Reporting entity
Inland Revenue Te Tari Taake (IR) is a government department as defined by section 2 of the Public Finance Act 1989, and is domiciled and operates in New Zealand.
The relevant legislation governing IR’s operations includes the Public Finance Act 1989, the Public Service Act 2020, and the Tax Administration Act 1994.
IR is a wholly owned entity of the Crown, whose primary objective is to provide services to the public rather than to make a financial return. Accordingly, IR has designated itself as a Public Benefit Entity (PBE) for financial reporting purposes.
Reporting period
The reporting period for these financial statements is for the year ended 30 June 2024. The unaudited forecast financial statements are for the year ending 30 June 2025.
The Commissioner of Inland Revenue, as Chief Executive, authorised these financial statements on 30 September 2024.
Statement of compliance
The financial statements have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand's generally accepted accounting practice (NZ GAAP) and the Treasury Te Tai Ōhanga instructions.
IR has applied the Tier 1 Public Benefit Entity International Public Sector Accounting Standards (PBE IPSAS) in preparing the 30 June 2024 financial statements.
Basis of preparation
The financial statements have been prepared on a going concern basis, and the accounting policies set out below and in the notes to the financial statements have been applied consistently to all periods presented in these financial statements.
These financial statements have been prepared on a historical cost basis unless otherwise stated. The accrual basis of accounting has been used.
Functional and presentation currency
These financial statements are presented in New Zealand dollars, and all values are rounded to the nearest thousand dollars ($000). The functional currency of IR is New Zealand dollars.
Estimations and judgements
In preparing these financial statements, judgements, estimates and assumptions have been made concerning the future.
These judgements, estimates and their associated assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on experience, including expectations of future events that are believed to be reasonable under the circumstances, and other factors. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods if the revision affects both current and future periods.
The main estimates and judgements that are relevant to IR’s financial statements are disclosed in Note 9 (Property, plant and equipment), Note 10 (Intangible assets), Note 11 (Debtors and prepayments), Note 13 (Employee entitlements) and Note 14 (Other liabilities).
Accounting policies
Significant accounting policies are included in the notes to which they relate. Significant accounting policies that do not relate to a specific note, and that materially affect the measurement of financial results, the financial position and/or output statements within the section on Our Performance, are outlined below.
Goods and services tax
All amounts in the financial statements, appropriation statements and output statements are exclusive of goods and services tax (GST), except for debtor Crown, net debtors and accounts payable, which are stated on a GST-inclusive basis. Where GST is not recoverable as input tax, it is recognised as part of the related asset or expense.
The net amount of GST owing or due at balance date, being the difference between output GST and input GST, is included in creditors and other payables in the Statement of Financial Position. The net GST paid or received, including the GST relating to investing and financing activities, is classified as an operating cash flow in the Statement of Cash Flows.
Commitments and contingencies are disclosed exclusive of GST.
Income tax
Government departments are exempt from income tax as Public Service agencies. No charge for income tax has been provided for.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash in transit and funds held in the bank accounts. All cash held in bank accounts is held in on-demand accounts and no interest is payable to IR. IR is only permitted to spend its cash and cash equivalents within the amount, scope and period of its Vote Revenue appropriations.
Foreign currency transactions
IR’s activities expose it to the risks of changes in foreign exchange rates. Foreign currency transactions (including those for which forward exchange contracts are held) are translated into New Zealand dollars using the spot exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the financial results. IR does not hold any departmental foreign currency bank accounts.
Comparatives
When the presentation or classification of items in the financial statements change, comparative figures for prior periods are re-stated to ensure consistency with the current period, unless it is impractical to do so. The presentation of some information has changed from the previous period, with prior period balances re-classified to be comparable with current year figures.
Cost allocations
IR allocates costs directly to an appropriation where a line of sight exists between an appropriation and a cost centre or a project. IR uses indirect allocation where a cost centre, a project or an initiative cannot be attributed directly to an appropriation. Indirect allocation rates are derived from the weighting of apportioned direct costs from relevant cost drivers to appropriations.
Budget and forecast figures
The budget, revised budget and forecast figures have been prepared in accordance with NZ GAAP using accounting policies that are consistent with those adopted in preparing these financial statements.
The budget and forecast figures are not subject to audit.
The budget figures for 2023–24 are those included in The Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2024.
The forecast figures for 2024–25 are those included in The Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2025.
The forecast financial statements have been prepared in accordance with the requirements of the Public Finance Act 1989 to communicate forecast financial information for accountability purposes. They are compliant with PBE Financial Reporting Standard 42 Prospective Financial Statements.
Forecast policies
The forecasts have been compiled on the basis of existing government policies and ministerial expectations at the time the statements were finalised. The Commissioner, in his role as Chief Executive of Inland Revenue, is responsible for the forecast financial statements including the appropriateness of the assumptions underlying them and all other required disclosures. The Commissioner approved the forecast financial statements for issue on 1 May 2024. Although IR regularly updates its forecasts, it will not publish updated forecast financial statements for the year ending 30 June 2025. The main assumptions are as follows:
- IR’s core activities will remain substantially the same as for the previous year.
- IR’s transformation programme ceased in 2021–22, with some residual transformation activities post the closure of the programme ending in 2023–24.
- Operating costs are based on historical information and IR’s best estimates of future costs to be incurred for the delivery of its services.
- Estimated year-end information for 2023–24 was used as the opening position for the 2024–25 forecasts.
Any changes to budgets during 2024–25 will be incorporated into The Supplementary Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2025.
Variations to forecast
The actual financial results for the forecast period covered are likely to vary from the information presented in these forecasts. Factors that may lead to a material difference between information in these forecast financial statements and the actual reported results include:
- changes due to initiatives approved by Cabinet
- technical adjustments to the budget, including transfers between financial years
- macroeconomic impacts on estimations, judgements and assumptions
- the timing of expenditure relating to significant programmes and projects.