Te Tari Taake Inland Revenue is a government department as defined by section 2 of the Public Finance Act 1989 and is domiciled and operates in New Zealand.
The relevant legislation governing Inland Revenue's operations includes the Public Finance Act 1989, and the Public Service Act 2020. Inland Revenue is a wholly owned entity of the Crown whose primary objective is to provide services to the public rather than to make a financial return. Accordingly, Inland Revenue has designated itself as a Public Benefit Entity (PBE) for financial reporting purposes.
These non-departmental financial schedules present financial information on public funds managed by Inland Revenue on behalf of the Crown.
These non-departmental balances are consolidated into the Financial Statements of the Government of New Zealand for the Year Ended 30 June 2023. For a full understanding of the Crown's financial position and the results of its operations and cash flows for the year, refer to the consolidated Financial Statements of the Government of New Zealand for the Year Ended 30 June 2023.
The reporting period for these financial schedules is for the year ended 30 June 2023. The unaudited forecast financial schedules are for the year ending 30 June 2024.
The Commissioner of Inland Revenue, as Chief Executive, authorised these financial schedules on 29 September 2023.
The financial schedules have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand generally accepted accounting practice (NZ GAAP) and Te Tai Ōhanga the Treasury instructions.
Inland Revenue has applied the Tier 1 Public Benefit Entity International Public Sector Accounting Standards (PBE IPSAS) in preparing the 30 June 2023 financial schedules.
The financial schedules have been prepared on a going concern basis, and the accounting policies set out below, and in the notes to the financial schedules have been applied consistently to all periods presented in these financial schedules.
These financial schedules have been prepared on a historical cost basis unless otherwise stated. The accrual basis of accounting has been used.
We have adopted PBE IPSAS 41 Financial Instruments this year. This standard supersedes the standard Public Benefit Entity-International Financial Reporting Standards 9 Financial Instruments (PBE IFRS 9) with similar requirements. As a consequence there is no significant change in accounting policy.
In preparing these financial schedules, critical estimates, judgements and assumptions have been made concerning the future.
These estimates, judgements and their associated assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on experience, including expectations of future events that are believed to be reasonable under the circumstances, and other factors. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods if the revision affects both current and future periods. Note 2 outlines minor updates which were made to the estimations used in the measurement of income tax during the period.
The estimates and assumptions that have a significant risk of causing a material adjustment to revenue, and the carrying amounts of receivables and payables within the next financial year, are referred to in the notes. The most significant areas of uncertainties are;
- Estimation of income tax revenue for other persons and companies–Note 2 outlines the significant uncertainties, assumptions and sensitivities in estimating income tax revenue for companies and other persons for the year ended 30 June 2023. The methodology used to estimate income tax revenue for companies and other persons is based on macroeconomic forecasts. There is implicit uncertainty in the assumptions used in the macroeconomic forecasts.
- Impairment of tax receivables–Note 3 outlines the significant uncertainties, assumptions and sensitivities in estimating the value of tax receivables and the associated impairment as at 30 June 2023. 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 loan–Note 6 outlines the significant uncertainties, assumptions, and sensitivities in estimating the fair value of the student loan portfolio as at 30 June 2023. 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.
There have been no material changes in accounting policies since the date of the last audited financial schedules.
All accounting policies have been applied consistently throughout the year.
The budget, revised budget and forecast figures have been prepared in accordance with NZ GAAP using accounting policies that are consistent with those adopted in preparing these financial schedules.
The budget and forecast figures are not subject to audit.
The budget figures for 2022–23 are those included in The Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2023.
The revised budget figures for 2022–23 (refer to the Statement of Non-Departmental Budgeted and Actual Expenditure Incurred Against Appropriations) are those included in The Supplementary Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2023.
The forecast figures for 2023–24 are those included in The Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2024. Any significant changes to the forecast included in the Pre-election Economic and Fiscal Update 2023 are noted in the footnotes to the Statement of Non-Departmental Budgeted and Actual Expenditure Incurred Against Appropriations.
The forecast financial schedules have been prepared in accordance with the requirements of the Public Finance Act 1989 to communicate forecast financial information for accountability purposes. They are compliant with PBE Financial Reporting Standard 42 Prospective Financial Statements.
The forecasts have been compiled on the basis of existing government policies and ministerial expectations at the time the schedules were finalised. The Commissioner, in his role as Chief Executive of Inland Revenue, is responsible for the forecast financial schedules including the appropriateness of the assumptions underlying them and all other required disclosures. The Commissioner approved the forecast financial schedules on 18 April 2023. Although Inland Revenue regularly updates forecasts, it will not publish updated forecast schedules for the year ending 30 June 2024.
The main assumptions are:
- Tax revenue: tax policy changes enacted and announced by the Government will take place as planned and will affect tax revenue and receipts as calculated and agreed between Inland Revenue and Te Tai Ōhanga, the Treasury.
- Student loans: the fair value of student loans is based on a valuation model adapted to reflect current student loans policy. As such, the fair value over the forecast period is sensitive to changes in a number of underlying assumptions, including future income levels, repayment behaviour and macroeconomic factors such as wage inflation and discount rates. Any change in these assumptions would affect the fiscal forecast.
- Small Business Cashflow Scheme: the fair value of the scheme over the forecast period is sensitive to changes in borrower repayments and defaults, which are based on volatile factors that are subject to change.
- Estimated year-end information for 2022–23 is used as the opening position for the 2023–24 forecasts.
For other key fiscal forecast assumptions, refer to the Budget Economic and Fiscal Update 2023 (https://www.treasury.govt.nz/sites/default/files/2023-05/befu23.pdf)1.
Any changes to budgets during 2023–24 will be incorporated into The Supplementary Estimates of Appropriations for the Government of New Zealand for the Year Ending 30 June 2024.
1 This link leads to information not covered by the audit opinion here.
The actual financial results for the forecast period covered are likely to vary from the information presented in these forecasts. Factors that may lead to a material difference between information in these forecast financial schedules and the actual reported results include:
- changes due to initiatives or legislation approved by Cabinet
- macroeconomic changes impacting revenue, expenditure and debt levels
- the timing and number of customers’ filing of returns and related payments
- the timing and number of customer refunds, disbursements and credit claims
- the outcome of disputes, including litigations.