Recently made a voluntary disclosure? Don’t forget about Commissioner’s discretion

• Commissioner’s discretion allows taxpayers who have made a voluntary disclosure, but have not previously filed a return for the relevant tax type, to use tax pooling via Tax Traders to reduce interest costs – provided Inland Revenue is satisfied certain criteria are met.
• Since the rules were broadened in March 2022, there has been a reasonable uptake and success in gaining Commissioner’s discretion across a wider range of tax types, including GST, employment-related taxes, and more.
• Inland Revenue assesses each application on a case-by-case basis, but inconsistencies can occur; advisers are encouraged to challenge declined requests if they believe the criteria are met, as successful access to tax pooling can result in material savings for clients.

With Tax Traders seeing an increase in the number of voluntary disclosures being made by taxpayers, we thought we’d spend some time looking at Commissioner’s discretion for tax pooling and how it may be able to assist your clients.  

So, what is Commissioner’s discretion? 

In situations where a voluntary disclosure has been made, but no previous return for the tax type has been filed, the Commissioner of Inland Revenue (IR) has discretion to allow your client to use Tax Traders to reduce their interest cost.  

Historically, this discretion was only granted for income tax and RWT – but in March 2022, it was widened to include voluntary disclosures for other tax types (see below).

Based on what Tax Traders is seeing across our client base, there has been a reasonable uptake and success in gaining Commissioner’s discretion since it was broadened three years ago. 

Data released under the Official Information Act by IR shows that 381 taxpayers sought Commissioner’s discretion to use tax pooling between 1 April 2022 and 30 June 2025, with 251 of those applications being granted.

What are the criteria my clients need to meet to be granted Commissioner’s discretion to? 

Broadly speaking, IR must be satisfied that:  

• Your client has been taking reasonable care to comply with their tax obligations. The ‘reasonable care’ test is like that used when applying shortfall penalties. It involves establishing what a reasonable person would do in the same circumstances, considering the taxpayer’s age, health, and background. 

• The voluntary disclosure relates to a new liability, not a liability that arose from a return by your client or an assessment of your client. 

• The voluntary disclosure is made within a reasonable time after your client becomes aware of the new liability, and before IR has contacted them. ‘Reasonable time’ is generally around three months after the knowledge of any new tax liability, although this will be determined on a case-by-case basis by IR. 

• Your client notifies the Commissioner of the details of the new liability and the notification results in an assessment of the new liability or in an obligation to pay the new liability. 
  

What tax types can Tax Traders assist with if Commissioner's discretion is granted? 

If your client satisfies all criteria above and receives Commissioner's discretion, then Tax Traders can assist with: 

• Income tax 

• GST 

• Withholding taxes (RWT, NRWT) 

• Employment-related taxes (PAYE, FBT, ESCT, RSCT) 

• Further income tax 

• Imputation penalty tax 

• Approved issuer levy. 
  

Thinking of seeking Commissioner’s discretion? 

IR considers each application for Commissioner’s discretion on a case-by-case basis, although we've seen inconsistencies on how it applies the rules.

If you believe you have good justification for your client to seek Commissioner's discretion and have had your request declined, feel free to contact us as we may be able to assist.

Access to tax pooling, especially for reassessments, can result in material savings for your client's. Make sure you don't miss this opportunity where your client meets these requirements. 

Please get in touch with our team if you have any questions.