Some tax refund agents are expected to close shop as Inland Revenue prepares for its biggest release of new software to date.
Inland Revenue, which is gearing up for what is called Release 3 of its $1.8 billion transformation in April, is now completing a program involving up to 70,000 tests.
The tests covered all aspects of its new START software's systems and processes, the department told Parliament's Finance and Expenditure Committee late last year as part of its consultation over a new tax bill.
A small amount of business system testing was set to continue this month while scaled business simulation testing (practicing go-live step-by-step, including the migration of data and processes following go-live), is scheduled through to March.
"Three mock go-live tests will be run," IRD said. "These will take place during January to March 2019 and are in effect a practice run for go-live weekend, including rolling back changes in the unlikely event this is necessary."
IRD is engaging with 31 tax refund companies it calls personal tax summary intermediaries (PTSIs), tax agents, software providers, and employers.
PTSIs, who work mostly with salary and wage earners to determine whether they have an end-of-year refund, are most affected. They request a summary from IRD on behalf of their client, confirm any refund and pass the refund on to the client after deducting a fee.
"Subject to the legislation being passed, the business model for PTSIs will fundamentally change as customers will automatically receive any tax refunds they are entitled to directly from Inland Revenue," IRD said. "Some PTSIs will cease trading and others will offer more value-add services as tax agents."
Inland Revenue's new system is also tightly integrated with five providers of practice management software for tax agents - Reckon, MYOB, CCH, Xero and TaxLab - with daily information feeds of transactional data and large volumes of returns being passed through.
Work is underway to ensure agents using these systems can continue their businesses uninterrupted after the April go-live.
Inland Revenue is also working with providers of accounting and payroll software to ensure their software supports filing employment information directly from their software.
Just over 100 software providers and payroll intermediaries have been identified with a product in New Zealand, while 85 plus are providers of payroll software who are currently engaging with Inland Revenue to develop and test interfaces for payday filing.
"The top ten providers are advancing through the testing process," IRD said. "They account for approximately 100,000 employers with 1.6 million employees out of the total market served by software providers covering approximately 1.8 million employees."
Paper is currently the dominant method of collecting PAYE information for the remaining 700,000 employees.
Inland Revenue is launching information campaigns at affected groups and expanding its workforce to manage increased demand after go-live and throughout the 2019 peak period.
A total of 1.517 million calls were received during the 2018 peak and IRD expects that to increase to around 1.863 million between during March to July 2019, up 23 per cent.
An additional 325 staff are being brought on-board from Inland Revenue’s temporary labour force to ensure they are fully trained in new systems and processes before April.
Colorado-based Fast Enterprises is supplying IRD's new tax platform.