Falling behind with Inland Revenue is incredibly common among young, growing businesses. It usually isn’t recklessness — it’s cash that went into stock, staff or a slow-paying client, leaving the GST or PAYE short. The key is what you do next, because tax debt that’s ignored tends to grow quickly.
What happens if you don’t pay IRD on time?
- Penalties apply to late payments and late filing.
- Interest accrues on unpaid amounts.
- Collection activity steps up over time.
In October 2025, Inland Revenue said it had begun contacting customers with overdue GST and employer tax debts of more than $1,000 that were between six months and five years old. It described an escalation path of phone calls, follow-up messages, in-person visits, deductions directly from bank accounts, and ultimately insolvency proceedings — and reported sending 16,500 bank deduction notices since mid-June, a 25% increase on the year before (Inland Revenue).
A bank deduction can land at the worst possible moment — right before payroll or a supplier payment — so dealing with the debt on your terms is much better than waiting.
Option 1: An IRD instalment arrangement
Inland Revenue offers instalment arrangements for people and businesses who can’t pay in full by the due date. You apply through myIR.
How it helps: it spreads the debt over time and, as IRD points out, making agreed regular payments means you’ll pay fewer penalties than if you just paid bits and pieces without an arrangement (Inland Revenue).
Keep in mind:
- it must be a formal agreement — irregular payments without one don’t give the same relief,
- interest may continue on the outstanding balance,
- you’ll need to keep current tax obligations up to date alongside the arrangement,
- missing arrangement payments can end it.
Option 2: Pay it out with a business loan
A property-secured business loan can refinance or pay out IRD debt in one go. Through Business Loanz, these loans:
- run from $20,000 to $1m,
- are secured on NZ property you or a supporting party own — first or second mortgage,
- need no financials or tax returns for the initial assessment,
- consider bad credit, defaults and arrears case by case,
- can be funded within 24 hours of approval in some cases.
For businesses trading about six months or more with healthy turnover, an unsecured loan or line of credit may also help cover a tax bill, particularly if the problem is a one-off timing crunch rather than a long-running debt.
Arrangement vs loan: how to compare
| IRD instalment arrangement | Business loan | |
|---|---|---|
| Who you owe | Inland Revenue | A lender |
| Speed | Depends on IRD’s agreement | Some decisions same day; property funding possibly within 24 hours of approval |
| Penalties and interest | Reduced penalties; interest may continue | IRD debt cleared; loan has its own cost |
| Collection pressure | Continues if the arrangement breaks | IRD debt paid off |
| Flexibility | Set by IRD | Structured to suit your cash flow |
The right answer depends on the amount, how long the debt has been outstanding, your cash flow and the cost of each option. Some businesses use both: a loan to clear the oldest debt and an arrangement for a smaller balance.
Fix the cause, not just the debt
Whichever route you choose, stop it happening again:
- Separate tax money. A dedicated savings account that receives a slice of every payout.
- Pay PAYE first. Employer deductions are your staff’s money held on trust; never use them for other bills.
- Match GST filing to cash flow. Two-monthly or monthly returns keep each bill smaller. Consider the payments basis if your turnover is $2m or less. See our GST guide.
- Plan provisional tax. Especially in your early years — see provisional tax in your first years.
- Get a weekly cash forecast with tax dates in it.
A step-by-step plan if you’re behind
- Get the full picture. Log in to myIR and write down every amount owing: GST, PAYE, income tax, provisional tax, plus penalties and interest.
- File any overdue returns. IRD can estimate your tax if returns are missing, and estimates are rarely in your favour. Filing also shows good faith.
- Work out what you can afford. Use a weekly cash forecast to see what the business can realistically pay each month without falling behind on current obligations.
- Contact IRD. Call or use myIR before they contact you. Explain the situation and what you can pay.
- Compare options. An instalment arrangement, a business loan to clear the debt, or a mix. Ask your accountant to sanity-check the plan.
- Separate future tax. Set up a tax savings account so the next return doesn’t add to the problem.
- Review monthly. Check the plan against reality and adjust early if something changes.
Why dealing with IRD debt helps your borrowing
Tax debt affects more than your relationship with Inland Revenue. Some tax debt that meets the statutory reporting criteria can appear on business credit reports (Centrix), and lenders see unpaid GST and PAYE as a sign of cash-flow stress. Clearing it — or being on a formal arrangement that you’re keeping to — puts you in a much better position for future funding, supplier accounts and leases.
Common mistakes
- Paying suppliers and skipping PAYE. Employer deductions are your staff’s money; falling behind on them is treated seriously.
- Making ad-hoc payments without an arrangement. It helps a little, but penalties and interest can continue at the full rate without a formal agreement.
- Ignoring letters. IRD’s escalation steps get more disruptive over time, and bank deductions can arrive at the worst moment.
- Borrowing without fixing the cause. A loan clears the debt, but if the business keeps spending its GST, the problem returns.
Talk to someone early
The earlier you act, the more options you have. If you’d like to explore paying out IRD debt or covering an upcoming tax bill, send an enquiry — it takes about 60 seconds and doesn’t affect your credit score. You can also read more on our GST and provisional tax funding page.