Covisory Update – NZ Inland Revenue in 2023

With 2023 quarter of the way through what is going on with the Inland Revenue?

As many of you know dealing with the IRD often they are an unwanted presence in your dealings with your clients.  Your clients are not too grateful when letters or emails arrive from the IRD ‘asking questions’ or ‘seeking information’.  Over COVID the IRD had been largely invisible but 2023 has seen them back with their risk reviews, questions, and initiatives.  So, what is in store for us?

1. Construction

The IRD estimates that 50,000 construction companies or contractors either owe them money or are behind in at least one return.  The IRD has created a toolbox particularly for people in the construction industry to help them make sure that they are paying the right amount of tax and keeping their affairs up to date.  It is a welcome initiative and you have got to give them credit for that.

2. Risk Reviews

The Covisory team have seen the rise of risk reviews again post COVID so it is back to normal business by the looks of it.  The risk reviews to date have been innocuous and simple around interest deductibility on residential properties and some property sales.  But you can expect the IRD’s audit sections will be ramping up activity. 

3. Debt Collection

The one that has been surprising has been their debt collection area, we have been dealing with them for a few clients where they have arrears, and we are proactively trying to manage them with the IRD.  Given the amount of money the government needs by now we would have thought that the IRD would be chasing outstanding debts particularly when some of these are quite large.  Interestingly we have had great difficulty engaging with the IRD and it has taken some time to get the IRD to respond to some of these.

Over COVID the IRD had been soft to deal with and our feeling going forward is that they are going to reverse that, and the pendulum will go completely across to the other side.  We are expecting the IRD to be difficult to deal with post COVID and that they are not going to cut many deals around time payment arrangements.  As the crunch comes on the government the pressure will come on the Revenue and that falls to the debt collectors.  So, if you have got clients that owe the IRD money or are going to have problems making payments as is always the case get in touch with the Revenue early but no more so than currently because in another 6-12 months you may see quite a significant difference in the IRD’s attitudes in these areas.

Over the last couple of years, the IRD has struggled as it has cut staff that are client facing, ie doing audits, introduced a new computer system and had to deal with COVID.  With these now behind them a new normalised IRD is going to see a lot of those people returning to their core functions.  So, beware and be ready because the IRD is going to be knocking on your door again soon or at least those of your clients.

Prepared by Nigel Smith