This category is limited to Inland Revenue undertaking investigation, audit and litigation activities.
What we do
We protect the integrity of the tax system starting with early interventions, such as education and integrity reviews. We use an intelligence and risk-based analytical approach to direct our activities. Where we identify people have not taken reasonable care or have intentionally done the wrong thing, we will apply sanctions such as shortfall penalties or, in the case of serious wrongdoing, we will prosecute.
Our ‘right from the start’ approach helps customers get it right, as we step in early when they’re making errors, and act if they choose to do the wrong thing. This helps ensure that everyone pays what they need to and receives the right entitlements.
Our systems, processes and capabilities allow us to see more and identify earlier where things do not look right so we can act promptly. We can detect potential incorrect or fraudulent returns before assessments are confirmed, making it harder for customers to get things wrong either accidentally or deliberately.
How we performed
This year we have been progressively rebalancing our compliance work as you can read here.
We are seeing the outcomes from our increased focus on compliance activities, with more than 5,100 audits opened in 2024 compared to 4,200 in 2023. In 2024 we closed 4,300 audits, assessing $460 million in additional tax, an increase from 3,600 audits and $397 million in additional tax in 2023. Our audits encompass a broad range of targeted risks including the following:
- A focus on employer obligations where employers have made various deductions from their employees’ salary or wages but have not paid these amounts to IR
- Non-compliance in areas such as diverted personal services, income splitting, trust distributions, financial statement reviews, and employee share schemes
- Property compliance including bright-line, speculators, and defaulting developers
- The hidden economy with an emphasis on sectors with a high prevalence of cash-based transactions such as hospitality and construction. Recent initiatives such as the Tax Toolbox for Tradies and liquor retailer campaigns have made our compliance work more visible.
- A series of operations focusing on businesses where there is a strong probability that electronic sales suppression software tools were being used.
- IR is starting to receive electronic sales transaction data from a group of payment service providers to help validate the accuracy of GST reported sales and the extent electronic and/or cash transactions may be under-reported to assist in identifying businesses operating partially or wholly outside of the system.
- Organised crime activities that often include tax evasion, fraud, identity theft and money laundering. We participate in responding to organised crime across government and support lead agencies by sharing information, intelligence and disruption of organised crime through targeted investigations.
| Compliance activity | 2024 cost (million) |
|---|---|
| Audit | $460.3 |
| COVID-19 product reviews | $57 |
| Voluntary disclosures | $322 |
| Integrity reviews | $135 |
| Total | $975 |
Performance measure results
This year, we achieved 1 out of 3 targets, the same as 2022–23.
| Performance measure | 2022-23 actual | 2023–24 target | 2023–24 actual | 2024–25 target |
|---|---|---|---|---|
| Percentage of customers whose compliance behaviour improves after receiving an audit intervention1 | 74.5% | 85% | 69.3% (not achieved) | 85% |
| Not achieved—The measure looks at the impact audit activity has on customer compliance behaviour across a range of compliance aspects. A number of these aspects had lower results in 2024 including customer addressing previous discrepancy area, customers paying or setting up a plan to pay the discrepancy amount and return compliance. Decreases in return and payment compliance may reflect the ongoing impact of challenging economic conditions for customers and a rebalancing from the higher compliance levels in 2023 as customers sought to meet requirements to access COVID-19 payment support. |
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| The identified value of compliance activities over associated costs | $9.042 | $10.00 | $9.50 (not achieved) | $10.00 |
| Not achieved—This measure looks at the cost effectiveness of our compliance activities. See here for more information on the different components that are included in this measure. We have progressively returned to a more balanced work programme and undertaken more proactive compliance activities, and expect results to improve over time. Some compliance activities like audit take some time to complete and results from the scaling up of activity in 2023–24 will not show up immediately. | ||||
| Percentage of litigation judgments found in favour of the Commissioner | 79.3% |
75% | 88.2% (achieved) | 75% |
| There are low volumes of litigation judgments, and we achieved the measure with 30 successful judgments during 2023–24. We expect an increase in compliance work to have a subsequent impact on the volume of cases in future years. We closely monitor our active cases for litigation risks. | ||||
1Actual performance is measured using a sample of audit cases.
2The result reported in the 2023 Annual Report of $8.92 did not correctly reflect a methodology improvement made during that year, the impact of this changes the result to $9.04 as at 30 June 2023.
All targets are unaudited.
What it cost
| Actual 2023 ($000) | Actual 2024 ($000) | Unaudited revised budget 2023 ($000) | Unaudited budget 2023 ($000) | Unaudited forecast 2024 ($000) | |
|---|---|---|---|---|---|
| Revenue | |||||
| Revenue from the Crown | $112,431 | $108,553 | $108,553 | $133,634 | $165,243 |
| Other revenue | $453 | $199 | $149 | $149 | $149 |
| Total revenue | $112,884 | $108,752 | $108,702 | $133,783 | $165,390 |
| Total expenses | $107,634 | $102,665 | $108,702 | $133,783 | $165,390 |
| Net surplus or (deficit) | $5,250 | $6,087 | - | - | - |