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Annual and corporate reports

To the readers of Inland Revenue’s annual report for the year ended 30 June 2023

The Auditor-General is the auditor of Inland Revenue Department (Inland Revenue). The Auditor-General has appointed me, Kelly Rushton, using the staff and resources of Audit New Zealand, to carry out, on his behalf, the audit of:

  • the financial statements of the Department on pages 123 to 1521, that comprise the statement of financial position, statement of commitments, statement of contingent liabilities and contingent assets as at 30 June 2023, the statement of comprehensive revenue and expense, statement of changes in taxpayers’ funds, and statement of cash flows for the year ended on that date and the notes to the financial statements that include accounting policies and other explanatory information;
  • the performance information for the appropriations administered by the Department for the year ended 30 June 2023 on pages 67 to 83 and 85 to 1072;
  • the statements of expenses and capital expenditure of the Department for the year ended 30 June 2023 on pages 117 to 1203; and
  • the schedules of non-departmental activities which are managed by the Department on behalf of the Crown on pages 156 to 1844 that comprise:
    • the schedules of assets; liabilities; commitments; and contingent assets and liabilities as at 30 June 2023;
    • the schedules of expenditure; revenue; gains and losses; and movements between other Government departments for the year ended 30 June 2023;
    • the schedule of trust money for the year ended 30 June 2023; and
    • the notes to the schedules that include accounting policies and other explanatory information.

1 Pages 123 to 152 refers to the ‘Financial Statements - Departmental’ section

2 Pages 67 to 83 and 85 to 107 refers to the section on ‘Our Performance’.

3 Pages 117 to 120 refers to the ‘Appropriation Statements’ in the section on ‘Our Performance’.

4 Pages 156 to 184 refers to the ‘Financial Schedules – Non-Departmental’ section.

Opinion

In our opinion:

  • the financial statements of the Department:
    • present fairly, in all material respects:
      • its financial position as at 30 June 2023; and
      • its financial performance and cash flows for the year ended on that date; and
    • comply with generally accepted accounting practice in New Zealand in accordance with Public Benefit Entity Reporting Standards; and
  • the performance information for the appropriations administered by the Department for the year ended 30 June 2023:
    • presents fairly, in all material respects:
      • what has been achieved with the appropriation; and
      • the actual expenses or capital expenditure incurred as compared with the expenses or capital expenditure that were appropriated or forecast to be incurred; and
    • complies with generally accepted accounting practice in New Zealand.
  • the statements of expenses and capital expenditure of the Department are presented, in all material respects, in accordance with the requirements of section 45A of the Public Finance Act 1989;
  • the schedules of non-departmental activities which are managed by the Department on behalf of the Crown present fairly, in all material respects, in accordance with the Treasury Instructions:
    • the assets; liabilities; commitments; and contingent liabilities and assets as at 30 June 2023; and
    • expenses; revenue; gains and losses; and movements between other Government departments for the year ended 30 June 2023; and
    • the schedule of trust monies for the year ended 30 June 2023.

Our audit was completed on 28 September 2023. This is the date at which our opinion is expressed.

The basis for our opinion is explained below, and we draw attention to the significant uncertainties with some transactions and balances that are included in the schedules of non-departmental activities. In addition, we outline the responsibilities of the Commissioner and Chief Executive (the Commissioner) and our responsibilities relating to the information to be audited, we comment on other information, and we explain our independence.

Emphasis of matter – Significant uncertainties 

Without modifying our opinion, we draw attention to the following matters in the non-departmental statements and schedules. 

Estimation of income tax revenue for companies and other persons 

Note 2 on pages 168 to 1705 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 about economic performance. There is uncertainty in the assumptions used in the macroeconomic forecasts and the relationship between those forecasts and tax revenue. 

Impairment of tax receivables 

Note 3 on pages 171 to 1736 outlines the significant uncertainties, assumptions, and sensitivities in estimating the value of tax receivables and 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 loans 

Note 6 on pages 178 to 1827 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. 

5 Pages 168 to 170 refers to Note 2 in the ‘Financial Schedules – Non-Departmental’ section.

6 Pages 171 to 173 refers to Note 3 in the ‘Financial Schedules – Non-Departmental’ section.

7 Pages 178 to 182 refers to Note 6 in the ‘Financial Schedules – Non-Departmental’ section.

Basis for our opinion

We carried out our audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the Professional and Ethical Standards and the International Standards on Auditing (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board. Our responsibilities under those standards are further described in the Responsibilities of the auditor section of our report. 

We have fulfilled our responsibilities in accordance with the Auditor-General’s Auditing Standards. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

Responsibilities of the Commissioner for the information to be audited

The Commissioner is responsible on behalf of the Department for preparing:

  • Financial statements that present fairly the Department’s financial position, financial performance, and its cash flows, and that comply with generally accepted accounting practice in New Zealand.
  • Performance information that presents fairly what has been achieved with each appropriation, the expenditure incurred as compared with expenditure expected to be incurred, and that complies with generally accepted accounting practice in New Zealand. 186 Annual Report 2023 Independent Auditor's Report
  • Statements of expenses and capital expenditure of the Department, that are presented fairly, in accordance with the requirements of the Public Finance Act 1989.
  • Schedules of non-departmental activities, in accordance with the Treasury Instructions, that present fairly those activities managed by the Department on behalf of the Crown.

The Commissioner is responsible for such internal control as is determined is necessary to enable the preparation of the information to be audited that is free from material misstatement, whether due to fraud or error.

In preparing the information to be audited, the Commissioner is responsible on behalf of the Department for assessing the Department’s ability to continue as a going concern. The Commissioner is also responsible for disclosing, as applicable, matters related to going concern and using the going concern basis of accounting, unless there is an intention to merge or to terminate the activities of the Department, or there is no realistic alternative but to do so.

The Commissioner’s responsibilities arise from the Public Finance Act 1989.

Responsibilities of the auditor for the information to be audited 

Our objectives are to obtain reasonable assurance about whether the information we audited, as a whole, is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit carried out in accordance with the Auditor-General’s Auditing Standards will always detect a material misstatement when it exists. Misstatements are differences or omissions of amounts or disclosures and can arise from fraud or error. Misstatements are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of readers, taken on the basis of the information we audited.

For the budget information reported in the information we audited, our procedures were limited to checking that the information agreed to the Department’s statement of intent.

We did not evaluate the security and controls over the electronic publication of the information we audited.

As part of an audit in accordance with the Auditor-General’s Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. Also:

  • We identify and assess the risks of material misstatement of the information we audited, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • We obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control.
  • We evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Commissioner.
  • We evaluate the appropriateness of the reported performance information for the appropriations administered by the Department.
  • We conclude on the appropriateness of the use of the going concern basis of accounting by the Commissioner and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Department’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the information we audited or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Department to cease to continue as a going concern.
  • We evaluate the overall presentation, structure, and content of the information we audited, including the disclosures, and whether the information we audited represents the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Commissioner regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Our responsibilities arise from the Public Audit Act 2001.

Other information

The Commissioner is responsible for the other information. The other information comprises the information included on pages 1 to 65, 84, 108 to 116, 121, 122, 153 to 156, and 189 to 2018, but does not include the information we audited, and our auditor’s report thereon.

Our opinion on the information we audited does not cover the other information and we do not express any form of audit opinion or assurance conclusion thereon.

Our responsibility is to read the other information. In doing so, we consider whether the other information is materially inconsistent with the information we audited, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on our work, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

8Pages 1 to 65, 84, 108 to 116, 121, 122, 153 to 156, and 189 to 201 refer to the following sections:

  • 1 to 65 and 84 etc. - Introduction through to the start of describing our performance in delivering outcomes and services in the 'Our performance' section.
  • 108 to 116 – ‘Significant initiatives’ and 'Changes to measures and targets' in the 'Our performance' section.
  • 121 and 122 – The introduction and contents page for the ‘Financial Statements – Departmental’ section.
  • 153 to 156 – The introduction and contents pages in the ‘Financial Schedules – Non-Departmental section’ and pages on ‘Why we include the non-departmental schedules’.
  • 189 to 201 - The 'Additional information' section.

Independence 

We are independent of the Department in accordance with the independence requirements of the Auditor-General’s Auditing Standards, which incorporate the independence requirements of Professional and Ethical Standard 1: International Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board.

For the year ended 30 June 2023 and subsequently, an external member of the Risk and Assurance Committee of the Department is a member of the Auditor-General’s Audit and Risk Committee. The Auditor-General’s Audit and Risk Committee is regulated by a Charter that specifies that it should not assume any management functions. There are appropriate safeguards to reduce any threat to auditor independence, as a member of the Auditor-General’s Audit and Risk Committee (when acting in this capacity) has no involvement in, or influence over, the audit of the Department.

Kelly Rushton

Audit New Zealand
On behalf of the Auditor-General
Wellington, New Zealand

Last updated: 19 Dec 2023
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