, should serve as a cautionary tale for other tradies.
Ignoring your tax responsibilities can result in hefty fines and even jail time. These cases are a sobering reminder of what can happen when you ignore your tax obligations. As bookkeepers, it’s our job to help you avoid the pitfalls of non-compliance.
Why Accurate Records Are Crucial?
In the Supreme Construction Civil and Drainage case, the business owners underreported income, falsified tax returns, and failed to account for PAYE and GST. Their deliberate actions resulted in nearly $800,000 in unpaid taxes. The Judge found the pair fully responsible for 69 tax-related offences, resulting in a three-year prison sentence.
It was found during the IRD investigation, that the owners, Naseeb and Ali, only provided their accountant with a small fraction of the information required. By withholding essential financial details and concealing relevant bank accounts, they severely limited their accountant's ability to prepare accurate tax filings.
From a bookkeeper's perspective, clients must maintain organised, accurate, and comprehensive financial records. Your bookkeeper plays an essential role in managing your business’s finances, but we are only as accurate as the information you provide. By providing up-to-date information, your bookkeeper can ensure you comply with tax regulations and identify potential financial risks before they become major issues.
In this case, the partial or selective sharing of information resulted in what the judge deemed as “deliberate offending”. He said they “decided not to comply with their tax obligations and made no genuine efforts to pay their tax.”
Partial or selective sharing of financial data can not only compromise the quality of your financial records but also lead to severe legal consequences if the information provided is found to be incomplete or misleading.
This case is a sobering reminder of what can happen when tax obligations are ignored. As bookkeepers, our role is to support you and your businesses in maintaining honesty and accuracy in your bookkeeping, to help you avoid the pitfalls of non-compliance and to safeguard your future.
When Tax Obligations Is Ignored
In the case of Ke Kia Lam, he was sentenced to community detention, 200 hours of community work, and ordered to pay $150,000 in reparation after evading over $411,000 in taxes. Lam received a self-employed income but failed to file income tax returns. He was required to pay GST but filed a NIL GST return twice. Lim’s case should serve as a cautionary tale for other tradies.
The IRD has now launched the 'Tax Toolbox' campaign to help tradies like Lam avoid these pitfalls. The campaign includes site visits and seminars aimed at educating tradies on their tax responsibilities. By promoting awareness and offering practical tips, the IRD hopes to prevent further cases of tax evasion in the industry.
Tradies who find it difficult to file tax returns can take several steps to make the process easier:
Hire a Bookkeeper: Engaging a professional can help ensure that all tax obligations are met accurately and on time.
Use Accounting Software: Tools like Xero, MYOB, or QuickBooks can simplify tracking income, expenses, and GST, and even help file returns directly with the IRD.
Stay Organised: Keeping a well-organised record of receipts, invoices, and other financial documents will reduce stress at tax time.
Seek IRD Support: The IRD offers resources and guidance specifically for tradies and small business owners to help navigate tax requirements.
Set Up Reminders: Scheduling regular tax check-ins throughout the year can help avoid last-minute stress.
Consider a Tax Agent: Using an IRD-approved tax agent might help with extended deadlines and staying compliant.
For those who prefer personalised assistance, hiring a professional bookkeeper will not only ensure that your records are accurate but also help you navigate the complexities of tax compliance. By building a solid relationship with your bookkeeper, you can focus on what you do best — running your business — while leaving the financial details to the experts.
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