IR Uncovers $150m Undeclared Tax

Inland Revenue (IR) has uncovered more than $150 million in undeclared income tax and GST from the property sector.

As part of its increased compliance work funded by extra money in last year’s budget, IR has been taking a closer look at the tax affairs of developers, people with rental properties, and those people covered by the Bright-line test.

The $153.5 million discrepancy for the first nine months of the current financial year is almost the same as the $156.8 million figure for the whole of the 2023-2024 financial year.

Defaulting Developers project

Inland Revenue focuses on defaulting property developers to make sure they meet their obligations for GST and Income Tax.

While some of the errors will be accidental, we’re also seeing a pattern of property developers claiming significant refunds as they incur costs up-front but then failing to file and pay once properties sell.

Where we expect a GST payment from a property sale and we don’t see the sale in the return, we contact the developer to make enquiries.

If there is no response or no return filed, we will take enforcement action quickly.

In the financial year to date we’ve found $72,937,921.00 in discrepancies from developers – a 48% increase on the same time last year.

Other GST Property issues

We’re seeing a growing number of issues involving companies or individuals making multiple land transactions where GST needs to be correctly accounted for.

Sometimes they are changing the intended use of the land or frequently transferring ownership between entities with or without GST registrations. These actions appear to be attempts to circumvent their GST obligations.

We see non-compliance or errors early, using our automated tools and analytics. Our work in this area so far, this financial year has found $59,959,470.00 in discrepancies – a 39% increase for the same time last financial year.

Bright-line

We started a campaign in March to help people understand their bright-line obligations. We’re telling people that if they’ve sold a property recently, they should check the property tax decision tool and work out if they need to pay tax.

So far this year IR has helped more than 550 customers with bright-line issues and processed $3.68m in voluntary disclosures.

The discrepancy found in the bright-line area is $14,152,162 – a 9% increase.

Help available online

We have redesigned the GST on property transactions tool, to help both buyers and sellers to determine their GST obligations - GST on property transactions, the Property tax decision tool - Buying and selling property.

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