Inland Revenue is planning a crackdown on the expenses claimed by real estate agents.
Most real estate salespeople are classed as self employed contractors, even though they will likely be working as part of a larger real estate agency group.
That arrangement means most agents will be responsible for working out and paying their own taxes.
Because they are self employed, they can offset expenses incurred in the course of running their business against the income they earn from sales commissions, reducing their tax liabilities.
Such expenses could include things such as operating a vehicle, telephone costs, running a home office and paying for accounting services.
However, Inland Revenue suspects some agents have been pushing the boundaries in terms of what they have been claiming as expenses.
IRD says it will be focussing both on the under-reporting of income and over-stating of expenses as part of its new campaign.
"Real estate is one area that is booming during COVID and our analysis of the sector suggests real estate salespeople/agents commonly claim high levels of expenses relative to their income," IRD spokesman Richard Owen said.
"Inland Revenue believes the issue is widespread and we must act.
"People are claiming private expenditure but not keeping logbooks or other business records to support the claim."
Owen emphasised the importance of keeping proper records to support expense claims.
"If we are concerned that someone has over claimed expenses, they will receive a letter from us requesting they prove the expenses claimed," he said.
"Things like bank statements, invoices, a logbook and any other information to confirm the expense is deductible."
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