1 April 2024 – 31 March 2025
Inland Revenue (IR) in New Zealand has significantly intensified tax compliance efforts over the past year. According to a report published in April 2025, automated screening systems analysed over three million tax returns in New Zealand, leading to 30,000 reviews. Combined with voluntary disclosures, these measures contributed $859 million to tax revenue.
For accountants and their clients, this means increased scrutiny of tax filings, with IR focusing on identifying inconsistencies, undisclosed income, and potential non-compliance rather than uncovering errors made by accountants.
While audits remain selective, IR’s broad compliance initiatives have resulted in shifts in claim activity, particularly around GST Verifications and Income Tax Returns.
This article examines the three most common Audit Shield claims activity categories, compiled by the Accountancy Insurance claims team from 1 April 2024 to 31 March 2025:
- GST Verifications – 53.33%
- Income Tax Returns – 30.86%
- Client Risk Reviews – 7.74%
By analysing shifts in claim frequency and the broader compliance environment, accountants can gain valuable insights into emerging audit risks, helping them better prepare for reviews and safeguard clients through Audit Shield.
The below pie chart shows the current distribution of all filed and finalised Audit Shield claims activity in New Zealand.
Here are the key highlights in specific review and audit categories based on claims activity data from 1 April 2024 to 31 March 2025:
GST Verifications and Income Tax Return
While GST Verification claim activity declined by nearly 7% compared with 1 April 2023 to 31 March 2024, it remained the most frequent claim type, accounting for 53.33% of all Audit Shield claims. This underscores the sustained scrutiny on GST compliance, even as IR adjusts its enforcement priorities.
Meanwhile, Income Tax Return related claim activity rose by 2% compared with 1 April 2023 to 31 March 2024, solidifying its position as the second most common claim type. This uptick reflects ongoing IR efforts to identify discrepancies in income reporting through sophisticated data-matching, targeted review campaigns, and random selection audits.
Despite the slight decline, GST Verifications remain IR’s primary audit focus, reinforcing the need for accountants to stay vigilant about tax reporting accuracy and compliance measures. Additionally, instances where undisclosed earnings are deposited into bank accounts without clear explanations continue to trigger reviews and investigations.
Claim proportion (frequency) 1 April 2024 – 31 March 2025: GST Verification Reviews and Audits accounted for 53.33% of all Accountancy Insurance claims.
Claim proportion (frequency) 1 April 2024 – 31 March 2025: Income Tax Return Reviews and Audits accounted for 30.86% of all Accountancy Insurance claims.
Client Risk Review
Client Risk Review claim activity increased slightly over the past year, reflecting evolving audit strategies by IR. Automated screening systems, expanded compliance data, and more targeted investigations have likely contributed to this rise.
Claim proportion (frequency) 1 April 2024 – 31 March 2025: Client Risk Review Reviews and Audits accounted for 7.74% of all Accountancy Insurance claims.
Who is being reviewed and audited?
Between 1 April 2024 and 31 March 2025, among the mix of accounting firms and their participating clients working with Accountancy Insurance, the following client categories experienced the highest number of claims:
- Business Groups with less than $500k turnover (Category E).
- Sole Traders/Partnerships/Non-Trading Companies & Trusts (Category D) and Business Groups with $1m – $3m turnover (Category G).
- Business Groups with $500k – $1m turnover (Category F).
Audit Shield claims registered in New Zealand by category^:
^Correct as at April 2025.
Factors driving audit activity
Insights from IR’s April 2025 report highlight an increase in compliance efforts across multiple tax areas, driven by data-driven investigations and expanded audit measures. Some of the key areas of focus include:
- Property data and debt collection
IR has been actively engaging business owners with outstanding tax debts. Based on its latest outreach efforts, 200 business owners with multiple properties were identified and encouraged to refinance to settle their obligations. The impact was swift, within a month, over $10 million of the $14 million owed was either paid or placed under arrangement. - Trust and compliance data
Leveraging a combination of IR’s own data, Trusts, and Companies Office records, officials have flagged 800 individuals who may be attempting to circumvent the top 39% tax rate by improperly retaining income in companies or trusts. These cases are now under review in collaboration with accountants. - Payment service providers and GST compliance
IR has further expanded its compliance initiatives by using transaction data from payment service providers to investigate businesses. - Crypto transactions under scrutiny
As part of its compliance measures, IR has issued 160 warning letters to customers failing to declare income from crypto transactions, which collectively amounts to $2.7m, according to its reports.
With Inland Revenue’s heightened compliance activity, accountants in New Zealand must remain vigilant. The surge in audits underscores the importance of Audit Shield, a comprehensive tax audit insurance solution that covers professional fees incurred in responding to IR reviews, audits, and investigations.
The latest figures reveal that audits can be high-stakes and resource-intensive, making protection more essential than ever. For accounting firms, offering Audit Shield to clients ensures peace of mind and financial security against unexpected scrutiny. As compliance efforts continue to ramp up, proactive measures like audit protection remain crucial for both accountants and their clients.
To find out how your firm and your clients can benefit from Audit Shield, please contact the team at Accountancy Insurance.
Contact Accountancy Insurance
We would love to hear from you.
About Accountancy Insurance
Thousands of accounting firms offer our tax audit insurance solution, Audit Shield to their clients. Find out why.