"Goodness, what a bird's nest of a nightmare. And how ironic IRD in this instance may end up being a savings scheme..."Featured comment
There is a possibility investors in Ross Asset Management may be eligible for tax return refunds.
Investors in the Wellington-based investment company have raised concerns over tax paid to the Inland Revenue Department on what could turn out to be fictitious returns.
PwC receiver John Fisk is expecting to file a court application to have the company liquidated, which means investors who have enjoyed ‘inflated returns’ may be targeted.
So far, Mr Fisk has uncovered just $11 million of the purported $450 million of assets, says he does not expect to find any more money and he says early indications show David Ross may have been running a Ponzi scheme.
In a statement released to investors’ group spokesman Bruce Tichbon, the IRD has stressed the burden of proof for any tax refunds will fall on the investor.
“Whether an investor would be able to ask for their back year returns to be amended due to a company failure will depend on whether they have earned the investment income previously returned,” the statement reads.
The IRD says taxpayers are required to pay income tax on all income, including interest and dividends.
If investors had derived interest or dividends which they then elected to reinvest, they, in effect, turned their income into capital.
They will be required to pay income tax on any income, although they may subsequently suffer a loss of their capital.
“In general, taxpayers will not be allowed a deduction for capital losses (which may be the original principal amount invested plus any interest or dividends reinvested).
“If investors can show that the income they had previously returned had, in fact, never been derived, then they can write to Inland Revenue and ask for the returns to be amended.
Mr Tichbon says every piece of information, such as this statement, moves the issue forward but “gives us another 10 questions to ask”.
He says he needs more information from the parties involved – the High Court, receiver, Financial Markets Authority, IRD and Serious Fraud Office – to clarify how income which had never been derived will be established for IRD purposes in the context of RAM.
Mr Ross has been released from hospital, where he spent the last three weeks in compulsory treatment under the Mental Health Act and is now expected to co-operate fully with those investigating RAM.
The Mental Health Act states that applying for a compulsory treatment order is a very serious step. Under the order, someone is required to receive treatment for up to six months.
A clinician must make the application for compulsory treatment if the patient is already under compulsory assessment – a process which anyone can apply for if they are concerned about someone’s mental health.
Compulsory treatment can only be applied for if the patient poses a serious danger to their own health and safety or that of others.
It is necessary, following the application, to attend a hearing before a family court or district court judge who will decide whether the patient needs compulsory treatment or not.