At Traktion, we use our expertise and training to interpret accounting and tax legislation, ensuring that you pay the least amount of tax legally required. If you’re generating profits, paying tax is inevitable, but we will assist you in minimising your tax obligations within the law. 

Minimalisation vs avoidance vs evasion

Minimalisation

Tax minimalisation is perfectly legal. A good example of this is investing money through a Portfolio Investment Entity (PIE). Kiwisaver is a type of PIE. Income from a PIE is taxed at a maximum of 28% but a trust investing in a bank term deposit must pay 33%. The Government intentionally put this in place to encourage individuals to invest in PIEs – taking advantage of this is not considered avoidance.

Avoidance

While tax avoidance is technically legal, it’s not the most socially acceptable approach. For example, restructuring your business from a sole trader to a company could be a valid business decision, but if it has been done to avoid tax, Inland Revenue can invoke its general anti-avoidance provision. It would consider the structure to be void for income tax purposes and treats the income and tax liability as if it was under the operation of a sole trader.

Evasion

Tax evasion is quite clear cut – it’s illegal. Underreporting income, being paid ‘under the table’, and claiming non-deductible expenses are the most common forms of evasion.

Inland Revenue can imprison you for up to five years and impose a maximum fine of $50,000. 

Conclusion

You can trust us to navigate the grey area between minimising tax and adhering to tax legislation. If you have any questions about your tax obligations or unsure about our treatment of any item, our team is always available to provide you with the support you need to make informed decisions.