Activity by Inland Revenue is picking up pace across the board—from investigations of large corporations to risk reviews of property investors and small business owners.  

Why are we seeing this? 

Firstly, in the NZ Budget 2024, $116million was specifically allocated over 4 years to enhance debt collection and tax compliance efforts, and ever since visible action has been ramping up in both areas.  In recent times there has been a review of over 30,000 tax returns alone, leading to $859 million in additional tax revenue through audits and voluntary disclosures.

Secondly Inland Revenue are using real-time data analytics and improved access to third-party information, as tools for bigger picture information gathering. Reviews and audits are then most often triggered when returns have been flagged as being outside the parameters considered ‘normal’ within the industry. For example, the tools have recently been used to review :

• Property transactions: by leveraging data from Land Information New Zealand to monitor compliance with the bright-line test and identify undeclared rental income.
• Cash-based businesses : by reviewing data collected in sectors like construction, trades, liquor/vape retail and hospitality.
• Retail and Service Sector : by analysing Eftpos data to identify possible use of Electronic Sales Suppression tools that can manipulate sales data to underreport income.

No industry is exempt from analysis, it’s a matter of when.  Now more than ever, it’s important to:

• Keep accurate and up-to-date financial records
• Disclose to us in full all property transactions, and financial investments such as crypto
• Work closely with us to identify any areas of potential concern
• Consider if taking up Audit Shield is right for you

An investigation can be called for a range of returns from Income Tax, GST to PAYE.  During an investigation of any nature our team will take prompt action, send relevant supporting documentation and respond with technical accuracy.  Audit Shield is an insurance-backed solution to provide freedom of mind that if Inland Revenue comes calling during the policy period, the professional accountancy costs incurred (up to a prescribed amount) will be covered. 

The message being sent to taxpayers is clear: tax compliance is a priority.  Analysis of data and information sharing with third-parties will only ever tell a portion of the full story, so the increasing number of risk reviews and audits for taxpayers are our new reality.  However the team here at CooperAitken are the qualified experts to advocate for your tax position. 

Contact our office if you would like more information on Audit Shield.