IR has increased targeted compliance activities to reduce the revenue loss that comes from deliberate non-compliance with tax obligations. We’ve worked to make it hard and costly for the few people who choose to do the wrong thing.
Visible compliance is important to the integrity of the whole tax system. IR has done more enforcement this year by:
- applying the full range of enforcement interventions to high-risk sectors
- addressing the greatest areas of risks to compliance and the integrity of the tax system
- completing 1,800 more audits than in 2023–24
- making new uses of data to target our efforts.
Between audits, customers making voluntary disclosures and automated system interventions that prevent fraud and other wrongdoing, we assessed discrepancies worth $1.45 billion.
As the following page notes, the Government invested additional funding in Budget 2024 on top of our baseline spend for compliance activities.
Implementing Budget 2024 initiatives
The return on investment (ROI) from compliance interventions was $11.81 for every dollar spent, compared to $9.50 in 2024 (our target is $10):
- 2025 - $1.45 billion*, $11.81 ROI
- 2024 - $975 million, $9.50 ROI.
- See the following page for more information about this.
Targeting high-risk areas
New Zealand’s tax system faces both longstanding and emerging risks in a number of areas. We’ve applied different strategies to different sectors and groups of customers based on the risks they pose, and we worked to minimise their impacts on revenue.
People operating outside the tax system
IR’s hidden economy programme targets people and businesses operating outside the tax system.
It can be difficult to identify customers and the amount of tax that has gone unpaid as a result.
We continually investigate, process anonymous information, analyse data, send targeted communications and take action against customers who don’t file accurate returns, don’t file at all or who under-declare and suppress income sources.
We work across a range of sectors where undeclared tax has been a longstanding issue such as horticulture and construction. Personal services and crypto-assets are newer focus areas.
This year, our series of ‘Getting it right’ campaigns continued. It uses advertising, media and targeted unannounced visits to lift compliance across high-risk sectors.
For example, we contacted vape store operators this year, made unannounced consent visits and provided targeted guidance on managing filing and payment obligations.
Liquor and vape store campaigns resulted in 250,000 sessions on our website, $3.4 million in debt going under repayment plans within 2 months of a visit and 39 audit referrals.
We’ve also trialled using customer behavioural insights more in our wider community compliance work. Community teams are using insights to help businesses meet employment obligations, improve record keeping and income reporting and pay overdue debt.
One business owner in the personal services sector that we visited commented, “It was good for us to hear that we are on the right track and your suggestions were very helpful. So thanks for bringing a positive and educational approach….”
Property non-compliance
This year, IR uncovered more than $228.5 million in undeclared income tax and GST from the property sector, 44% more than 2023–24. We’ve focused on areas where there is the highest risk of revenue loss because of customer errors or deliberate wrongdoing.
For example, non-compliance by property developers includes them claiming GST refunds at the start of projects as they incur costs but then failing to file and pay GST once properties sell. We have targeted 5,230 such cases since July 2023, closed 584 audits and assessed $80.7 million in discrepancies.
We’ve also worked to improve the compliance of residential rental investors with unreported rental income and customers whose property sales incur bright-line rule obligations.
Year-on-year we have developed and enhanced property tools that:
- make it easier for customers to work out a potential obligation online
- enable the sending of automatic notifications when our systems see a transaction with potential unpaid tax
- expand the pool of potential customers who might owe tax. You can read about the role data matching is playing in our section on proactive, data-driven risk management in property compliance.
Revenue is available to fund government programmes and services
Failure to file or pay
IR is responding to a specific group of employers who fail to file returns and pay PAYE. Where appropriate, we’ve taken civil and criminal interventions:
- investigation and prosecution
- liquidation and bankruptcy
- disallowing PAYE tax credits claimed by shareholders when their company did not pay the PAYE (this creates income tax debt for the shareholder)
- facilitating prohibition of directors where serious offences have occurred or automatic prohibitions following a court conviction.
We’ve also continued to monitor and take action on phoenix companies. This includes court proceedings for directors who are personally liable for the debts of their phoenix companies. (A phoenix company may exist when a director forms a new company with a similar name after liquidation of their previous company).
Compliance activities this year
- 17,940 field visits.
- 7,641 audits opened, 49% higher than last year.
- 6,147 audits closed, 42% higher than 2024.
- 28,530 voluntary disclosures by customers, 1% higher than last year.
- 17 arrest warrants issued, 42% higher than last year.
- 80 warrants to access premises, 63% higher than last year.*
- 50 prosecutions initiated, 32% higher than last year.
- 30 prosecutions completed, 1 less than last year.
- 88,367 S157 deductions for overdue debt were issued, 19% higher than last year.
- 77,420 active deductions for child support, 5% lower than last year.
*A customer may have multiple warrants for multiple premises.
Taxing crypto-assets
Crypto-assets are treated as personal property for our tax rules. They exist on the internet and can be transacted anywhere in the world.
The tax risks posed by crypto-assets relate to customers not returning the income that arises from disposing of them, as well as untaxed income being diverted into crypto-assets.
We’re growing our capabilities, and aligning processes and systems, to operate in an economy where crypto-assets play an increasingly significant role.
Analysis of data from New Zealand crypto exchanges matched to our customer information found approximately 188,000 New Zealand customers. They have undertaken transactions worth a total value of $7.2 billion.
We pinpointed the top 1.5% of traders—those responsible for 79% of that total—and contacted them directly to address why their crypto income hadn’t been included in their tax returns.
Overall, our activities in this area identified $9.8 million in tax owed. $7.3 million of this amount came from voluntary disclosures by customers.
As at 30 June 2025, more than 150 customers were under review, with total tax at risk in the tens of millions.
Recognising that a number of crypto-users are still unaware of their tax obligations, we’re planning a wider campaign for smaller traders.
As noted in our section on Implementing Government priorities, we’ll begin exchanging information with overseas tax authorities on crypto-asset income soon and use this data to widen the scope of our work.
Progressing policy initiatives
Preventing sales suppression tools from getting established in New Zealand
The use of digital technologies to facilitate tax evasion remains a significant concern. This year marked a milestone with the first successful prosecution in New Zealand for the possession of an electronic sales suppression tool.
Our compliance efforts in this area continue to evolve, with a strong and sustained focus on combating digitally enabled tax evasion. We are actively collaborating with our international tax treaty partners to address this global issue.
Organised crime
As outlined in our section on making a broader contribution, the Minister of Revenue has requested that we strengthen our efforts to support the disruption of organised crime.
Alongside our work to improve information-sharing with other agencies such as New Zealand Police, our enforcement activities this year identified the following:
- $33.5 million in undeclared tax from 93 audits
- 1,183 customers made payments towards $4.2 million in debt across tax and social policy products.
Criminal charges were laid this year against 6 entities for multiple counts of tax evasion.
Increased audits
A 42% increase in completed audits this year is largely behind the overall increase in revenue we assessed from enforcement. Audits assessed additional tax of $1 billion.
Audit activity continues to grow with approximately 4,800 cases on hand at 30 June 2025, 27% more than June 2024.
Our priorities include auditing organised crime, hidden economy and property related activities. However, we’re continuing to scrutinise our whole customer base and how different customers are interpreting and applying legislation to their tax affairs.
The flow-on into prosecutions
One flow-on effect from our increased compliance activities is a steady increase in prosecutions initiated for tax evasion, knowledge and Crimes Act 1961 offences.
Building momentum in this area, and completing each prosecution, takes time. We completed 1 less prosecution than in 2023–24. However, we initiated more prosecutions.
- There were 50 active cases before the courts at 30 June 2025.
- We issued 17 warrants to arrest this year.
Maintaining filing compliance
More than 12 million tax returns were filed on time in 2024–25 (96.4% of them). We continue our efforts to support customers to file on time and maximise revenue assessed from finalising late-filed returns through the Budget 2024 investment in compliance activities.
While we delivered $1.4 billion in assessed revenue from late-filed returns, we did not meet the $1.7 billion target, which was based on a particularly high result in 2023–24.
The return on investment from our unfiled return activity continues to be over $50 for every dollar spent, against a target of $45.
| Year | Revenue assessed |
|---|---|
| 2025 | $51.87 |
| 2024 | $71.63 |
| 2023 | $60.12 |
| 2022 | $61.10 |
| 2021 | $53.75 |
Using data to sharpen enforcement
IR has continued to leverage data and analytics to better target enforcement.
This year, we launched our first campaign using data from payment services providers. Monthly summaries from the largest providers helped us identify businesses underreporting sales in GST returns, resulting in $12.6 million in additional assessed tax.
We’ve also made it clear that switching to cash won’t help people avoid our scrutiny. We continue to uncover businesses spending or banking undeclared cash. In horticulture, we identified $46 million in undeclared tax this year.
Property datasets are enhancing our compliance efforts, giving us a clearer view of ownership across individuals, trusts, companies and partnerships. It’s also helping us recover debt in other areas—customers are paying faster when they know we’re aware of their holdings.
We’re now starting to do this with customers who have crypto-assets sufficient to pay debt.
Enforcement next year
The Government’s investment in enforcement activities will continue next year. We'll focus on collecting more debt and assessing additional revenue, while promoting tax compliance and strengthening public trust:
- Trust in IR rose from 61% to 63% this year.
- The percentage of customers who agreed that, if someone tries to avoid paying the right amount, they will get in trouble with us increased from 80% to 83% this year.
The impact of tip-offs on compliance
A tried-and-true source that helps us ensure compliance and a sense of fairness within the tax system is anonymous information reported by the public.
We receive around 7,000 reports a year from people passing on information, commonly about cash. This includes businesses not returning cash sales or using it to pay staff and suppliers.
Tip-offs consistently highlight the frustration in communities with businesses and people who are not doing the right thing. We appreciate the courage it takes to submit a report.
Every tip-off is read and categorised to identify patterns and trends, system-level vulnerabilities and specific individuals or entities. One analysis helped us identify 300 businesses for our community teams to visit in December 2024 and January 2025.
An unannounced visit can be an effective alternative to a formal audit. These visits allow us to validate information, begin constructive conversations with customers about their obligations and positively influence behaviours. They can also prompt voluntary disclosures from customers who realise they owe tax.
IR acting on tip-offs helps reassures those who are paying their fair share that we support them and fairness for all.