This category is limited to activities to prevent returns and debt becoming overdue, and to collect unfiled returns and overdue payments, whether for the Crown, other agencies or external parties.
We seek to achieve the timely and efficient collection of revenue and debt owed. We believe the best approach for managing debt is helping customers avoid getting into debt in the first place. We do this by:
- understanding our customers, their circumstances and their experiences and dealings with us and other government agencies
- using analytical capabilities to anticipate what customers may need from us, to help them stay on track
- reaching customers who need our help earlier by tailoring our approach and messages to them
- ensuring that policy settings reflect a whole-of-government approach and support consistent customer experiences
- equipping our people to support customers in debt.
When customers do get into debt, we help them work through their options and come up with a plan that suits their specific circumstances. We are required under section 6A of the Tax Administration Act to collect the highest net revenue over time, considering the resources we have available, levels of voluntary compliance and compliance costs.
This year, we've continued to focus on supporting customers through the COVID-19 pandemic; administering COVID-19 support; setting up payment arrangements; and, where possible, applying our new powers to write off penalties and interest. Our tools and systems have provided automated reminders to customers.
Read more about how customers are using myIR to set up instalment arrangements themselves, and their adherence to instalment arrangements, on the following pages.
Most customers want to do the right thing. This is reflected in the high proportion of customers who file returns and make payments on time. Increasingly, customers are filing returns on time: the rate improved from 94.3% in 2020-21 to 95.7% in 2021-22. The rate at which customers made payments on time remains relatively steady at 89.4%, which was half a percentage point less than in 2020-21.
| Year | Target | Returns filed on time | Tax paid on time |
|---|---|---|---|
| 2018 | 85% | 85.4% | 87.9% |
| 2019 | 85% | 85.2% | 86.8% |
| 2020 | 85% | 93.2% | 85.9% |
| 2021 | 85% | 94.3% | 89.9% |
| 2022 | 85% | 95.7% | 89.4% |
This year, tax debt increased by 10.5% to $4.846 billion (excluding student loans, child support and the Small Business Cashflow Scheme). However, while tax debt has grown, so has tax revenue. The proportion of debt to revenue has stayed broadly the same as last year and the pre-pandemic year of 2018-19. Read more about the tax debt to revenue ratio.
| Tax and social policy type | 2018 | 2019 | 2020 | 2021 | 2022 | Change since 2021 |
|---|---|---|---|---|---|---|
| Income tax | $1,651.3 | $1,609.8 | $1,742.6 | $1,585.0 | $1,791.1 | 13.0% |
| GST | $814.9 | $1,180.6 | $1,550.0 | $1,523.0 | $1,824.5 | 19.8% |
| PAYE and KiwiSaver[1] | $417.3 | $517.1 | n/a | n/a | n/a | n/a |
| Employment activities[1] | n/a | n/a | $741.3 | $919.6 | $822.3 | -10.6% |
| Working for Families Tax Credits | $140.1 | $128.8 | $167.2 | $198.5 | $250.8 | 26.3% |
| Other tax | $79.8 | $85.0 | $45.8 | $157.7 | $157.3 | -0.2% |
| Total tax debt | $3,103.4 | $3,521.3 | $4,246.9 | $4,383.8 | $4,846.0 | 10.5% |
1 The consolidation of employer deductions to an 'employment activities' account changes how we group tax debt. We are unable to compare PAYE and KiwiSaver debt with 'employment activities' debt.
GST and income tax debt
The increase in tax debt was mainly due to increases in GST and income tax debt. These types of debt were $301.5 million and $206.1 million higher respectively than in 2020-21.
The COVID-19 pandemic has caused some income streams for businesses to stop or slow down. While some businesses have struggled to earn income and meet their fixed costs (such as rent and wages), they've been unable to pay their tax.
We've seen a significant jump in GST registrations over the last 2 years, with 33,000 more customers registered for GST in 2021-22 compared to 2019-20. COVID-19 affected employment, so the increase in GST registrations is likely due to salary and wage earners who lost their employment becoming self-employed. The increase may also be due to businesses that were previously operating outside the system registering for GST so they could access COVID-19 support payments.
Working for Families Tax Credit debt
Most Working for Families Tax Credit (WfFTC) customers receive payments in instalments during the year that are based on their estimated annual income. The COVID-19 pandemic has made some customers' income more variable and harder to estimate accurately. This means that some WfFTC customers ended up being overpaid.
WfFTC debt increased by $52.3 million from 2020-21. While the accuracy of WfFTC assessments has remained relatively steady over the last few years, as outlined on the 'People receive payments they are entitled to' page, we know it is very difficult for some WfFTC customers to repay their debt. This means WfFTC debt continues to grow, with 70% of WfFTC debt being over 12 months old as at 30 June 2022, compared to 68% the previous year.
People receive payments they are entitled to (2022)
Some customers simply cannot pay off their debt. When customers are experiencing hardship, in some circumstances we can write off their debt. This year, we wrote off WfFTC debt totalling $24.6 million.
We try to help customers avoid getting into debt by identifying who might be at risk of being overpaid, communicating with them during the year and adjusting their payments if necessary. We still completed all the early interventions we would normally do, and our system generated actions continued, but we did not follow up with WfFTC customers who were already in debt.
In 2022-23, we'll focus more on supporting customers to manage their debt. We'll look at customers with more than 1 year of debt and work with them to resolve it, if possible, or write it off. We'll continue playing an active part in the Government's Working for Families review, to understand how WfFTC can be improved to better meet the needs of families.
Employment activities debt
Employment activities debt (PAYE and KiwiSaver employer contributions debt) decreased by $97.2 million. This is an excellent result, especially considering the difficulties that businesses - particularly large employers - have faced during the COVID-19 pandemic. The decrease is also in part due to large enterprises making significant lump-sum payments for debt during the year.
It is really important that we receive employment income information on time, as it affects so many other things, such as Working for Families entitlements.
We've had mixed results with social policy debt this year. Child support debt fell, while student loan debt increased, particularly for overseas-based borrowers.
Child support debt
Child support debt fell by $178.0 million this year. This is mostly due to work we did before we moved child support to new systems and processes in October 2021. We wrote off $181 million, including penalties, to encourage paying parents to restart their payments and to reflect the revised penalty rates introduced in October 2021.
| Child support debt | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| Total debt value | $2.259 | $2.208 | $2.151 | $1.366 | $1.188 |
| Penalties only | $1.662 | $1.608 | $1.553 | $0.726 | $0.586 |
Note: The past due child support gross receivables in 'Note 5 - Receivables - child support' comprises penalty and Crown entitlement debt. It differs to the total debt reported above as it does not include non-custodial parent assessment debt payable to the receiving carer.
Note 5 - Receivables child support (2022)
Student loan debt
As at 30 June 2022, overdue student loan debt was $2.0 billion, which is 17.6% more than it was last year.
| Student loan debt | 2018 | 2019 | 2020 | 2021 | 2022 |
|---|---|---|---|---|---|
| New Zealand-based borrowers | $116.2 | $131.8 | $133.0 | $140.9 | $152.3 |
| Overseas-based borrowers | $1,205.2 | $1,349.1 | $1,446.1 | $1,579.6 | $1,870.3 |
| Total | $1,321.4 | $1,480.9 | $1,579.1 | $1,720.5 | $2,022.6 |
For New Zealand-based borrowers who earn salary and wages, repayments are automatically deducted from their employment income. Those who are self-employed pay directly with interim payments. This is reflected in their higher repayment rates: 94.7% of New Zealand-based borrowers made their required repayments in 2021-22, a similar level to 2020-21 where it was 95.3%.
However, only 24.5% of overseas-based borrowers made the repayments they were required to this year, a decrease from 27.2% in 2020-21. The longer a borrower is out of New Zealand, the less engaged they are with their student loan. Overseas-based borrowers account for 73% of customers with overdue amounts, and 92% of the amounts overdue. 84% of overseas-based borrower default is more than 2 years old, and 58% is more than 5 years old. There are options available to everyone including overseas-based borrowers who cannot meet their repayments, so we encourage them to contact us if they are having trouble making their repayments.
We have focused on providing support and encouraging customers to self-manage their debt rather than direct compliance interventions. As we move out of the COVID-19 pandemic restrictions and people start to travel, we will be engaging with travellers to ensure that they are aware of their obligations and how we can help them to keep their repayments on track. A range of activities is planned to target a more diverse range of overseas customer groups based on their situation and the length of time they have been away from New Zealand.
We introduced a new performance measure in 2021-22 - the 'percentage of student loan customers that meet their obligations'. Across both New Zealand-based and overseas-based borrowers, 84.1% were meeting their repayment obligations. We have set a target of 85% for 2022–23.
Detailed reporting on the Student Loan Scheme is available on the Education Counts website.
We write off tax debt in cases of serious hardship, bankruptcy or liquidation, or if the cost of collecting the debt is uneconomic. This year, we wrote off $512.6 million of debt using these provisions, compared with $695.0 million in 2020-21.
This year, we have maintained our focus on supporting customers through the COVID-19 pandemic. This support includes applying new legislative powers to write off penalties and interest, where possible. We remitted $176.1 million using these provisions in 2021-22.
| Write-offs | 2020-21 | 2021-22 |
|---|---|---|
| General write-offs | $695.0 | $512.6 |
| COVID write-offs | $117.7 | $176.1 |
| Total overdue repayments | $812.8 | $688.7 |
Read more about other actions we take, such as liquidations under the 'We started looking at businesses with bigger debts to see if they're still viable' content on the following page.
We helped customers to avoid getting into debt or manage their repayments
This year, we achieved 7 out of 9 measures for the ‘Management of debt and unfiled returns’ category in the ‘Services for customers’ appropriation. This was an improvement on 2020-21, when we achieved 6 out of 10 measures.
| 2020-21 actual | Performance measure | 2021-22 target | 2021-22 actual | 2022-23 target |
|---|---|---|---|---|
| 94.3% | Percentage of returns filed by customers on time | 85% | 95.7% (achieved) | 90% (refer to 'Changes to meeasures and targets') |
| $53.75 | Value of assessed revenue for every unfiled return dollar spent | $45 | $61.10 (achieved) | $45 |
| This measure demonstrates the cost-effectiveness of our work to recover assessed revenue from returns not filed by the due date. We use our analytical tools to identify unfiled returns that are likely to be of a higher value. The result is impacted by our reduced focus on some compliance activities in 2021-22, resulting in lower costs being applied to this measure. In 2021-22, we increased the target from $40 to $45. |
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| 89.9% | Percentage of tax payments made by customers on time | 85% | 89.4% (achieved) | 90% (refer to 'Changes to meeasures and targets') |
| $40.03 | Cash collected for every debt dollar spent | $40.00 | $43.43 (achieved) | $40.00 |
| 72.5% | Percentage of child support assessments paid on time | 70% | 70.2% (achieved) | 70% |
| New measure | Percentage of student loan customers that meet their obligations | Baseline year | 84.4% | 85% (refer to 'Changes to meeasures and targets') |
| 49.2% | Percentage of unfiled returns that are finalised within 6 months | 60% | 42.3% (not achieved) | 60% |
| Not achieved - This measure demonstrates the level of activity focused on helping customers with unfiled returns. To support customers through the COVID-19 pandemic, we focused less on compliance activities. We've now resumed compliance activities and continue to focus on finalising higher-value unfiled returns, rather than those that are less cost-effective to pursue. |
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| 51.7% | Percentage of collectable debt value over 2 years old | 40% or less | 40.5% (not achieved) | 40% or less |
| Not achieved - This measure looks at how much of our collectable debt is aging and therefore becoming harder to collect. When individual income tax assessments were introduced in 2019, more customers received an annual tax assessment and, consequently, the number of customers with debt rose. Our performance against this measure has been affected by large enterprises making significant lump-sum payments for debt under that was less than 2 years old. This has resulted in the percentage of collectable debt over 2 years old rising. From 2020-21, we removed student loan debt and Small Business Cashflow Scheme debt from this measure and changed the target from 50% or less to 40% or less. |
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| 49.7% | Percentage of new customer debt resolved within 6 months | 50% | 61.7% (achieved) | 50% |
| 79.8% | Percentage of New Zealand liable parent child support debt cases resolved within 12 months | 75% | 80.0% (achieved) | 75% |
Changes to measures and targets
All targets are unaudited.
| Actual 2021 ($000) | Actual 2022 ($000) | Unaudited revised budget 2022 ($000) | Unaudited budget 2022 ($000) | Unaudited forecast 2023 ($000) | |
|---|---|---|---|---|---|
| Revenue | |||||
| $89,804 | Revenue from the Crown | $92,117 | $92,117 | $82,362 | $94,587 |
| $349 | Other revenue | $327 | $1,272 | $1,272 | $1,272 |
| $90,153 | Total revenue | $92,444 | $93,389 | $83,634 | $95,859 |
| $90,093 | Total expenses | $89,863 | $93,389 | $83,634 | $95,859 |
| $60 | Net surplus or (deficit) | $2,581 | n/a | n/a | n/a |
In Budget 2018, we received additional funding to target assessed revenue for unfiled company returns and associated returns. 2021-22 was the final year of this initiative.
We decided to defer our campaign work and reprioritise compliance activities for supporting customers during the COVID-19 pandemic. This has influenced our results.
We assessed $19.1 million in returns in 2021-22 against the annual target of $65 million. Against our multi-year target of $240 million to 30 June 2022, we have assessed a total of $141.9 million.
| 2020-21 unaudited ROI actual | Additional funding | 2021-22 unaudited ROI actual |
|---|---|---|
| $4.63 | Unfiled company returns - Budget 2018 | $2.50 |