To the readers of Inland Revenue’s annual report for the year ended 30 June 2025
The Auditor-General is the auditor of Inland Revenue (the Department). The Auditor-General has appointed me, John Whittal, using the staff and resources of Audit New Zealand, to carry out, on his behalf, the audit of:
- The financial statements of the Department, that comprise the statement of financial position, statement of commitments, statement of contingent liabilities and contingent assets as at 30 June 2025, the statement of comprehensive revenue and expense, statement of changes in equity, and statement of cash flows for the year ended on that date, and the notes to the financial statements that include accounting policies and other explanatory information on pages 95 to 126[1].
- The end-of-year performance information for appropriations of the Department for the year ended 30 June 2025 on pages 38 to 75[2].
- The statements of expenses and capital expenditure of the Department for the year ended 30 June 2025 on pages 88 to 92[3].
- The schedules of non-departmental activities which are managed by the Department on behalf of the Crown on pages 130 to 161[4] that comprise:
- the schedules of assets, liabilities, commitments, and contingent assets and contingent liabilities as at 30 June 2025;
- the schedules of revenue, expenses, gains and losses, and capital receipts for the year ended 30 June 2025; and
- the notes to the schedules that include accounting policies and other explanatory information.
- The statement of trust monies and the schedule of non-departmental trust monies for the year ended 30 June 2025 on pages 103 and 136[5].
Opinion
In our opinion:
- The annual financial statements of the Department:
- fairly present, in all material respects:
- its financial position as at 30 June 2025; and
- its financial performance and cash flows for the year ended on that date; and
- comply with generally accepted accounting practice in New Zealand in accordance with Public Benefit Entity Reporting Standards.
- fairly present, in all material respects:
- The end-of-year performance information for appropriations:
- provides an appropriate and meaningful basis to enable readers to assess what has been achieved with each appropriation; determined in accordance with generally accepted accounting practice in New Zealand; and
- fairly presents, in all material respects:
- what has been achieved with each appropriation; and
- the actual expenses or capital expenditure incurred in relation to each appropriation as compared with the expenses or capital expenditure that were appropriated or forecast to be incurred; and
- complies with generally accepted accounting practice in New Zealand.
- The statements of expenses and capital expenditure have been prepared, in all material respects, in accordance with the requirements of section 45A of the Public Finance Act 1989.
- The schedules of non-departmental activities which are managed by the Department on behalf of the Crown have been prepared, in all material respects, in accordance with the Treasury Instructions. The schedules comprise:
- the assets, liabilities, commitments, and contingent assets and contingent liabilities as at 30 June 2025; and
- revenue, expenses, gains and losses, and capital receipts for the year ended 30 June 2025.
- The statement of trust monies and the schedule of non-departmental trust monies for the year ended 30 June 2025 have been prepared, in all material respects, in accordance with the Treasury Instructions.
Our audit was completed on 30 September 2025. This is the date at which our opinion is expressed.
Emphasis of matters – Significant uncertainties
Without modifying our opinion, we draw attention to the following matters in the non-departmental statements and schedules:
Estimation of income tax revenue for companies and other persons
Note 2 on pages 141 to 143[6] outlines the significant uncertainties, assumptions, and sensitivities in estimating income tax revenue for companies and other persons for the year ended 30 June 2025. The methodology used to estimate income tax revenue for companies and other persons is based on macroeconomic forecasts about economic performance. There is uncertainty in the assumptions used in the macroeconomic forecasts and the relationship between those forecasts and tax revenue.
Impairment of tax receivables
Note 3 on pages 144 to 146[7] outlines the significant uncertainties, assumptions, and sensitivities in estimating the value of tax receivables and associated impairment as at 30 June 2025. The impairment of tax receivables is calculated based on expected future repayments. The future repayments are uncertain because of the uncertainty associated with the estimation of the repayment behaviour of debtors.
Student loans
Note 6 on pages 153 to 158[8] outlines the significant uncertainties, assumptions, and sensitivities in estimating the fair value of the student loan portfolio as at 30 June 2025. The fair value is based on expected future income levels and debt repayments. The expected future income levels and debt repayments are uncertain because they are dependent on macroeconomic factors and the behaviour of borrowers.
Basis for our opinion
We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the Professional and Ethical Standards, the International Standards on Auditing (New Zealand), and New Zealand Auditing Standard 1 (Revised): The Audit of Service Performance Information issued by the New Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Responsibilities of the auditor section of our report.
We have fulfilled our responsibilities in accordance with the Auditor-General’s Auditing Standards.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of the Chief Executive for the information to be audited
The Chief Executive is responsible on behalf of the Department for preparing:
- Annual financial statements that fairly present the Department’s financial position, financial performance, and its cash flows, and that comply with generally accepted accounting practice in New Zealand.
- End-of-year performance information for appropriations that:
- provides an appropriate and meaningful basis to enable readers to assess what has been achieved with each appropriation; determined in accordance with generally accepted accounting practice in New Zealand;
- fairly presents what has been achieved with each appropriation;
- fairly presents the actual expenses or capital expenditure incurred in relation to each appropriation as compared with the expenses or capital expenditure that were appropriated or forecast to be incurred; and
- complies with generally accepted accounting practice in New Zealand.
- Statements of expenses and capital expenditure of the Department, that are prepared in accordance with section 45A of the Public Finance Act 1989.
- Schedules of non-departmental activities, prepared in accordance with the Treasury Instructions, of the activities managed by the Department on behalf of the Crown.
- Statement of trust monies in accordance with the Treasury Instructions.
The Chief Executive is responsible for such internal control as is determined is necessary to enable the preparation of the information to be audited that is free from material misstatement, whether due to fraud or error.
In preparing the information to be audited, the Chief Executive is responsible on behalf of the Department for assessing the Department’s ability to continue as a going concern.
The Chief Executive’s responsibilities arise from the Public Finance Act 1989.
Responsibilities of the auditor for the information to be audited
Our objectives are to obtain reasonable assurance about whether the information we audited, as a whole, is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit carried out in accordance with the Auditor-General’s Auditing Standards will always detect a material misstatement when it exists. Misstatements are differences or omissions of amounts or disclosures, and can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of readers, taken on the basis of the information we audited.
For the budget information reported in the information we audited, our procedures were limited to checking that the information agreed to the Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2025. For the forecast financial information for the year ending 30 June 2026, our procedures were limited to checking to the best estimate financial forecast information based on the Budget Economic Fiscal Update for the year ending 30 June 2026.
We did not evaluate the security and controls over the electronic publication of the information we audited.
As part of an audit in accordance with the Auditor-General’s Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. Also:
- We identify and assess the risks of material misstatement of the information we audited, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control.
- We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Chief Executive.
- We evaluate whether the end-of-year performance information for appropriations:
- provides an appropriate and meaningful basis to enable readers to assess what has been achieved with each appropriation. We make our evaluation by reference to generally accepted accounting practice in New Zealand; and
- fairly presents what has been achieved with each appropriation.
- We evaluate whether the statements of expenses and capital expenditure, schedules of non-departmental activities, and statement of trust monies have been prepared in accordance with legislative requirements.
- We conclude on the appropriateness of the use of the going concern basis of accounting by the Chief Executive.
- We evaluate the overall presentation, structure and content of the information we audited, including the disclosures, and whether the information we audited represents the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the Chief Executive regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Our responsibilities arise from the Public Audit Act 2001.
Other information
The Chief Executive is responsible for the other information. The other information comprises all of the information included in the annual report other than the information we audited and our auditor’s report thereon.
Our opinion on the information we audited does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon.
Our responsibility is to read the other information. In doing so, we consider whether the other information is materially inconsistent with the information we audited or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on our work, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Independence
We are independent of the Department in accordance with the independence requirements of the Auditor-General’s Auditing Standards, which incorporate the independence requirements of Professional and Ethical Standard 1: International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board.
For the year ended 30 June 2025 and subsequently, an external member of the Risk and Assurance Committee of the Department is a member of the Auditor-General’s Audit and Risk Committee. The Auditor-General’s Audit and Risk Committee is regulated by a Charter that specifies that it should not assume any management functions. There are appropriate safeguards to reduce any threat to auditor independence, as a member of the Auditor-General’s Audit and Risk Committee (when acting in this capacity) has no involvement in, or influence over, the audit of the Department.
Other than the audit, and the relationship with the Auditor-General’s Audit and Risk Committee, we have no relationship with, or interests in, the Department.
John Whittal
Audit New Zealand
On behalf of the Auditor-General
Wellington, New Zealand
[1]Pages 95 to 126 refers to the section:
Departmental financial statements
[2]Pages 38 to 75 refers to the section:
Year-end performance for Vote Revenue appropriations
[3]Pages 38 to 75 refers to the section:
[4]Pages 38 to 75 refers to the section:
Non-departmental financial schedules
[5]Pages 103 and 136 refer to the following sections:
Schedule of Non-departmental Trust Monies
[6]Refers to Note 2 in the Non-departmental Financial Schedules:
[7]Refers to Note 3 in the Non-departmental Financial Schedules:
[8]Refers to Note 6 in the Non-departmental Financial Schedules: