Inland Revenue says it has shut down a coordinated tax fraud scheme that spread by word of mouth through the transport industry and then across the country, stopping just over $4 million in bogus expense claims before the money left the building.
In a media release published on Wednesday, the department said a specialist team noticed some unusual returns earlier this month and took a closer look. What it found was thousands of people filing amended income tax returns loaded with expenses they were never entitled to claim.
“Our investigation has identified, and stopped, nearly three thousand fraudulent amended returns, including 542 received in just one night,” Inland Revenue’s Sarah Bourke said.
Not all of it was caught in time. “$151,787 of refunds were paid out before a new measure was put in place to stop the fraud while $4.015m in bogus claims was stopped. Inland Revenue is taking action to recover the money with one individual already under an instalment arrangement to pay it back,” Bourke said.
Bourke said the scheme appeared to be spreading through a community or workplace network rather than being run through any single organisation. “What initially appeared to be concentrated in the transport industry has broadened significantly to other areas across the country,” she said.
The clearest sign of how it was travelling turned up at the counter. “As well several customers came into our Front of House in Auckland and Wellington earlier in the week wanting to reset their myIR passwords so they could amend their returns,” Bourke said. “They told IR staff the word in the transport industry was that there were people who knew how to get extra money and mentioned someone on social media offering to help people with the expense claims.”
The reason nearly 3,000 amended returns set off alarms inside the department is that a New Zealander who earns only salary, wages or investment income has almost nothing to claim in the first place. Inland Revenue’s own guidance on non-business expenses runs to five items and stops there. You can claim what you paid an accountant or tax agent to complete and file your return. You can claim income protection insurance premiums where the payout would be taxable. You can claim commission charged on your interest and dividend income, though not bank fees. You can claim interest on money you borrowed to buy shares or make an investment that will produce taxable income. And you can claim interest you have already paid to Inland Revenue for late payment of tax.
That is the entire list for someone on a payslip. Steel-capped boots, tools, meals on the road, a phone used for work, the drive to and from a depot, none of it is deductible for a New Zealand wage earner, no matter how real the spending was. Australia lets employees claim work-related expenses and its tax season is built around them. New Zealand removed that ability for salary and wage earners decades ago and never brought it back. Anyone typing a figure into the other expenses field in myIR on the strength of a video is claiming something the law simply does not allow.
Bourke set out the consequences plainly. “People who claim expenses that are not legitimate could be subject to sanctions, including a 150% evasion shortfall penalty and/or prosecution, as well as having to pay the money back,” she said. That penalty is calculated on the tax that was avoided, so somebody who wrongly pulled a $1,000 refund can find themselves repaying the $1,000 and a further $1,500 on top of it.
“Work is already underway to identify people promoting/running the scheme. If anyone is thinking they can make a quick buck by joining in the scheme they should think again. Inland Revenue is aware, can see what is happening and will take action. There are always consequences,” Bourke said. The department added that it has since received anonymous information about the scheme from members of the public.
Deloitte tax specialist Robyn Walker told RNZ the likeliest explanation was that people who would normally have their tax calculated for them automatically had seen online that they could log in and adjust the assessment themselves. “It’s quite concerning,” she said. Walker said the fact the department picked the pattern up early showed the system was working, but argued the response now needed to be firm. “They do need to take a hard line with it,” she said.
There is a much larger cautionary tale across the Tasman. The Australian Taxation Office launched Operation Protego in April 2022 after banks began flagging suspicious refunds, and it turned into the biggest tax fraud in that country’s history. The method was different, involving an invented business, a fraudulent Australian Business Number application and fictitious activity statements filed to harvest GST refunds, but the delivery mechanism was the same. In an August 2023 statement the ATO said it had “stopped $2.7 billion being paid to fraudsters” and taken compliance action against more than 56,000 people, with over 100 suspected perpetrators arrested. “This was an unprecedented threat proliferated via social media and is now contained,” the office said at the time.
The New Zealand version is far smaller, and it is worth being clear about that. It is also structurally easier to join. No fake business is required and no new registration is needed, just an existing myIR login and a few keystrokes in a field that is already sitting there. That is why it moved at the speed it did. Five hundred and forty-two amended returns in a single night is not the signature of a professional syndicate. It is what a message looks like as it goes around a workplace.
Anyone who has amended a return in the past few weeks on somebody else’s advice can go back into myIR and correct it. Doing that voluntarily, before the department comes calling, is the cheapest option on the table.
Have you seen these claims doing the rounds at your workplace or in your social media feed? Tell us what you have come across in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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