The Inland Revenue Department (IRD) has significantly improved its data-matching capabilities following the completion of its START (Simplified Tax and Revenue Technology) program. This multi-year business transformation initiative, which cost approximately $1.5 billion and was completed in 2022, was designed to modernise New Zealand’s tax system, making it more efficient, user-friendly, and data-driven. With increased government funding aimed at boosting tax compliance, property investors need to be more vigilant than ever about accurately reporting their rental income.
Helen Willis and I learned about these developments at the CAANZ Tax Conference 2024, where the IRD presented its improved data-matching capabilities and compliance strategies.
How has the IRD’s data matching improved?
The IRD now has better access to external data sources, including records from the Australian Taxation Office (ATO) and online platforms such as Airbnb. This means they can more easily identify taxpayers who are earning rental income but failing to declare it.
The START program has enabled the IRD to integrate sophisticated data analytics and automation, allowing them to process vast amounts of information quickly and accurately. Through real-time data sharing with international tax authorities and digital platforms, the IRD can now pinpoint inconsistencies and discrepancies in tax filings more efficiently than ever before.
If you have an Airbnb rental or receive income from properties in New Zealand or Australia, the IRD’s enhanced systems can now cross-check your earnings with these platforms. They are actively using this data to target individuals who may not be fully compliant with their tax obligations.
Increased funding, increased compliance efforts
The government has provided additional resources to the IRD, with an expectation that every dollar spent on compliance efforts will yield a return of over $5. This means more audits, investigations, and data-driven enforcement actions are likely to occur in the coming months and years.
As part of this initiative, the IRD has received additional funding to expand its compliance workforce, enhance risk assessment tools and improve audit capabilities. This funding has been directed towards increasing the use of artificial intelligence and machine learning to identify patterns of tax evasion more effectively. The IRD has also been given resources to strengthen its collaboration with overseas tax authorities, enabling them to track undeclared income across jurisdictions with greater precision.
With the implementation of the START program, compliance measures have become more automated and streamlined, reducing manual errors and enhancing detection capabilities. The system also allows the IRD to send targeted notifications to taxpayers, warning them of potential discrepancies before enforcement actions are taken.
If you have undeclared rental income, now is the time to act. The IRD offers voluntary disclosure options, which can significantly reduce penalties if you come forward before they contact you.
What should property investors do?
- Ensure full disclosure – Make sure you are reporting all rental income, including short-term accommodation from platforms like Airbnb.
- Keep accurate records – Maintain detailed records of income and expenses related to your property investments.
- Seek professional advice – If you are unsure about your tax obligations, consulting a tax specialist can help ensure compliance and avoid penalties.
With the IRD’s enhanced ability to track rental income, it’s crucial for property investors to be proactive in meeting their tax obligations. If you have any concerns about your tax position, now is the time to seek advice and ensure that your tax affairs are in order.
At The Accounting Hub, we specialise in helping property investors stay compliant while optimising their tax position. Get in touch with us today to discuss how we can assist you.
