The tax department has cut 770 full-time jobs and is now halfway through a planned 1500 job cull being undertaken as part of its $1.6 billion transformation project.

On Thursday the Inland Revenue Department will close for a week as it migrates 19 million personal tax files onto a new system in the third stage of its overhaul.

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1.6 million Kiwis getting tax refunds

But alongside the massive system upgrade the IRD will slim down as more processes become automated and digitised.

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From 6000 staff in 2016, it has already reached the halfway point with the rest due to be cut by 2021.

Naomi Ferguson, Inland Revenue Commissioner, said since the business case had been set out in 2015 it had been helping staff upskill and shrinking through natural attrition.

"As staff have left over past few years we have used natural attrition to think about how we downsize. We do have quite a large number of staff on short term contracts at the moment knowing that actually we won't need the same number of staff in the long term.

It has around 1000 staff alone working on the transformation project itself with testing, training and learning new skills.

Ferguson said short-term contractors were being offered the same training as existing staff and opportunities to learn how to work with new digital technology so they had something on their CV at the end of the process.

Last year it reorganised front-line staff cutting out a layer of management in the process and making 140 people redundant.

"One of the reasons why [we did that] with our front line staff is we wanted to give them the confidence of new roles. They know we have been managing that space and they can see that that is all very visible."

Ferguson admitted some staff were still questioning what their future was at the organisation.

"Are there still some people thinking where is my future? Of course - there is a whole range."

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She said some had worked for the tax department for 40 years and wanted to see the changes come through and were then happy to move on but others wanted to stay and see where the opportunities lay.

"Our staff can see how we are managing this to create space and for many that has been a reassuring part of it."