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New Zealand’s voluntary disclosure rules can reduce an applicable shortfall penalty, but they do not erase the tax shortfall itself. Under Inland Revenue’s interpretation statement issued on 27 March 2026, a full disclosure made before you are first notified of a pending audit or investigation can reduce some penalties by 100% and others by 75%; after notice but before the audit or investigation starts, the reduction is 40%. The amount depends on the penalty category, the timing and completeness of the disclosure, and any other statutory reductions that apply.
What does voluntary disclosure do?
A voluntary disclosure is a taxpayer’s disclosure to Inland Revenue of a tax shortfall after taking a tax position. If the Commissioner considers the disclosure full, section 141G of the Tax Administration Act 1994 allows the shortfall penalty to be reduced. Inland Revenue’s March 2026 interpretation statement says the disclosure must provide all the details of the shortfall, and that the reduction depends on when it is made and which penalty category applies. IS 26/09 is the current detailed source for these reduction rules.
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The relief applies to a shortfall penalty, not to the underlying tax. Inland Revenue considers the information and works out the tax owed; it may ask for more information. A disclosure therefore does not promise that the tax, interest or every other consequence will be cancelled. The agency’s pages on lowering a shortfall penalty and making a voluntary disclosure describe the public-facing process.
How much can a voluntary disclosure reduce the penalty?
The potential reduction depends on whether Inland Revenue has notified you of a pending audit or investigation and whether that audit or investigation has started. The figures below are reductions to the penalty, not percentages deducted from the tax shortfall.
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| When the full disclosure is made | Penalty category | Possible reduction |
|---|---|---|
| Before you are first notified of a pending audit or investigation | Not taking reasonable care; unacceptable tax position | 100% |
| Before you are first notified of a pending audit or investigation | Gross carelessness; abusive tax position; evasion | 75% |
| After notification, but before the audit or investigation starts | The categories above | 40% |
These are Inland Revenue’s published rates under its March 2026 interpretation statement. The 100% reduction is limited to the two categories shown; it is not the general pre-audit rate for every type of shortfall penalty. Once an audit or investigation has started, the 40% post-notification reduction described above is no longer available on that timing basis. That does not establish that every other kind of relief is unavailable; the result depends on the rules and facts that apply.
Inland Revenue’s public guidance lists headline starting rates of 20% for not taking reasonable care, 20% for an unacceptable tax position, 40% for gross carelessness, 100% for an abusive tax position and 150% for evasion. These are penalty rates, not the voluntary-disclosure reductions. Classification and thresholds differ by category, so a taxpayer cannot choose a category simply to obtain a more favorable rate. See Inland Revenue’s shortfall penalties guidance.
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Suppose, solely to illustrate the arithmetic, a $10,000 tax shortfall were assessed in the 40% gross-carelessness category, producing a $4,000 penalty before reductions. A 75% reduction of that penalty would leave $1,000 of penalty; it would not reduce the $10,000 tax shortfall. If the same hypothetical penalty qualified for a 40% reduction, $2,400 of penalty would remain. These examples apply the published percentages to a hypothetical penalty only; they do not determine how Inland Revenue would classify or assess a real case, or account for other statutory rules.
What counts as a full disclosure?
Inland Revenue must be able to understand the shortfall and make a correct assessment. Its 2026 interpretation statement describes relevant information as including the taxpayer’s identity and contact details, the tax types and periods involved, why the shortfall happened, the amount, and the facts needed to assess the correct tax. Any other information necessary to assess the shortfall should also be included. A partial explanation or a message that merely says there may be an error may not supply all the details needed for a full disclosure.
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In practice, assemble the facts before submitting: identify each affected tax type and period, explain what happened, provide the figures and supporting details you have, and identify any outstanding returns. Inland Revenue asks taxpayers to gather an IRD or GST number, the reason for disclosure, the year or tax period, and any outstanding returns. If something relevant is missing or uncertain, make that clear rather than presenting an unsupported estimate as settled fact; Inland Revenue may ask for further information. The statutory question is whether the Commissioner considers the disclosure full.
Why does timing matter, and whose notice counts?
For the higher pre-notification reductions, the full disclosure must be made before you are first notified of a pending audit or investigation. For the 40% reduction, it must be made after notification but before the audit or investigation begins. The sequence matters: a taxpayer who has already received notice should not assume that the pre-notification rate remains available just because no audit meeting has taken place yet.
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Disclosure should be made as soon as you identify a possible shortfall. Waiting to finish every internal review can put a pre-notification reduction at risk if Inland Revenue sends a notice in the meantime; at the same time, the information must still be complete enough to meet the full-disclosure requirement. The practical task is to gather the facts quickly, disclose promptly, and explain the affected periods and circumstances accurately.
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How do I make a voluntary disclosure to Inland Revenue?
Individuals, businesses, trusts and employers can make a disclosure. Inland Revenue lists several channels, so the process is not limited to a single online form.
- Identify the affected tax and periods. Gather your IRD or GST number, relevant tax types and periods, outstanding returns, the amount involved if known, and the facts explaining the error.
- Check notification history. Review whether you or a relevant person, such as an officer or tax adviser, has received a notice of a pending audit or investigation. Note the date and recipient.
- Choose a submission channel. Inland Revenue lists a message through myIR, the IR281 voluntary disclosure form, a phone call, a letter, an office visit, an interview, and the myIR amendment option where available. Follow the current instructions for the chosen channel on its voluntary disclosure page.
- Include the full explanation and relevant details. State what happened and give Inland Revenue the information it needs to assess the correct tax for each affected period. Keep a copy of what you submit and any subsequent correspondence.
- Respond to follow-up requests. Inland Revenue considers the disclosure, determines the tax owed and may ask for more information. A requested clarification or missing document can matter to the assessment.
The listed channels are ways to communicate with Inland Revenue; the information itself is what makes a disclosure potentially full. An amendment option may be available in myIR, but its availability does not by itself establish that all relevant tax types or periods have been disclosed. Check the official guidance for the route that fits the correction.
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Can other reductions be added to the voluntary-disclosure reduction?
Do not add every available reduction together or apply the same relief multiple times. A shortfall penalty can only be reduced once for the same shortfall, and statutory rules govern interactions among voluntary-disclosure relief, temporary-shortfall relief and other reductions. Inland Revenue’s penalty-lowering guidance and its 2026 interpretation statement explain that the outcome depends on those interaction rules.
This means the headline voluntary-disclosure percentage is not always the final result. First identify the penalty category and timing; then consider whether another statutory reduction applies and how the legislation orders or limits the reductions. The available information does not support calculating an individual result without the assessment facts, including the shortfall, conduct, periods and notification history.
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Is a correction when filing the same as voluntary disclosure?
No. Section 141G concerns a shortfall after a taxpayer has taken a tax position and later discloses the shortfall. Inland Revenue’s 2026 interpretation statement distinguishes this from section 141H, which concerns adequate disclosure of a tax position at the time it is taken and may reduce certain penalties by 75%. Those are different mechanisms: do not treat a correction made after discovering an error as though it were the same as disclosure made when filing.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.When should I get professional help?
A tax agent or accountant experienced with Inland Revenue voluntary disclosures may be useful when several periods or tax types are involved, the disclosure’s completeness is uncertain, or the timing of a notice is unclear. The amount and category of any penalty depend on the facts, and an adviser cannot guarantee a particular reduction. Inland Revenue’s submission channels remain available directly to taxpayers, including through myIR and IR281.
This explanation covers New Zealand’s Inland Revenue rules reflected in IS 26/09, dated 27 March 2026, and the agency guidance cited above. It is general information, not an assessment of a particular taxpayer’s liability or legal advice. For a specific case, the decisive details include what tax position was taken, the shortfall and periods, the conduct Inland Revenue attributes, whether a relevant notice was received, and whether the disclosure contains all assessment-relevant information.
Frequently Asked Questions
Can I make a voluntary disclosure if Inland Revenue has already started an audit?
You can still contact Inland Revenue and disclose the facts, but the 40% post-notification reduction described here requires disclosure before the audit or investigation starts. Whether another form of relief or another consequence applies depends on the particular facts and statutory rules.
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Do I need a tax agent to disclose a tax shortfall in New Zealand?
Inland Revenue lists direct routes such as myIR, IR281, phone, letter and other contact options, so its process is not limited to disclosures made by an adviser. A tax professional may help where multiple periods, tax types or notice questions make completeness difficult to assess.
What if I discover mistakes in more than one tax return?
Identify each affected tax type and period so Inland Revenue can consider the complete shortfall, rather than describing only one return if others are affected. Keep the explanations and figures organized by period; the assessment depends on the full set of relevant facts.
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Does a voluntary disclosure mean Inland Revenue will not charge interest?
No such guarantee follows from the penalty reduction rules. The disclosure may reduce an applicable shortfall penalty, while the tax owed and other consequences are assessed separately under the rules that apply.
