Estimates of appropriations

Vote Revenue - Finance and Government Administration Sector - Estimates 2018/19

Vote Revenue#

APPROPRIATION MINISTER(S): Minister of Revenue (M57)

APPROPRIATION ADMINISTRATOR: Inland Revenue Department

RESPONSIBLE MINISTER FOR INLAND REVENUE DEPARTMENT: Minister of Revenue

Overview of the Vote#

The Minister of Revenue is responsible for appropriations in the Vote for the 2018/19 financial year covering the following:

  • a total of just over $15 million for policy advice and services to other agencies
  • a total of just over $647 million for investigations, management of debt and outstanding returns, services to inform the public about entitlements and meeting obligations, and services to process obligations and entitlements
  • a total of just over $143 million for departmental capital expenditure for the purchase or development of assets by and for the use of Inland Revenue
  • a total of just over $4,794 million for benefits or related expenses, mainly for tax credits, KiwiSaver payments and benefit payments such as child support and paid parental leave
  • a total of just over $12 million for borrowing expenses, relating to interest paid on deposit schemes administered by Inland Revenue, and
  • a total of $1,290 million for other expenses, mainly for the impairment and write-off of debt and initial fair value write-down on student loans.

The Minister of Revenue is also responsible for a multi-year appropriation of just under $1,139 million for the implementation of business transformation.

The Minister of Revenue is also responsible for a capital injection of just over $98 million to Inland Revenue. 

The Minister of Revenue is also responsible for Crown revenue and receipts in the Vote for the 2018/19 financial year covering the following:

  • a total forecast of $76,559 million for tax revenue
  • a total forecast of $1,111 million for non-tax revenue, and
  • a total forecast of $1,529 million for capital receipts.

Details of these appropriations are set out in Parts 2-4.

Details of Appropriations and Capital Injections#

Annual and Permanent Appropriations#

  2017/18 2018/19
Titles and Scopes of Appropriations by Appropriation Type Final
Budgeted
$000
Estimated
Actual
$000
Budget
$000

Departmental Output Expenses

     

Policy Advice (M57)

This appropriation is limited to the provision of advice, including second opinion advice and contributions to policy advice led by other agencies, to support decision-making by Ministers on government policy matters.
9,397 9,397 10,608

Services to Other Agencies RDA (M57)

This appropriation is limited to the provision of services by Inland Revenue to other agencies, where those services are not within the scope of another departmental output expense appropriation in Vote Revenue.
5,071 4,571 4,684

Investigations (M57)

This appropriation is limited to undertaking investigation, audit and litigation activities administered by Inland Revenue.
152,717 148,613 -

Management of Debt and Outstanding Returns (M57)

This appropriation is limited to activities to prevent returns becoming outstanding and debt becoming overdue, and to collect outstanding returns and overdue payments, whether for the Crown, other agencies or external parties.
139,944 135,679 -

Services to Inform the Public About Entitlements and Meeting Obligations (M57)

This appropriation is limited to providing information and assistance to the public to make them aware of their obligations and entitlements. This also includes the provision of services to help Ministers fulfil their responsibilities to Parliament and the New Zealand public, other than policy decision-making responsibilities.
232,249 225,419 -

Services to Process Obligations and Entitlements (M57)

This appropriation is limited to both the registration, assessment and processing of tax obligations and other entitlements, including associated review and Crown accounting activities, and the collection and sharing of related information with other agencies.
105,056 102,755 -

Total Departmental Output Expenses

644,434 626,434 15,292

Departmental Capital Expenditure

     

Inland Revenue Department - Capital Expenditure PLA (M57)

This appropriation is limited to the purchase or development of assets by and for the use of the Inland Revenue Department, as authorised by section 24(1) of the Public Finance Act 1989.
123,096 123,095 143,200

Total Departmental Capital Expenditure

123,096 123,095 143,200

Benefits or Related Expenses

     

Best Start Tax Credit PLA (M57)

This appropriation is limited to Best Start Tax Credits made to eligible recipients in accordance with section 185 of the Tax Administration Act 1994.
- - 80,000

Child Support Payments PLA (M57)

Child support payments to custodial persons who are not dependent on the state for financial support (expenses incurred pursuant to section 141 of the Child Support Act 1991).
288,000 288,000 300,000

Child Tax Credit PLA (M57)

Extra assistance for low to middle income families who are not dependent on the state for financial support (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).
800 800 600

Family Tax Credit PLA (M57)

Family Support payments made to beneficiaries and non-beneficiaries during the year (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).
1,696,000 1,696,000 2,628,000

In-Work Tax Credit PLA (M57)

Extra assistance for low to middle income families where the person works a minimum of 20 hours per week and does not have a partner, or a person and their partner work a minimum of 30 hours per week (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).
533,000 533,000 540,000

KiwiSaver: Interest (M57)

To enable the payment of interest on KiwiSaver contributions as set out in the KiwiSaver Act 2006.
10,000 8,000 10,000

KiwiSaver: Tax Credit (M57)

To enable the payment of a tax credit to KiwiSaver members and the payment of residual tax credits to employers as set out in the Income Tax Act 2007.
832,000 822,000 850,000

Minimum Family Tax Credit PLA (M57)

Extra payment made to families where at least one parent is working for salary or wages (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).
12,000 12,000 14,000

Paid Parental Leave Payments (M57)

This appropriation is limited to Paid Parental Leave Payments made to parents in accordance with the Parental Leave and Employment Protection Act 1987.
297,000 287,000 360,000

Parental Tax Credit PLA (M57)

This appropriation is limited to expenses incurred on parental tax credit as provided for in subpart MD of the Income Tax Act 2007 and as authorised by section 185 of the Tax Administration Act 1994.
29,000 29,000 5,000

Payroll Subsidy PLA (M57)

This appropriation is limited to the payment of a subsidy to a payroll agent undertaking employers' payroll-related tax compliance activities on their behalf, section 185 of the Tax Administration Act 1994.
7,600 7,600 6,500

Total Benefits or Related Expenses

3,705,400 3,683,400 4,794,100

Non-Departmental Borrowing Expenses

     

Adverse Event Interest PLA (M57)

This appropriation is limited to interest on Adverse Event Income Equalisation Reserve accounts held by taxpayers in the farming and agriculture business, authorised by section 65ZH(1) of the Public Finance Act 1989.
10 10 10

Environmental Restoration Account Interest PLA (M57)

This appropriation is limited to interest on Environmental Restoration accounts, authorised by section 65ZH(1) of the Public Finance Act 1989.
2,000 2,000 2,000

Income Equalisation Interest PLA (M57)

This appropriation is limited to interest on Income Equalisation Reserve Scheme accounts held by taxpayers in the farming, fishing or forestry industries, authorised by section 65ZH(1) of the Public Finance Act 1989.
7,000 7,000 10,000

Total Non-Departmental Borrowing Expenses

9,010 9,010 12,010

Non-Departmental Other Expenses

     

Impairment of Debt and Debt Write-Offs (M57)

This appropriation is limited to bad debt write-offs for Crown debt administered by Inland Revenue, excluding child support and student loans and to amounts relating to the impairment of this debt.
800,000 640,000 680,000

Initial Fair Value Write-Down Relating to Student Loans (M57)

This appropriation is limited to the initial fair value write-down of student loans.
638,000 615,000 610,000

Impairment of Debt Relating to Child Support (M57)

This appropriation is limited to the impairment of child support debt.
5,000 - -

Impairment of Debt Relating to Student Loans (M57)

This appropriation is limited to the impairment of student loan debt.
66,000 - -

Total Non-Departmental Other Expenses

1,509,000 1,255,000 1,290,000

Multi-Category Expenses and Capital Expenditure

     

Services for Customers MCA (M57)

The single overarching purpose of this appropriation is to deliver a customer-centric, integrated tax and entitlement service experience for New Zealanders that is agile and intelligence-led.
- - 647,659

Departmental Output Expenses

     

Investigations

This category is limited to undertaking investigation, audit and litigation activities administered by Inland Revenue.
- - 171,983

Management of Debt and Outstanding Returns

This category is limited to activities to prevent returns becoming outstanding and debt becoming overdue, and to collect outstanding returns and overdue payments, whether for the Crown, other agencies or external parties.
- - 152,255

Services to Inform the Public About Entitlements and Meeting Obligations

This category is limited to providing information and assistance to the public to make them aware of their obligations and entitlements. This also includes the provision of services to help Ministers fulfil their responsibilities to Parliament and the New Zealand public, other than policy decision-making responsibilities.
- - 207,949

Services to Process Obligations and Entitlements

This category is limited to both the registration, assessment and processing of tax obligations and other entitlements, including associated review and Crown accounting activities, and the collection and sharing of related information with other agencies.
- - 115,472

Total Multi-Category Expenses and Capital Expenditure

- - 647,659

Total Annual and Permanent Appropriations

5,990,940 5,696,939 6,902,261

Multi-Year Appropriations#

Type, Title, Scope and Period of Appropriations Appropriations, Adjustments and Use $000

Departmental Other Expenses

   

Transformation (M57)

This appropriation is limited to the design and implementation of a modern system for tax revenue and social policy administered by Inland Revenue.

Commences: 01 July 2017

Expires: 30 June 2021
Original Appropriation 1,112,607
Adjustments to 2016/17 -
Adjustments for 2017/18 26,254
Adjusted Appropriation 1,138,861
Actual to 2016/17 Year End -
Estimated Actual for 2017/18 220,168
Estimated Actual for 2018/19 320,876
Estimated Appropriation Remaining 597,817

Total Annual and Permanent Appropriations and Multi-Year Appropriation Forecasts#

  2017/18 2018/19
  Final
Budgeted
$000
Estimated
Actual
$000
Budget
$000
Total Annual and Permanent Appropriations 5,990,940 5,696,939 6,902,261
Total MYA Departmental Other Expenses Forecasts 220,168 220,168 320,876

Total Annual and Permanent Appropriations and Multi-Year Appropriation Forecasts

6,211,108 5,917,107 7,223,137

Capital Injection Authorisations#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Inland Revenue Department - Capital Injection (M57) 58,600 58,600 98,200

Supporting Information#

Part 1 - Vote as a Whole#

1.1 - New Policy Initiatives

Policy Initiative Appropriation 2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Budget 2018 Research and Development Tax Credit Implementation Services for Customers MCA          
 

Services to Inform the Public About Entitlements and Meeting Obligations

- 480 600 320 320
 

Services to Process Obligations and Entitlements

- 600 750 400 400
 

Investigations

- 120 150 80 80
  Multi-Category Expenses          
Budget 2018 Tax Compliance Activity - Funding to Collect Additional Revenue Policy Advice - 950 950 700 400
  Departmental Output Expenses          
  Services for Customers MCA          
 

Management of Debt and Outstanding Returns

- 5,850 5,850 5,900 5,900
  Multi-Category Expenses          
  Impairment of debt and debt write offs - 10,700 15,000 15,000 15,000
  Non-Departmental Other Expenses          
Changes made during passage of the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill Payroll Subsidy PLA
Non-Departmental Other Expenses
1,700 6,500 3,900 - -
Extending Paid Parental Leave to 26 weeks Paid Parental Leave
Non-Departmental Benefits or Related Expenses
- 66,000 68,700 142,700 148,400
Families Package Implementation Services for Customers MCA          
 

Services to Inform the Public About Entitlements and Meeting Obligations

- 1,010 410 350 350
 

Services to Process Obligations and Entitlements

- 2,050 840 710 710
  Multi-Category Expenses          
  Best Start PLA
Non-Departmental Benefits or Related Expenses
- 80,000 231,000 373,000 451,000
  Family Tax Credit PLA
Non-Departmental Benefits or Related Expenses
(97,000) 540,000 530,000 520,000 510,000
  Minimum Family PLA - 1,300 1,300 1,300 1,300
  Non-Departmental Benefits or Related Expenses          
  Parental Tax Credit PLA - (28,000) (27,000) (26,000) (25,000)
  Non-Departmental Benefits or Related Expenses          
First year fees-free in 2018 Initial Fair Value Write-Down Relating to Student Loans
Non-Departmental Other Expenses
(52,627) (70,465) (71,951) (68,526) (72,383)
Increase student allowance and living costs loans by $50 Initial Fair Value Write-Down Relating to Student Loans
Non-Departmental Other Expenses
24,813 56,005 59,106 61,271 63,302
Tertiary Education Annual Maximum Fee Movement Initial Fair Value Write-Down Relating to Student Loans
Non-Departmental Other Expenses
- 1,272 2,107 2,270 2,329
Budget 2017 Family Incomes Package Implementation Services to Inform the Public About Entitlements and Meeting Obligations 800 - - - -
  Departmental Output Expenses          
  Services to Process Obligations and Entitlements 1,600 - - - -
  Departmental Output Expenses          
Total Initiatives   (120,714) 674,372 821,712 1,029,475 1,102,108

Summary of Financial Activity#

  2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22
  Actual
$000
Actual
$000
Actual
$000
Actual
$000
Final Budgeted
$000
Estimated
Actual
$000
Departmental
Transactions
Budget
$000
Non-
Departmental
Transactions
Budget
$000
Total
Budget
$000
Estimated
$000
Estimated
$000
Estimated
$000

Appropriations

                       
Output Expenses 8,673 10,522 11,050 11,386 14,468 13,968 15,292 - 15,292 14,807 14,546 14,246
Benefits or Related Expenses 3,678,047 3,708,849 3,550,477 3,621,139 3,705,400 3,683,400 N/A 4,794,100 4,794,100 4,928,400 5,166,400 5,325,300
Borrowing Expenses 8,908 5,176 7,907 6,783 9,010 9,010 - 12,010 12,010 12,010 12,000 12,000
Other Expenses 2,046,945 1,614,494 1,414,087 1,288,208 1,729,168 1,475,168 320,876 1,290,000 1,610,876 1,553,086 1,679,731 1,551,754
Capital Expenditure 44,691 32,388 61,115 100,661 123,096 123,095 143,200 - 143,200 150,000 168,800 40,000
Intelligence and Security Department Expenses and Capital Expenditure - - - - - - - N/A - - - -
Multi-Category Expenses and Capital Expenditure (MCA)                        
Output Expenses 690,881 693,478 652,182 635,477 629,966 612,466 647,659 - 647,659 555,068 484,015 474,359
Other Expenses - - - - - - - - - - - -
Capital Expenditure - - - - - - N/A - - - - -

Total Appropriations

6,478,145 6,064,907 5,696,818 5,663,654 6,211,108 5,917,107 1,127,027 6,096,110 7,223,137 7,213,371 7,525,492 7,417,659

Crown Revenue and Capital Receipts

                       
Tax Revenue 56,207,968 59,747,539 63,401,693 69,222,866 72,193,000 72,193,000 N/A 76,559,000 76,559,000 81,520,000 86,279,000 91,246,000
Non-Tax Revenue 1,456,383 1,152,579 1,161,292 1,143,664 1,106,500 1,106,500 N/A 1,111,000 1,111,000 1,114,700 1,115,400 1,112,100
Capital Receipts 1,111,028 1,388,866 1,424,519 1,331,379 1,433,000 1,433,000 N/A 1,529,000 1,529,000 1,615,000 1,701,000 1,791,000

Total Crown Revenue and Capital Receipts

58,775,379 62,288,984 65,987,504 71,697,909 74,732,500 74,732,500 N/A 79,199,000 79,199,000 84,249,700 89,095,400 94,149,100

Note - where restructuring of the vote has occurred then, to the extent practicable, prior years information has been restated as if the restructuring had occurred before the beginning of the period covered. In this instance Total Appropriations for the Budgeted and Estimated Actual year may not equal Total Appropriations in the Details of Appropriations and Capital Injections.

Adjustments to the Summary of Financial Activity Table Due to Vote Restructuring#

  2013/14
Adjustments
$000
2014/15
Adjustments
$000
2015/16
Adjustments
$000
2016/17
Adjustments
$000
2017/18
Final Budgeted
Adjustments
$000
2017/18
Estimated
Actual
Adjustments
$000

Appropriations

           
Output Expenses (690,881) (693,478) (652,182) (635,477) (629,966) (612,466)
Benefits or Related Expenses - - - - - -
Borrowing Expenses - - - - - -
Other Expenses - - - - - -
Capital Expenditure - - - - - -
Intelligence and Security Department Expenses and Capital Expenditure - - - - - -
Multi-Category Expenses and Capital Expenditure (MCA)            
Output Expenses 690,881 693,478 652,182 635,477 629,966 612,466
Other Expenses - - - - - -
Capital Expenditure - - - - - -

Total Appropriations

-

-

-

-

-

-

Crown Revenue and Capital Receipts

           
Tax Revenue - - - - - -
Non-Tax Revenue - - - - - -
Capital Receipts - - - - - -

Total Crown Revenue and Capital Receipts

- - - - - -

The adjustments in the table above reflect the new Multi-Category Appropriation - Services for Customers. The prior year information in the Summary of Financial Activity table has been restated to reflect the current Vote structure.

Departmental Output Expenses

Source: Inland Revenue

Inland Revenue's Departmental output expenses have decreased from $700 million in 2013/14 to an estimated amount of just over $626 million in 2017/18 and a budgeted amount of just under $663 million in 2018/19.

Beyond 2018/19, Departmental output expenses will continue to reduce, reflecting productivity savings resulting from Inland Revenue's multi-year transformation. Alongside improved customer services and increased policy agility, the transformation will result in Inland Revenue being a more effective and efficient organisation that can achieve higher levels of performance with fewer resources.

The one-off increase in expenditure in 2018/19 is mainly due to:

  • expenditure transfers from one-off efficiencies realised in 2017/18 to support the temporary changes in operating costs as Inland Revenue implements its transformation programme, and
  • additional funding received from the Families Package Implementation, Budget 2018 Research and Development Tax Credit Implementation, and Budget 2018 Tax Compliance Activity - Funding to Collect Additional Revenue.

Departmental Other Expenses

Source: Inland Revenue

The Departmental other expenses category incorporates one multi-year appropriation (MYA) for Inland Revenue's transformation, covering 2017/18, 2018/19, 2019/20 and 2020/21. For completeness, transformation costs are also shown for the pre-MYA years 2015/16 to 2016/17 as well as the estimated amount for 2021/22 which will be covered by an annual Transformation appropriation.

This appropriation covers expenditure for the multi-year, business-led, technology-enabled transformation of New Zealand's revenue system. As this is a multi-year appropriation, the amounts are indicative of the spend in each of the individual years.

Non-Departmental Benefits or Related Expenses

Source: Inland Revenue

Non-Departmental benefits or related expenses include appropriations for KiwiSaver, Working for Families Tax Credits, Best Start tax credit, payroll subsidy, paid parental leave payments and child support payments to custodial persons.

Total Non-Departmental benefits or related expenses remained relatively static from 2013/14 to 2017/18. Fluctuations occur because an improving economy steadily increases KiwiSaver tax credits, child support payments to custodial persons, and paid parental leave payments. Conversely an improving economy reduces Working for Families entitlements as incomes grow, and this caused some of the downwards trend in 2015/16.

The increase in Non-Departmental benefits or related expenses from 2018/19 is the result of Families Package policy changes. Working for Families Tax Credits are substantially increased from 1 July 2018 due to the aforementioned policy changes which increase the family tax credit per-child entitlements for most families. The threshold for abatement of entitlements also increases, meaning fewer families face abatement. Income growth sees Working for Families entitlements decrease overall from 2019/20 onwards until 2021/22 where there is a small increase due to a forecast indexation adjustment in April 2021.

The Best Start tax credit, which is also part of the Families Package, commences from 1 July 2018. Expenditure on Best Start increases steadily over the forecast period as the policy phases in.

Paid parental leave is also increased by an extension to 22 weeks' entitlement from July 2018, and to 26 weeks from July 2020.

Non-Departmental Borrowing Expenses

Source: Inland Revenue

Non-Departmental borrowing expenses include interest payments for the income equalisation, adverse event, and environmental restoration account schemes. The interest payable varies with the size of the deposits in these schemes. These schemes are designed to allow taxpayers to smooth income between tax years - either to smooth out variability in incomes or to set aside income to deal with an adverse event or provide for environmental restoration costs.

Actual results to date are variable and reflect deposit balances in the schemes. The forecast for interest expense in 2017/18 reflects the expected level of the schemes' activity for the remainder of the year. From 2018/19 the forecast includes a provision for a potential increase in activity.

Non-Departmental Other Expenses

Source: Inland Revenue

Non-Departmental other expenses include bad debt write-offs, the initial fair value write-down on student loans. Impairments relating to student loans, child support, general tax, KiwiSaver, and Working for Families Tax Credits debt are also included.

The large reduction from 2013/14 to 2016/17 resulted from both significantly lower than forecast debt impairment mainly due to a material fall in the overdue debt book over the period and a change in accounting standards affecting the way we recognise impairment relating to child support debt in the year ended 30 June 2015.

From 2017/18 the level of Non-Departmental other expenses stabilises.

Non-Departmental Tax Revenue

Source: Inland Revenue

Non-Departmental tax revenue incorporates unconsolidated source deductions (PAYE), other persons' tax, fringe benefit tax, corporate tax including company tax, other direct income tax, GST and other indirect tax administered by Inland Revenue.

Total tax revenue is forecast to continue to grow over the next five years at an average rate of 5.7% per annum, above nominal gross domestic product (GDP) growth which averages around 5%. Taxes paid by individuals such as PAYE and other persons' tax, are forecast to grow faster than GDP. This is due to an increasing average tax rate as incomes grow (known as fiscal drag), and because salary and wage incomes are forecast to grow slightly faster than GDP. Net company tax is forecast to outpace GDP growth, mainly owing to previously announced policy measures such as the base erosion and profit shifting policy (BEPS) which commences June 2019.

GST is the second largest tax type administered by Inland Revenue after PAYE and is forecast to, on average, grow in line with GDP. An expected recovery in deposit interest rates from recent lows is forecast to increase resident withholding tax on interest income.

The forecasts include additional revenue amounts arising from the implementation of Inland Revenue's Business Transformation programme, starting at $90 million in the year to June 2019, and rising to $540 million per annum by 2021/22.

Non-Departmental Non-Tax Revenue

Source: Inland Revenue

Non-Departmental non-tax revenue incorporates child support collections from non-custodial parents, student loan interest unwind (interest income due to reversing the initial fair value write-down over the life of the loan), unclaimed monies, and interest and penalties on Working for Families Tax Credits debt.

The large reduction in 2014/15 reflected a change in accounting standards affecting the way we recognise child support penalty revenue. Under the new accounting standards, child support revenue is initially recognised at fair value.

Non-Departmental Capital Receipts

Source: Inland Revenue

Non-Departmental capital receipts include student loan capital repayments and deposits into the adverse event income equalisation, income equalisation, and environmental restoration account schemes.

The lower receipts in 2013/14 and 2016/17 reflect lower income equalisation reserve scheme receipts. Receipts in this scheme are forecast to stabilise from 2017/18. The growth seen in 2018/19 and future years is attributable to higher forecast student loan capital repayments, which have a steadily increasing trend each year as incomes grow.

1.4 - Reconciliation of Changes in Appropriation Structure#

    Old Structure New Structure
2017/18 Appropriations
in the 2017/18 Structure
2017/18
(Current)
$000
Appropriations to which
Expenses (or Capital
Expenditure) have been Moved from or to
Amount
Moved
$000
2017/18 Appropriations
in the 2018/19 Structure
2017/18
(Restated)
$000
2018/19
$000

Departmental Output Expenses

           
Investigations 152,717 Transferred to Multi-Category Appropriation: Services for Customers-Investigations (152,717)   - -
Management of Debt and Outstanding Returns 139,944 Transferred to Multi-Category Appropriation: Services for Customers-Management of Debt and Outstanding Returns (139,944)   - -
Services to Inform the Public About Entitlements and Meeting Obligations 232,249 Transferred to Multi-Category Appropriation: Services for Customers-Services to Inform the Public About Entitlements and Meeting Obligations (232,249)   - -
Services to Process Obligations and Entitlements 105,056 Transferred to Multi-Category Appropriation: Services for Customers-Services to Process Obligations and Entitlements (105,056)   - -

 

     

Multi-Category Appropriations: Services for CustomersMulti-Category Appropriations: Services for Customers

   
  - Transferred from Departmental Output Appropriation: Investigations 152,717 Investigations 152,717 171,983
  - Transferred from Departmental Output Appropriation: Management of Debt and Outstanding Returns 139,944 Management of Debt and Outstanding Returns 139,944 152,255
  - Transferred from Departmental Output Appropriation: Services to Inform the Public About Entitlements and Meeting Obligations 232,249 Services to Inform the Public About Entitlements and Meeting Obligations 232,249 207,949
  - Transferred from Departmental Output Appropriation: Services to Process Obligations and Entitlements 105,056 Services to Process Obligations and Entitlements 105,056 115,472

Non-Departmental Benefits or Related Expenses

           
Best Start PLA N/A N/A N/A N/A N/A 80,000

Total changes in Appropriation Structure

629,966

 

-

 

629,966

727,659

The purpose of the Services for Customers multi-category appropriation is to deliver a customer-centric, integrated tax and entitlement service experience for New Zealanders that is agile and intelligence-led.

Explanations of the reasons for changing the appropriation structure are noted in the details of each appropriation in Parts 2-4.

Part 2 - Details of Departmental Appropriations#

2.1 - Departmental Output Expenses#

Policy Advice (M57)

Scope of Appropriation
This appropriation is limited to the provision of advice, including second opinion advice and contributions to policy advice led by other agencies, to support decision-making by Ministers on government policy matters.
Expenses and Revenue
  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 9,397 9,397 10,608
Revenue from the Crown 9,384 9,384 10,595
Revenue from Others 13 13 13
What is Intended to be Achieved with this Appropriation

This appropriation is intended to provide policy advice to support decision-making by Ministers on tax and social policy matters, to protect and maintain the integrity of the tax system while ensuring that our tax system is as simple as possible and is internationally competitive.

How Performance will be Assessed and End of Year Reporting Requirements
  2017/18 2018/19
Assessment of Performance Final Budgeted
Standard
Estimated
Actual
Budget
Standard

Primary measures#

     

Percentage of ministerial satisfaction for policy advice.

80% 80% 90%

Percentage of sampled reports that meet quality standards (see Note 1).

75% 75% 80%

Average cost per hour of producing policy advice outputs.

$150.00 or less $150.00 or less $150.00 or less

Note 1 - A quality score of 70% or better.

These policy performance measures cover the breadth of Inland Revenue's policy advice (tax, social policy and KiwiSaver).

End of Year Performance Reporting

Performance information for this appropriation will be reported by Inland Revenue in the department's Annual Report 2019.

Current and Past Policy Initiatives
Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000

Current Government

           
Budget 2018 Tax Compliance Activity - Funding to Collect Additional Revenue 2018/19 - 950 950 700 400
Reasons for Change in Appropriation

This increase in 2018/19 is mainly due to:

  • additional funding of $950,000 for the Budget 2018 initiative: Tax Compliance Activity - Funding to Collect Additional Revenue, and
  • a transfer of $135,000 from 2017/18 to 2018/19 as a result of efficiencies and other savings made in the 2017/18 financial year.

Services to Other Agencies RDA (M57)#

Scope of Appropriation#

This appropriation is limited to the provision of services by Inland Revenue to other agencies, where those services are not within the scope of another departmental output expense appropriation in Vote Revenue.

Expenses and Revenue#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 5,071 4,571 4,684
Revenue from the Crown - - -
Revenue from Others 5,071 4,571 4,684

What is Intended to be Achieved with this Appropriation#

This appropriation is intended to provide support services to other government agencies, such as the provision of a hosted financial management information system and shared financial transactional services.

How Performance will be Assessed and End of Year Reporting Requirements#

  2017/18 2018/19
Assessment of Performance Final Budgeted
Standard
Estimated
Actual
Budget
Standard

Primary measures#

     

Percentage of satisfaction of the Department of Internal Affairs for services provided.

70% 75% 75%

Percentage of satisfaction of the New Zealand Productivity Commission for services provided.

70% 85% 90%

End of Year Performance Reporting#

Performance information for this appropriation will be reported by Inland Revenue in the department's Annual Report 2019.

2.2 - Departmental Other Expenses#

Transformation (M57)#

Scope of Appropriation and Expenses

Type, Title, Scope and Period of Appropriations Appropriations, Adjustments and Use $000

Transformation (M57)

This appropriation is limited to the design and implementation of a modern system for tax revenue and social policy administered by Inland Revenue.

Commences: 01 July 2017

Expires: 30 June 2021
Original Appropriation 1,112,607
Adjustments to 2016/17 -
Adjustments for 2017/18 26,254
Adjusted Appropriation 1,138,861
Actual to 2016/17 Year End -
Estimated Actual for 2017/18 220,168
Estimated Actual for 2018/19 320,876
Estimated Appropriation Remaining 597,817

What is Intended to be Achieved with this Appropriation

This appropriation is intended to design and implement a modern system for tax revenue and social policy administered by Inland Revenue that meets government priorities and responds to customers' changing expectations. This will lead to the more efficient collection of taxes and distribution of entitlements. It will also have wider benefits for New Zealand, including reduced compliance and operating costs, as well as the more agile delivery of policy changes in the future.

How Performance will be Assessed and End of Year Reporting Requirements

  2017/18 2018/19
Assessment of Performance Final Budgeted
Standard
Estimated
Actual
Budget
Standard

Primary measures#

     

Income tax is administered in START.

N/A N/A 30 June 2019

Employers are able to send their PAYE information to Inland Revenue on a payday basis (subject to legislation being enacted).

N/A N/A 30 June 2019

Working for Families is administered in START.

N/A N/A 30 June 2019

End of Year Performance Reporting

Performance information for this appropriation will be reported by Inland Revenue in the department's Annual Report 2019.

Current and Past Policy Initiatives

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000

Previous Government

           
Business Transformation 2015/16 226,000 190,000 156,000 70,000 64,000

2.3 - Departmental Capital Expenditure and Capital Injections#

Inland Revenue Department - Capital Expenditure PLA (M57)#

Scope of Appropriation

This appropriation is limited to the purchase or development of assets by and for the use of the Inland Revenue Department, as authorised by section 24(1) of the Public Finance Act 1989.

Capital Expenditure

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Forests/Agricultural - - -
Land - - -
Property, Plant and Equipment 14,000 14,000 13,000
Intangibles 109,096 109,095 130,200
Other - - -

Total Appropriation

123,096 123,095 143,200

Significant Projects

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Business Transformation 90,672 90,672 130,200
Total 90,672 90,672 130,200

What is Intended to be Achieved with this Appropriation

This appropriation is intended to invest in the renewal, upgrade and redesign of assets that support the delivery of the department's services. This includes the capital investment required for the implementation of business transformation.

How Performance will be Assessed and End of Year Reporting Requirements

Expenditure supports the delivery of the department's performance measures in accordance with the department's capital asset management priorities for 2018/19 which are:

  • implementation of business transformation (approximately 90%), and
  • maintain and improve business infrastructure including technology replacements and accommodation fit-outs (approximately 10%).

Transformation spending will be assessed against the performance measures agreed for the Transformation appropriation.

End of Year Performance Reporting

Performance information for this appropriation will be reported by Inland Revenue in the department's Annual Report 2019.

Reasons for Change in Appropriation

Inland Revenue has updated the capital cost estimates for the remainder of the Transformation programme to 2021/22. The forecast shows that while Inland Revenue expects to remain well within the approved funding envelope, the timing of some of the costs and contingencies has changed due to the planned release approach and the timing of key support activities across the programme. Capital spending in 2018/19 and out years has been updated to better align with the updated work programme.

Capital Injections and Movements in Departmental Net Assets

Inland Revenue Department

Details of Net Asset Schedule 2017/18
Estimated Actual
$000
2018/19
Projected
$000
Explanation of Projected Movements in 2018/19
Opening Balance 253,605 311,722  
Capital Injections 58,600 98,200 The cost estimates for the remainder of the Transformation programme have been updated. Capital injections have been adjusted to reflect the planned release approach and the timing of key support activities across the programme.
Capital Withdrawals (483) - Capital withdrawal of $483,000 for the business tax package initiative.
Surplus to be Retained (Deficit Incurred) - -  
Other Movements - -  

Closing Balance

311,722 409,922  

Part 3 - Details of Non-Departmental Appropriations#

Best Start Tax Credit PLA (M57)

Scope of Appropriation
This appropriation is limited to Best Start Tax Credits made to eligible recipients in accordance with section 185 of the Tax Administration Act 1994.
Expenses
  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation - - 80,000
What is Intended to be Achieved with this Appropriation

This permanent appropriation provides for payments to all families with a dependent child in the first year of the child's life to help with day-to-day living costs. Payments continue for low and middle income families until the dependent child turns three years old.

How Performance will be Assessed and End of Year Reporting Requirements

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for Best Start tax credit payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives
Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current  Government            
Families Package 2018/19 - 80,000 231,000 373,000 451,000
Reasons for Change in Appropriation

This is a new non-departmental benefits or related expenses appropriation effective from 1 July 2018.

Conditions on Use of Appropriation
Reference Conditions
Subpart MG of the Income Tax Act 2007 Sets out the entitlement and calculation of the Best Start tax credit.

Child Support Payments PLA (M57)#

Scope of Appropriation#

Child support payments to custodial persons who are not dependent on the state for financial support (expenses incurred pursuant to section 141 of the Child Support Act 1991).

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 288,000 288,000 300,000

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for the transfer of child support payments from non-custodial parents to custodial persons.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for child support payments to custodial persons under the Child Support Act 1991. Performance information is provided under the Services for Customers Multi-Category Appropriation relating to the administration of the payment is provided under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Previous Government            
Addressing child support legacy debt 2015/16 1,100 1,100 - - -
Child support compliance 2014/15 18,000 18,000 - - -

Reasons for Change in Appropriation#

The increase in 2018/19 is due to an increase in the number of child support cases as a result of general population growth, and forecast improvements to the labour market. The latter increases the amount collected from non-custodial parents and transferred to custodial persons, and it also decreases the likelihood that custodial persons are dependent on the state for financial support.

Conditions on Use of Appropriation#

Reference Conditions
Section 141 of the Child Support Act 1991 On payment of money received by the Commissioner by way of child support to qualifying custodians, if the qualifying custodian of the child is not a recipient of a social security benefit.

Child Tax Credit PLA (M57)#

Scope of Appropriation#

Extra assistance for low to middle income families who are not dependent on the state for financial support (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 800 800 600

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for payments to families with dependent children aged 18 or younger to help with day-to-day living costs.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for child tax credit payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Reasons for Change in Appropriation#

The child tax credit was replaced by the in-work tax credit in April 2006. People ineligible for the in-work tax credit could continue to receive the child tax credit until no longer eligible. The appropriation will continue to decline as the remaining recipients gradually change to the in-work tax credit or are no longer eligible.

Conditions on Use of Appropriation#

Reference Conditions
Subpart MZ of the Income Tax 2007 Sets out the entitlement for and calculation of the child tax credit

Family Tax Credit PLA (M57)#

Scope of Appropriation#

Family Support payments made to beneficiaries and non-beneficiaries during the year (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 1,696,000 1,696,000 2,628,000

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for payments to low to middle income families with dependent children aged 18 or younger to help with day-to-day living costs.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for family tax credit payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
Families Package 2018/19 (97,000) 540,000 530,000 520,000 510,000
Previous Government            
Budget 2017 Family Incomes Package 2017/18 97,000 371,000 316,000 308,000 308,000
Package for children living in material hardship 2015/16 (30,520) (28,550) (28,550) (28,550) (28,550)

Reasons for Change in Appropriation#

The family tax credit is payable to families with eligible children whose family income is below the relevant abatement cut-off point. The appropriation generally declines over time because income growth reduces entitlement for families with annual family incomes over the abatement threshold.

From 1 July 2018, family tax credit entitlements for children under 16 will increase to match the 16-18 year old entitlement rates. The family income abatement threshold will increase from $36,350 to $42,700 and consequentially fewer families will face abatement, although those which do will have their entitlements reduced at a faster rate of 25% (currently 22.5%). Overall, the combined changes will increase the family tax credit appropriation from 1 July 2018.

Conditions on Use of Appropriation#

Reference Conditions
Subpart MD 3 of the income Tax Act 2007 Sets out entitlement for and calculation of the family tax credit.

In-Work Tax Credit PLA (M57)#

Scope of Appropriation#

Extra assistance for low to middle income families where the person works a minimum of 20 hours per week and does not have a partner, or a person and their partner work a minimum of 30 hours per week (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 533,000 533,000 540,000

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for payments to families who work the required hours each week and have dependent children aged 18 or younger to help with day-to-day living costs.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for in-work tax credit payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Previous Government            
Budget 2017 Family Incomes Package 2017/18 - 2,000 2,000 2,000 2,000
Package for children living in material hardship 2015/16 100,000 95,000 95,000 95,000 95,000

Conditions on Use of Appropriation#

Reference Conditions
Sections MD 4-10 of the Income Tax Act 2007 Sets out the entitlement for and calculation of the in-work tax credit

KiwiSaver: Interest (M57)#

Scope of Appropriation#

To enable the payment of interest on KiwiSaver contributions as set out in the KiwiSaver Act 2006.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 10,000 8,000 10,000

What is Intended to be Achieved with this Appropriation#

This appropriation provides for interest payments to members on KiwiSaver contributions while they are held with Inland Revenue. Inland Revenue is required to hold members' contributions for three months from the date of the first contribution before transferring it to their KiwiSaver providers.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for KiwiSaver interest payments under the KiwiSaver Act 2006. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Conditions on Use of Appropriation#

Reference Conditions
Section 84-91 of the KiwiSaver Act 2006 Interest payable by Inland Revenue on KiwiSaver member contributions while they are being held by Inland revenue prior to being forwarded to KiwiSaver scheme providers.

KiwiSaver: Tax Credit (M57)#

Scope of Appropriation#

To enable the payment of a tax credit to KiwiSaver members and the payment of residual tax credits to employers as set out in the Income Tax Act 2007.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 832,000 822,000 850,000

What is Intended to be Achieved with this Appropriation#

This appropriation encourages participation in the KiwiSaver scheme by providing for an annual payment to contributing members aged 18 or over who meet the eligibility criteria.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for KiwiSaver tax credit payments under the KiwiSaver Act 2006. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Reasons for Change in Appropriation#

The increase in the tax credit in 2018/19 is due to an increase in the total number of contributing members as well as increases in their contributions due to forecast income growth.

Conditions on Use of Appropriation#

Reference Conditions
Part MK 1-8 of the Income Tax Act 2007 Provides a tax credit for members up to a cap of $10 per week.

Minimum Family Tax Credit PLA (M57)#

Scope of Appropriation#

Extra payment made to families where at least one parent is working for salary or wages (expenses incurred pursuant to section 185 of the Tax Administration Act 1994).

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 12,000 12,000 14,000

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for payments to families with dependent children aged 18 or younger to ensure that the annual income after tax of a family does not fall below $26,156 where at least one parent is working. 

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for minimum family tax credit payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services to Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
Families Package 2018/19 - 1,300 1,300 1,300 1,300
Previous Government            
Package for children living in material hardship 2015/16 1,800 1,800 1,800 1,800 1,800

Reasons for Change in Appropriation#

The increase in 2018/19 is due to the indexation-related increases to minimum family tax credit which are made each year. These maintain the level of the credit relative to welfare benefit rates. The Winter Energy Payment is included in future calculations of the minimum family tax credit entitlement from 1 July 2018 bringing the guaranteed minimum amount to $26,156 for the 2018/19 fiscal year.

Conditions on Use of Appropriation#

Reference Conditions
Subpart ME of the Income Tax Act 2007 Sets out the entitlement for and calculation of the minimum family tax credit.

Scope of Appropriation#

This appropriation is limited to Paid Parental Leave Payments made to parents in accordance with the Parental Leave and Employment Protection Act 1987.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 297,000 287,000 360,000

What is Intended to be Achieved with this Appropriation#

This appropriation provides for payments to eligible parents and adoptive parents when they take parental leave from their employment to care for their new-born or adopted child (under the age of six). These payments provide employment protected leave and compensate for the loss of income.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for paid parental leave payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
Extending paid parental leave to 26 weeks 2018/19 - 66,000 68,700 142,700 148,400
Previous Government            
Extending the duration of parental leave payments of preterm babies 2015/16 3,400 3,400 3,400 3,400 3,400
Paid parental leave payments 2014/15 63,900 65,200 65,200 65,200 65,200

Reasons for Change in Appropriation#

The increase in 2018/19 reflects the extension of paid parental leave payments from 18 to 22 weeks from 1 July 2018.

Conditions on Use of Appropriation#

Reference Conditions
Part 7A of the Parental Leave and Employment Protection Act 1987 Establishes the calculation for the payment of paid parental leave payments.

Parental Tax Credit PLA (M57)#

Scope of Appropriation#

This appropriation is limited to expenses incurred on parental tax credit as provided for in subpart MD of the Income Tax Act 2007 and as authorised by section 185 of the Tax Administration Act 1994.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 29,000 29,000 5,000

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for payments to families with a new-born baby for the first 10 weeks after the birth to help with day-to-day living costs.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for parental tax credit payments under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
Families Package 2018/19 - (28,000) (27,000) (26,000) (25,000)
Previous Government            
Package for children living in material hardship 2015/16 (480) (450) (450) (450) (450)
Parental tax credit 2014/15 13,000 13,000 13,000 13,000 13,000

Reasons for Change in Appropriation#

The decrease in 2018/19 is due to the replacement of the parental tax credit. From 1 July 2018, the parental tax credit, is replaced by Best Start payments and will only apply to children born before 1 July 2018. The residual appropriation in 2018/19 is intended to cover these claims to the extent that their entitlement period crosses into the 2018/19 fiscal year, and/or the claims are made at year end on 2018/19 tax returns.

Conditions on Use of Appropriation#

Reference Conditions
Sections MD 11-12 of the Income Tax Act 2007 Sets out the entitlement for (MD 11) and calculation of (MD 12) the parental tax credit.

Payroll Subsidy PLA (M57)#

Scope of Appropriation#

This appropriation is limited to the payment of a subsidy to a payroll agent undertaking employers' payroll-related tax compliance activities on their behalf, section 185 of the Tax Administration Act 1994.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 7,600 7,600 6,500

What is Intended to be Achieved with this Appropriation#

This permanent appropriation provides for payments to payroll agents who undertake payroll services on behalf of small businesses so they can focus their efforts on growing their businesses.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for the payment of a payroll subsidy under the Income Tax Act 2007. Performance information relating to the administration of the payment is provided under the Services for Customers Multi-Category Appropriation under the Services to Process Obligations and Entitlements category.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
Changes made during passage of the Taxation (Annual Rates for 2017-18, Employment and Investment Income, and Remedial Matters) Bill 2017/18 1,700 6,500 3,900 - -
Previous Government            
Making Tax Simpler: Better Administration of PAYE and GST 2017/18 (1,700) (7,300) (8,100) (8,900) (8,900)

Reasons for Change in Appropriation#

The decrease in 2018/19 is due to the payroll subsidy being phased out. From 1 April 2019, the eligibility threshold will be lowered to include only employers whose payrolls are below $50,000 of PAYE and employer superannuation contribution tax (ESCT) per annum (currently $500,000). The subsidy will cease altogether from 1 April 2020.

Conditions on Use of Appropriation#

Reference Conditions
Section RP 4 of the Income Tax Act 2007 Establishes the payment of a subsidy by the Commissioner to a listed PAYE intermediary for a payroll service that they provide to an employer (RP 4(1)). The calculation of the subsidy is specified in the Income Tax Act (Payroll Subsidy) regulations.

3.3 - Non-Departmental Borrowing Expenses#

Adverse Event Interest PLA (M57)#

Scope of Appropriation

This appropriation is limited to interest on Adverse Event Income Equalisation Reserve accounts held by taxpayers in the farming and agriculture business, authorised by section 65ZH(1) of the Public Finance Act 1989.

Expenses

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 10 10 10

What is Intended to be Achieved with this Appropriation

This appropriation provides for interest payments on deposits held in an adverse event income equalisation scheme. This scheme allows farmers who experience adverse events to carry income from forced livestock sales over to the next income year.

Environmental Restoration Account Interest PLA (M57)#

Scope of Appropriation#

This appropriation is limited to interest on Environmental Restoration accounts, authorised by section 65ZH(1) of the Public Finance Act 1989.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 2,000 2,000 2,000

What is Intended to be Achieved with this Appropriation#

This appropriation provides interest payments on deposits held in an environmental restoration account. The environmental restoration account allows businesses to set aside money to cover restoration costs for monitoring, avoiding, remedying or mitigating the detrimental environmental effects which may occur in later years.

Income Equalisation Interest PLA (M57)#

Scope of Appropriation#

This appropriation is limited to interest on Income Equalisation Reserve Scheme accounts held by taxpayers in the farming, fishing or forestry industries, authorised by section 65ZH(1) of the Public Finance Act 1989.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 7,000 7,000 10,000

What is Intended to be Achieved with this Appropriation#

This appropriation provides interest payments on deposits held in the income equalisation scheme. This scheme allows taxpayers in the farming, fishing, and forestry industries to make payments during the year to equalise income between different income years.

Reasons for Change in Appropriation#

The increase in 2018/19 allows for potential volatility in the use of the income equalisation scheme.

3.4 - Non-Departmental Other Expenses#

Impairment of Debt and Debt Write-Offs (M57)#

Scope of Appropriation

This appropriation is limited to bad debt write-offs for Crown debt administered by Inland Revenue, excluding child support and student loans and to amounts relating to the impairment of this debt.

Expenses

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 800,000 640,000 680,000

What is Intended to be Achieved with this Appropriation

This appropriation provides for the write-off of the Crown debt and for recognising an impairment to reflect the recoverable value of the Crown debt as at the end of a financial year, relating to general tax, KiwiSaver and Working for Families Tax Credits.

How Performance will be Assessed and End of Year Reporting Requirements

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for the impairment of debt and debt write-offs. Performance information relating to this expenditure is provided under the Services for Customers Multi-Category Appropriation under the Management of Debt and Outstanding Returns category.

Current and Past Policy Initiatives

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
Tax compliance activity - additional revenue 2018/19   10,700 15,000 15,000 15,000
Previous Government            
Revenue investment continuation 2017/18 (6,525) (6,525) (6,525) - -
Small business tax package 2016/17 (27,000) (53,000) (78,000) (100,280) (119,590)
Revenue investment 2015/16 11,601 11,601 11,601 - -
Unfiled returns 2014/15 19,698 15,758 - - -

Reasons for Change in Appropriation

The decrease in 2018/19 reflects forecast changes in the level of overdue debt, impairment and write-offs. Currently forecasts show a small increase in the overall level of debt in 2017/18 and for debt to remain at a similar level through 2018/19.

Initial Fair Value Write-Down Relating to Student Loans (M57)#

Scope of Appropriation#

This appropriation is limited to the initial fair value write-down of student loans.

Expenses#

  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000
Total Appropriation 638,000 615,000 610,000

What is Intended to be Achieved with this Appropriation#

This appropriation provides for incurring the expense relating to reductions in the nominal value of new student loan lending to reflect the present value of that lending.

How Performance will be Assessed and End of Year Reporting Requirements#

An exemption was granted under section 15D(2)(b)(ii) of the Public Finance Act 1989, as additional performance information is unlikely to be informative because this appropriation is solely for the initial fair value write-down of student loans. Performance information relating to this expenditure is available to the House of Representatives in the Student Loan Scheme Annual Report 2018.

Current and Past Policy Initiatives#

Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000
Current Government            
First year fees-free in 2018 2017/18 (52,627) (70,465) (71,951) (68,526) (72,383)
Increase student allowance and living costs loans by $50 2017/18 24,813 56,005 59,106 61,271 63,302
Tertiary Education Annual Maximum Fee Movement 2017/18 - 1,272 2,107 2,270 2,329
Previous Government            
Annual maximum fee movement for 2017 and 2018 2016/17 2,971 3,262 3,380 3,380 3,380
Response to the Syrian refugee crisis: implementation 2016/17 49 25 12 - -
Delivering support to graduate-entry students affected by the 7 EFTS limit to complete long undergraduate programmes 2015/16 797 969 627 - -
Investing to increase the number of engineering graduates 2015/16 108 477 371 990 1,224
Maintain the student allowance parental income threshold 2015/16 1,623 2,520 2,520 2,520 2,520
Set the annual maximum fee movement to 3% for 2016 2015/16 (5,173) (5,363) (5,363) (5,363) (5,363)
Supporting better pubic services and business growth within Vote Tertiary Education 2015/16 1,965 2,013 2,013 2,013 2,013
Additional medical places 2014/15 1,242 1,552 1,644 1,644 1,644
Suspending the student loan repayment threshold until 1 April 2017 2014/15 (11,260) (11,260) (11,260) (11,260) (11,260)

Reasons for Change in Appropriation#

The decrease in 2018/19 is mainly due to macroeconomic changes impacting on the initial fair value ratio used to calculate the write-down.

Part 4 - Details of Multi-Category Expenses and Capital Expenditure#

Multi-Category Expenses and Capital Expenditure#

Services for Customers (M57)

Overarching Purpose Statement
The single overarching purpose of this appropriation is to deliver a customer-centric, integrated tax and entitlement service experience for New Zealanders that is agile and intelligence-led.
Scope of Appropriation

Departmental Output Expenses

Investigations
This category is limited to undertaking investigation, audit and litigation activities administered by Inland Revenue.
Management of Debt and Outstanding Returns
This category is limited to activities to prevent returns becoming outstanding and debt becoming overdue, and to collect outstanding returns and overdue payments, whether for the Crown, other agencies or external parties.
Services to Inform the Public About Entitlements and Meeting Obligations
This category is limited to providing information and assistance to the public to make them aware of their obligations and entitlements. This also includes the provision of services to help Ministers fulfil their responsibilities to Parliament and the New Zealand public, other than policy decision-making responsibilities.
Services to Process Obligations and Entitlements
This category is limited to both the registration, assessment and processing of tax obligations and other entitlements, including associated review and Crown accounting activities, and the collection and sharing of related information with other agencies.
Expenses, Revenue and Capital Expenditure
  2017/18 2018/19
  Final Budgeted
$000
Estimated Actual
$000
Budget
$000

Total Appropriation

- - 647,659

Departmental Output Expenses

     
Investigations - - 171,983
Management of Debt and Outstanding Returns - - 152,255
Services to Inform the Public About Entitlements and Meeting Obligations - - 207,949
Services to Process Obligations and Entitlements - - 115,472

Funding for Departmental Output Expenses

     

Revenue from the Crown

- - 623,240
Investigations - - 171,679
Management of Debt and Outstanding Returns - - 150,233
Services to Inform the Public About Entitlements and Meeting Obligations - - 206,671
Services to Process Obligations and Entitlements - - 94,657

Revenue from Others

- - 24,419
Investigations - - 304
Management of Debt and Outstanding Returns - - 2,022
Services to Inform the Public About Entitlements and Meeting Obligations - - 1,278
Services to Process Obligations and Entitlements - - 20,815
Comparators for Restructured Appropriation
  2017/18 2018/19
Vote, Type and Title of Appropriation Final Budgeted
$000
Estimated Actual
$000
Budget
$000

Vote Revenue: Departmental Output Expense: Services for Customers

     
Investigations 152,717 148,613 -
Management of Debt and Outstanding Returns 139,944 135,679 -
Services to Inform the Public About Entitlements and Meeting Obligations 232,249 225,419 -
Services to Process Obligations and Entitlements 105,056 102,755 -

Total

629,966

612,466

-

What is Intended to be Achieved with this Appropriation

This appropriation is intended to ensure customers find it easy to meet their tax and social policy obligations and receive the payments they are entitled to.

How Performance will be Assessed for this Appropriation
  2017/18 2018/19
Assessment of Performance Final Budgeted
Standard
Estimated
Actual
Budget
Standard

Percentage of customers satisfied with the overall quality of service delivery from Inland Revenue (see Note 1).

90% 87.2% 90%

Percentage of customers who feel Inland Revenue makes it easy for people to get it right (see Note 1).

75% 78.5% 80%
What is Intended to be Achieved with each Category and How Performance will be Assessed
  2017/18 2018/19
Assessment of Performance Final Budgeted
Standard
Estimated
Actual
Budget
Standard

Departmental Output Expenses

     

Investigations

     
Primary measures
     

Percentage of customers whose compliance behaviour improves after receiving an audit intervention (see Note 2).

80% 85% - 88% 85%

Discrepancy identified for every output dollar spent.

$7.00 $6.50 - $7.00 $7.00

Percentage of litigation judgments found in favour of the Commissioner.

66% 90% 75%
Supporting measures
     

Percentage of audited customers who are satisfied with their experience (see Note 2).

70% 77% 75%

Management of Debt and Outstanding Returns

     
Primary measures
     

Percentage of returns filed by customers on time.

80% 84.9% 85%

Value of assessed revenue for every outstanding return dollar spent.

$45.00 $68.00 $45.00

Percentage of tax payments made by customers on time.

85% 87.9% 85%

Cash collected for every debt dollar spent.

$40.00 $60.00 $30.00

Percentage of child support assessments paid on time.

65% 69% 70%
Supporting measures
     

Average cost of finalising an outstanding return.

$16.00-$18.00 $16.00-$18.00 $18.00-$20.00

Percentage growth in outstanding returns.

0% or less 5.8% 0% or less

Percentage of collectable debt value over two years old.

60% or less 50% 55% or less

Percentage of new customer debt resolved within six months.

80% 80% 80%

Percentage of New Zealand liable parent child support debt cases resolved within 12 months.

75% 76.5% 75%

Services to Inform the Public About Entitlements and Meeting Obligations

     
Primary measures
     

Percentage of customers who perceive that Inland Revenue does enough to inform them of their rights and obligations (see Note 1).

80% 82.2% 85%

Percentage of customers who perceive that resolving issues with Inland Revenue requires low effort (see Note 1).

80% 75.8% 80%
Supporting measures
     

Average cost of a customer-initiated contact.

$35.00 or less $40.00 $35.00 or less

Percentage of telephone calls answered within two minutes.

75% 65% 75%

Percentage of all rulings reports, adjudication reports and public items that meet the applicable purpose, logic, alternatives, consultation, and practicality standards.

100% 100% 100%

Number of published or finalised public items that give the Commissioner's interpretation of the law.

25 25 25

Percentage of public items (including relevant public consultation), completed within 18 months of allocation.

85% 82.4% 85%

Percentage of adjudication cases completed within three months of receipt.

90% 88.9% 90%

Percentage of taxpayer ruling applications that have a draft ruling completed within three months of receipt.

90% 88.9% 90%

Percentage of non-qualifying ruling applications that have a draft ruling completed within six months of receipt.

90% 88.9% 90%

Percentage of submissions by the applicant on any draft ruling responded to within one month of receipt.

90% 88.9% 90%

Services to Process Obligations and Entitlements

     
Primary measures
     

Percentage of social policy and tax registrations processed within five working days.

85% 91.3% 85%

Percentage of income tax disbursements issued within six weeks.

85% 90.3% 85%

Percentage of GST disbursements issued within four weeks (see Note 3).

95% 95.3% 95%
Supporting measures
     

Percentage of income tax returns finalised within four weeks.

90% 92.1% 90%

Percentage of GST returns finalised within three weeks.

95% 97.8% 95%

Percentage of employer monthly schedule employee deductions finalised within four weeks.

95% 99.8% 95%

Average cost of processing income tax returns, GST returns and employer monthly schedules.

$4.00 or less $2.50 $4.00 or less

Percentage of notices and statements produced without error.

98.5% 99.8% 99.8%

Percentage of tax credit claim payments made within three weeks.

90% 91.3% 90%

Percentage of Working for Families Tax Credit (WfFTC) payments made on the first regular payment date following an application.

95% 99.1% 95%

Percentage of paid parental leave payments issued to customers on the first pay day following the agreed date of entitlement.

97% 97% 97%

Percentage of child support administrative review decisions issued within seven weeks.

85% 89.7% 90%

Percentage of child support assessments issued within two weeks.

80% 81.4% 80%

Note 1 - Actual performance measured using a sample of the customer population.

Note 2 - Actual performance measured using a sample of audit cases.

Note 3 - Section 46 of the Goods and Services Tax Act 1985 stipulates refunds are to be issued within 15 working days unless selected for a screening or investigation. The four week's measure includes additional time for screening or investigation.

All performance measures cover the breadth of Inland Revenue's business (tax, social policy and KiwiSaver).

End of Year Performance Reporting

Performance information for this appropriation will be reported by Inland Revenue in the department's Annual Report 2019.

Current and Past Policy Initiatives
Policy Initiative Year of
First
Impact
2017/18
Final Budgeted
$000
2018/19
Budget
$000
2019/20
Estimated
$000
2020/21
Estimated
$000
2021/22
Estimated
$000

Investigations

           

Current Government

           
Budget 2018 Research and Development Tax Credit Implementation 2018/19 - 120 150 80 80

Previous Government

           
Revenue investment continuation 2017/18 9,584 9,584 9,584 - -
Business tax package 2016/17 150 100 - - -
Revenue investment 2015/16 16,602 16,602 16,602 - -
Share of costs for Budget 2015 whole-of-government initiatives 2015/16 (240) (180) (180) (180) (180)
Cashing out research and development tax losses 2014/15 119 119 119 119 119
Property compliance initiative continuation 2014/15 5,000 5,000 5,000 5,000 5,000

Management of Debt and Outstanding Returns

           

Current Government

           
Budget 2018 Tax Compliance Activity - Funding to Collect Additional Revenue 2018/19 - 5,850 5,850 5,900 5,900

Previous Government

           
Revenue investment continuation 2017/18 10,400 10,400 10,400 - -
Business tax package 2016/17 890 630 - - -
Share of costs for Budget 2015 whole-of-government initiatives 2015/16 (260) (190) (190) (190) (190)
Child support compliance 2014/15 6,734 6,757 - - -
Unfiled returns 2014/15 6,675 6,675 - - -
Property compliance initiative continuation 2014/15 1,650 1,650 1,650 1,650 1,650
Student loans overseas-based borrowers compliance initiative continuation 2014/15 4,850 4,850 4,850 4,850 4,850

Services to Inform the Public About Entitlements and Meeting Obligations

           

Current Government

           
Budget 2018 Research and Development Tax Credit Implementation 2018/19 - 480 600 320 320
Families Package Implementation 2018/19 - 1,010 410 350 350

Previous Government

           
Budget 2017 family incomes package implementation 2017/18 800 - - - -
Business tax package 2016/17 420 310 - - -
Share of costs for Budget 2015 whole-of-government initiatives 2015/16 (400) (300) (300) (300) (300)
Cashing out research and development tax losses 2014/15 475 475 475 475 475
Child support compliance 2014/15 2,245 2,253 - - -
Unfiled returns 2014/15 2,861 2,861 - - -

Services to Process Obligations and Entitlements

           

Current Government

           
Budget 2018 Research and Development Tax Credit Implementation 2018/19 - 600 750 400 400
Families Package Implementation 2018/19 - 2,050 840 710 710

Previous Government

           
Budget 2017 family incomes package implementation 2017/18 1,600 - - - -
Automatic Exchange of Information 2016/17 2,620 3,300 2,700 2,400 2,400
Share of costs for Budget 2015 whole-of-government initiatives 2015/16 (127) (103) (103) (103) (103)
Cashing out research and development tax losses 2014/15 594 594 594 594 594
Reasons for Change in Appropriation

Inland Revenue has simplified its appropriation structure and moved to a multi-category appropriation (MCA). The previous four separate appropriations are now grouped into a single overarching appropriation to deliver a customer-centric, integrated tax and entitlement service experience for New Zealanders that is agile and intelligence-led.

The MCA for 2018/19 has increased because Inland Revenue has transferred savings made in 2017/18 into the following year. These efficiencies and other savings were generated through the application of transformation related workforce management principles, early transformation benefits associated with moving customers to online channels, and the renegotiation of vendor contracts in 2017/18. These efficiencies and other savings have been transferred to 2018/19 and out years to ensure that Inland Revenue is well placed to deliver administrative savings and meet the required level of contribution to the Transformation programme.

The increase is also due to additional funding received from the Families Package Implementation, Budget 2018 Research and Development Tax Credit Implementation, and Budget 2018 Tax Compliance Activity - Funding to Collect Additional Revenue.