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.
What we do
We seek to achieve the timely and efficient collection of unfiled returns, revenue and debt owed. We believe the best approach for managing debt and unfiled returns is by helping customers get it right from the start. 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 1994 to collect the highest net revenue over time, considering the resources we have available, levels of voluntary compliance and compliance costs.
How we performed
This year, we have balanced assisting customers following adverse weather events and dealing with economic pressures while supporting Government priorities such as Cost of Living Payments.
We provided additional support to those directly affected by the adverse weather events through community visits, remitting penalties and interest on delayed payments or filing, delaying automatic deductions and reminder notifications and writing off debt in specific circumstances.
We provide options for customers to pay off what they owe in instalments while they get back on track, minimising the costs they incur by paying late. As at 30 June 2023, there were 77,000 active arrangements for tax and student loan debt covering $1.62 billion. 30.6% of the arranged amount has been paid. There were 163,000 instalment arrangements set up in 2022–23, compared to 140,000 in 2021–22.
We temporarily stopped or deferred some of our compliance activities. Our systems and tools have been able to do much of the heavy lifting while we supported other priority work, providing automated reminders to customers where appropriate. As collection activities take time to progress, the deferral of some activities has impacted on some 2022–23 performance results. We are rebalancing our work programme and putting more focus on compliance activities.
General tax and Working for Families debt
This year, tax debt increased by 19.8% to $5.799 billion (excluding student loans, child support and COVID-19 support products) with 44,000 more customers in debt than June 2022. The key driver of debt growth is GST, $415.3 million higher than 2021–22, followed by income tax, which is $352.2 million higher.
The increase in tax debt was also higher than forecast, this together with higher levels of write-offs and COVID-19 remissions than expected, resulted in unappropriated expenditure for our Impairment of Debt and Debt Write-offs appropriation. See this page for more information.
Statement of non-departmental unappropriated expenditure
| Tax and social policy type | 2019 | 2020 | 2021 | 2022 | 2023 | Change since 2022 |
|---|---|---|---|---|---|---|
| Income tax | $1,609.8 | $1,742.6 | $1,585.0 | $1,791.1 | $2,143.3 | 19.7% |
| GST | $1,180.6 | $1,550.0 | $1,523.0 | $1,824.5 | $2,239.8 | 22.8% |
| PAYE and KiwiSaver 1 | $517.1 | - | - | - | - | - |
| Employment activities 1 | - | $741.3 | $919.6 | $822.3 | $1,015.9 | 23.5% |
| Working for Families Tax Credits | $128.8 | $167.2 | $198.5 | $250.8 | $245.6 | -2.1% |
| Other tax2 | $85.0 | $45.8 | $157.6 | $152.6 | $153.9 | 0.9% |
| Total general tax and Working for Families debt | $3,521.3 | $4,246.9 | $4,383.7 | $4,841.3 | $5,798.5 | 19.8% |
1 The consolidation of employer deductions to an ‘employment activities’ account changes how we group general tax and Working for Families debt. We are unable to compare PAYE and KiwiSaver debt with ‘employment activities’ debt.
2 Other tax amounts for 2021 and 2022 have been updated to exclude the COVID-19 Resurgence Support Payment and COVID-19 Support Payment debt amounts previously reported in this category.
GST, income tax and employment activities debt
A combination of factors has impacted the increases in GST, income tax and employment information debt. Pressure from the challenging economic environment has caused income streams for businesses to stop or slow down, resulting in some businesses not meeting their tax obligations.
Our deferral of some proactive debt recovery during the year is likely to also be a contributing factor to the increases in debt across these taxes.
Our plans to address this increase in debt include:
- more of our people working on compliance-focused activity
- a focus on the few customers with high-value debt
- a GST remediation plan to address overdue GST returns and payments, and
- an ongoing focus on employer debt including potential prosecution activity for extreme examples of non-compliance.
Working for Families Tax Credits (WFFTC) debt
WFFTC debt decreased by $5.2 million from 2021–22. This decrease partly reflects, our efforts over the latter part of 2022–23 on aged debt (over 4 years) and supporting new debtors to get back on track. The number of customers with WFFTC debt at 30 June 2023 is 55,700. This is similar to the previous year, which was 55,900 at 30 June 2022.
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.
Social policy debt
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 $90 million this year. We wrote off $79 million, including penalties, to encourage paying parents to restart their payments and to reflect the revised penalty rates introduced in October 2021. The debt position has remained relatively steady from 2021–22. This is partly because incremental penalties have not been applied since 1 April 2021.
| Child support debt | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| Total debt value | $2,208 | $2,151 | $1,366 | $1,188 | $1,098 |
| Penalties only | $1,608 | $1,553 | $726 | $586 | $504 |
Note: The past due child support gross receivables on this page 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 4 - Receivables - child support
Student loan debt
As at 30 June 2023, overdue student loan debt was $2.2 billion, 9.3% more than last year.
| Student loan debt | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| New Zealand-based borrowers | $131.8 | $133.0 | $140.9 | $152.3 | $168.1 |
| Overseas-based borrowers | $1,349.1 | $1,446.1 | $1,579.6 | $1,870.3 | $2,042.7 |
| Total | $1,480.9 | $1,579.1 | $1,720.5 | $2,022.6 | $2,210.8 |
The increase in New Zealand-based borrower debt is for similar reasons to the growth in income tax debt.
Repayments from overseas-based customers have reduced, reflecting the impacts of the COVID-19 pandemic across the globe. 87% of overdue overseas-based borrower debt is over 2 years old and poses significant collection challenges. We have engaged third-party providers to help us find and collect of student loans from overseas-based customers to help them to get their repayments back on track. 74% of overseas-based borrowers owe 92% of the total overdue student loan debt. This is a long-term trend.
We are returning to a balanced portfolio of work with a focus is on supporting customers and making it easier for them to self-manage their obligations online via myIR.
Detailed reporting on the Student Loan Scheme is available at
Publications - educationcounts.govt.nz
COVID-19 support product debt
As at 30 June 2023, debt for COVID-19 support products was $104 million, 209% more than last year. The increase is due partly to repayment requirements for the Small Business Cashflow Scheme not being met following the expiry of the interest-free period for many borrowers. The increase also reflects our targeted integrity work to ensure customers were eligible to receive the COVID-19 support products and that the money was correctly applied to their business expenditure. We found that recalled payments were not due to fraud but rather because the required revenue decline was not reached or the funds were spent entirely or partially on non-business expenditure.
| COVID-19 support product | 2021 | 2022 | 2023 |
|---|---|---|---|
| Resurgence Support Payment |
0.1 |
3.5 |
13.9 |
| Covid Support Payments |
- |
1.2 |
7.8 |
| COVID-19 Resurgence Support Payment and COVID-19 Support Payment |
0.1 | 4.7 | 21.7 |
| Small Business Cashflow Scheme |
6.7 |
29.0 |
82.4 |
| Total | 6.9 | 33.7 | 104.1 |
Write-offs
We write off tax debt in cases of serious hardship, bankruptcy or liquidation, or if the cost of collecting the debt is uneconomical. This year, we wrote off $523.5 million of debt using these provisions, compared to $512.6 million in 2021–22.
We have continued to support customers following the COVID-19 pandemic, applying specific legislative powers to write off penalties and interest, where possible. We remitted $230.9 million using these provisions in 2022–23 and $176.1 million in 2021–22. We are deactivating the COVID-19 indicator for customers who no longer require it. This means customers will no longer receive automatic COVID-19-impacted penalty and interest remissions.
| Write-offs | 2021-22 | 2022-23 |
|---|---|---|
| General write-offs | $512.6 | $523.5 |
| COVID write-offs | $176.1 | $230.9 |
| Total | $688.7 | $754.4 |
Note: Write-offs include general tax, Working for Families Tax Credits, KiwiSaver, COVID-19 Resurgence Support Payment and COVID-19 Support Payment debt.Read more about other actions we take, such as liquidations, on this page.
Unfiled returns
At 30 June 2023 there were 1.5 million outstanding returns yet to be filed, including 685,000 for individual income tax, 409,000 for non-individual income tax, 332,000 for GST, 39,000 for employer activities and 36,000 for other tax products. This is a 3.4% increase of total outstanding returns as at 30 June 2022 (1.45 million).
We continue to refine return filing criteria and adjust customers’ filing requirements where appropriate. This includes shifting customers from having to file an individual income tax return to receiving an automatically calculated assessment. We sent fewer 2022 individual income tax returns to customers than the previous year, reducing from 1.366 million to 1.312 million, a 4% decrease.
Our focus on high-value returns can be seen in our results for the 'value of assessed revenue for every unfiled dollar spent', achieving $60.12 in 2022–23.
Performance measure results
This year, we achieved 6 out of 8 measures for the ‘Management of Debt and Unfiled Returns’ category in the ‘Services for Customers’ appropriation, a similar result to 2021–22 when we achieved 7 out of 9 measures.
| 2021-22 actual | Performance measure | 2022-23 target | 2022-23 actual | 2023-243 target |
|---|---|---|---|---|
| $61.10 | Value of assessed revenue for every unfiled return dollar spent | $45 | $60.12 (achieved) | $45 |
| This measure demonstrates the cost-effectiveness of our work to recover assessed revenue from returns not filed by the due date. We needed to balance our efforts across key priorities and support customers dealing with a number of challenges. We targeted our unfiled return activity and used our analytical tools to identify unfiled returns that were likely to be of higher value. | ||||
| $43.43 | Cash collected for every debt dollar spent | $40 | $47.11 (achieved) | $40 |
| This measure demonstrates the cost-effectiveness in collecting overdue debt. Our systems did much of the heavy lifting as we had to prioritise our activities to support customers across a number of other areas. This meant the costs incurred were lower this year. We also saw more customers setting up instalment arrangements in 2022–23 to help manage their obligations during challenging times. |
||||
| 70.2% | Percentage of child support assessments paid on time |
70% | 70.8% (achieved) | 70% |
| 83.8%1 | Percentage of student loan customers that meet their obligations | 85% | 83.1% (not achieved) | 85% |
| Not achieved–This measure looks at compliance levels for student loan customers. Repayment levels for New Zealand-based borrowers remain high at 94.3% but are slightly lower than 2021–22, reflecting broader economic conditions. Repayments from overseas-based customers remain low at 26% but improved slightly from 25% in 2021–22. |
||||
| 42.3% | Percentage of unfiled returns that are finalised within 6 months |
60% | 41.1% | 60% |
| Not achieved–This measure demonstrates the level of activity focused on helping customers with unfiled returns. To assist customers dealing with adverse weather events and support Government priorities including the Cost of Living Payments, we focused less on proactive compliance activities. We are returning to a more balanced work programme and continue to focus on finalising returns of higher value. |
||||
| 40.5% | Percentage of collectable debt value over 2 years old | 40% or less | 33.4% (achieved) | 40% or less |
| This measure focuses on the age of debt as older debts tend to become harder to collect. Our year-end result reflects a large increase in new debt, mainly income tax, which made the aged debt look smaller in comparison. Total collectable debt increased from $3.74 billion in June 2022 to $4.41 billion in June 2023. |
||||
| 61.7% | Percentage of new customer debt resolved within 6 months | 50% | 58.6% (achieved) | 50% |
| 80.0% | Percentage of New Zealand liable parent child support debt cases resolved within 12 months | 75% | 84.0% | 75% |
All targets are unaudited.
1Result reported in the 2022 Annual Report was incorrectly reported as 84.4%.
What it cost
| Actual 2022 ($000) | Actual 2023 ($000) | Unaudited revised budget 2023 ($000) | Unaudited budget 2023 ($000) | Unaudited forecast 2024 ($000) | |
|---|---|---|---|---|---|
| Revenue | |||||
| $92,117 | Revenue from the Crown | $90,489 | $90,489 | $94,587 | $96,969 |
| $327 | Other revenue | $471 | $1,272 | $1,272 | $1,272 |
| $92,444 | Total revenue | $90,960 | $91,761 | $95,859 | $98,241 |
| $89,863 | Total expenses | $85,511 | $91,761 | $95,859 | $98,241 |
| $2,581 | Net surplus or (deficit) | $5,449 | - | - | - |