Home > Updates > Inland Revenue’s increased audit activity and use of property data
Inland Revenue’s investigation and enforcement activity has been relatively quiet over the last decade. During this time the Inland Revenue was undergoing a massive digital transformation, which absorbed a significant amount of their internal resources. Additionally, the arrival of COVID-19 during this transformation project resulted in Inland Revenue halting most audit activity.
This position changed in May 2024 following the Government’s Budget announcement. Inland Revenue received an additional $29 million in funding for taxation compliance. This funding has been allocated to a mixture of debt recovery and investigations. Since then, there has been a noticeable increase in Inland Revenue’s investigative activity.
In a media release from Inland Revenue’s Segment Lead for Significant Enterprises, Tony Morris, in April 2025, some figures were provided that demonstrated this increased activity. From July 2024 to December 2024, Inland Revenue opened 3,600 audits – 50% more than during the same period the previous year. Inland Revenue uncovered $600 million in additional tax through audits (with half of this amount coming from fewer than 10 audits) and reviewed 30,000 filed returns that resulted in audits or voluntary disclosures, adding $859 million in tax revenue.
Inland Revenue has also contacted more than 200 business owners with multiple property holdings who collectively owe approximately $14 million in tax debts and has completed seven prosecutions for tax evasion. Furthermore, Inland Revenue has identified 800 individuals who may be attempting to avoid the 39% tax rate by retaining income within companies or trusts. It has also begun utilising payment service provider data to investigate businesses, including the monitoring of GST compliance.
In addition to the increased audit activity, Inland Revenue has intensified its focus on property sales over the past few months following the allocation of additional funding. In its May 2025 media release, the department reported uncovering more than $150 million in undeclared income tax and GST within the property sector during the first nine months of the current financial year – nearly the same as the total for the entire 2023–2024 financial year. Particular attention is being directed towards defaulting property developers. To date, Inland Revenue has identified approximately $73 million in discrepancies from this group, representing a 48% increase compared with the same period last year.
Taxpayers should be prepared for increased compliance activity, as evidenced by Inland Revenue’s expanded information requests and the greater level of detail sought during annual risk reviews. Many of these enquiries will inevitably progress to audits and disputes.
If this happens to you, it is vital to understand at an early stage where Inland Revenue might be heading and to think strategically about how to respond. Weighing up options to manage the process and minimise adverse outcomes will help inform your response. One of the most effective strategies to prevent disputes is to ensure that Inland Revenue agrees with the tax treatment adopted. A voluntary disclosure provides an opportunity for taxpayers to declare past errors or omissions, and in some cases may result in a full reduction of shortfall penalties.
When a dispute becomes unavoidable, it is critical to contact your tax advisor at an early stage. Managing the timeline and due dates for replying to Inland Revenue during the dispute process is important to ensure you can continue to challenge Inland Revenue’s position.
During the dispute process, it is also important to consider what documents are subject to legal privilege and ensure that privilege is maintained. For more advice or guidance on what to do if you receive an audit notification letter, please contact your tax advisor.
Nexia New Zealand is one of New Zealand’s leading full-service chartered accounting and business advisory consultancy firms, offering the full range of chartered accounting, business advisory, corporate advisory, tax, audit, insolvency, liquidation and receivership services.
Nexia New Zealand has four offices throughout New Zealand: Victoria Street in Christchurch, Albany on Auckland’s North Shore, Newmarket in the Auckland CBD and Hastings in Hawke’s Bay.
Reach out to one of our trusted Nexia Advisors. We have offices in Christchurch, Auckland and Hastings.
