Tax Audit Guide — IRD Investigations and Audits in New Zealand
the IRD tax audits and investigations in New Zealand. The guide covers the IRD audit triggers (the "risk review", the "desk audit", the "field audit"), the taxpayer's rights and the obligations during the audit, the record-keeping requirements, and the dispute resolution process.
IRD Audit Types
The IRD conducts the tax audits to verify the taxpayer's compliance with the tax laws. The audit types include: (a) the risk review — the IRD reviews the taxpayer's affairs using the data matching and the risk assessment models (the "automatic risk assessment" based on the income, the expenses, the industry benchmarks), (b) the desk audit — the IRD requests the specific information and the documents by the letter or the email (the "correspondence audit"), and (c) the field audit — the IRD visits the taxpayer's premises to inspect the records and the operations (the "on-site audit"). The common audit triggers include: the significant fluctuations in the income, the high-value claims (the "home office, the vehicle, the travel"), the industry-specific risk factors, and the data matching discrepancies.
Audit Process and Rights
The taxpayer during the audit has the right to: (a) the professional representation (the "tax agent or the lawyer"), (b) the reasonable time to provide the documents (the "14 to 28 days" for the standard requests), (c) the access to the IRD's audit findings and the proposed adjustments, and (d) the dispute of the IRD's assessments through the formal dispute process (the "IRD disputes process" — the notice of the proposed adjustment, the "NOPA", the "solicitors notice", the "taxation review authority"). The taxpayer should maintain the adequate records for the 7 years and cooperate with the IRD during the audit. The failure to keep the proper records may result in the penalties.