Tax Watch: 27 October 2026

Tax governance reminder 

IR has issued a reminder about the importance of effective tax governance, encouraging businesses to maintain documented tax processes and controls that are appropriate for their size, complexity and risk profile. 

This includes identifying areas where tax errors are most likely to arise and regularly reviewing tax governance arrangements as the business changes. Inland Revenue also notes that a business’s tax governance framework may be taken into account when determining penalties where errors are identified during an investigation.

Reducing unintended refunds of provisional tax payments

From 6 October 2026, IR has changed how certain provisional tax payments are treated to reduce unintended refunds. Where a payment is made to the previous income tax year after that year’s return has been processed, any excess remaining after outstanding tax is paid will generally be transferred to the current income tax year rather than refunded.

Extreme wet and cold conditions across Southland and the Clutha District

Due to the weather affecting Southland and the Clutha District is IR is providing support for affected individuals and businesses. Eligible farmers and growers can also access early income equalisation refunds. Similar relief is available outside the designated regions on a case-by-case basis.

Case summaries:

- Taxpayer required to pay GST on insurance sum 

In Mainzeal Property & Construction Limited (in liq) v CIR [2026] NZHC 2715, Mainzeal received an insurance payment from QBE for losses caused by four former directors. Mainzeal argued the payment was not subject to GST because it was not received “under a contract of insurance”. The High Court found that s 5(13) applies where a registered person receives an insurance payment relating to a loss incurred in its taxable activity, even where the recipient is a third party to the insured loss. The decision provides useful clarification on the scope and application of s 5(13) to insurance proceeds.

- High Court decision about payments basis upheld

The High Court upheld the Commissioner’s refusal to allow an infrastructure company to change from the GST payments basis to the invoice basis. The Court confirmed a liquidator cannot make this change; a taxpayer seeking to change basis  must have ceased to qualify for the payments basis at the time it notifies IR. A historical failure to qualify is not sufficient.

- Relief from consequences of “unless order” granted

A tax challenge that had been struck out after the disputant failed to meet filing requirements under an “unless order” has been reinstated. Although the non-compliance was serious, it was not intentional or willful and enforcement would be disproportionate and contrary to the overall interests of justice.

Enforcement updates:

- Tax evasion and fraud cases

Four recent court cases highlight Inland Revenue’s continued enforcement action against deliberate tax evasion and fraud. They include concealed income, false GST, donation claims and misuse of COVID-19 support payments. Sentences ranged from community and home detention to imprisonment, with reparation orders in some cases.

- PAYE offending

An Auckland logistics company director was sentenced to nine months’ home detention for failing to account for employee PAYE. The company failed to make PAYE payments on 45 occasions and was subsequently placed into liquidation with approximately $6.3 million of tax debt.

- Failure to provide information

A Christchurch contractor was fined $3,500 for failing to provide information requested by IR about GST returns that had generated refunds. Despite repeated requests, including a formal notice requiring the information to be provided, the taxpayer did not supply all of the requested records.