Tax debt has become one of the defining pressures on New Zealand small businesses. As at 30 June 2025, businesses owed Inland Revenue about $9.3 billion in overdue tax, up $1.4 billion in a year. IRD-initiated liquidation applications rose 49% to 650 in the year to June 2025, and bank deduction notices climbed sharply. Budget 2026 then added further funding for debt collection. Inland Revenue is also the largest petitioning creditor in court-appointed insolvencies, according to Centrix data reported in 2026.
None of that means you’re in trouble if you owe tax. It means the window for quiet, informal delay has closed. Here are the options.
Option 1: an instalment arrangement
IRD lets businesses split tax debt into weekly or fortnightly payments, arranged through myIR or by contacting IRD. For larger debts, IRD may ask for a 12-month cash flow forecast (form IR591) to understand your position.
Pros: no loan costs; keeps the relationship with IRD constructive; flexible for modest debts. Cons: interest and some penalties generally continue; missing an instalment can end the arrangement; new debt during the arrangement is a serious problem.
Despite hundreds of thousands of arrangements being set up, only a small share of total tax debt was under an active repayment plan as at early 2025, according to reporting on IRD figures. Arrangements work best when entered early.
Option 2: financial relief
In genuine hardship, IRD may write off certain penalties or amounts. Companies, partnerships and trusts follow a streamlined application because IRD usually already holds much of their information. Relief isn’t automatic, and IRD will want to understand your situation in detail.
Option 3: pay in full from your own resources
If the business has the cash, or can release it by collecting debtors, trimming stock or selling a surplus asset, paying in full stops interest and penalties accruing and removes enforcement risk. Weigh this against leaving the business too thin to trade.
Option 4: refinance with a loan
Borrowing to pay IRD in full swaps a tax creditor for a commercial one. It generally makes sense when:
- the debt is large, and instalments would squeeze trading;
- enforcement has started: a deduction notice, statutory demand or liquidation threat;
- you want one predictable repayment;
- you own property with equity.
Many banks are reluctant to lend for tax arrears. Non-bank lenders are generally more willing. Through our panel, property-secured business loans from $20,000 to $1m can refinance or pay out IRD debt, and bad credit, defaults and arrears are considered case by case. See paying IRD debt without a bank.
Option 5: combine them
Often the best answer is a mix: pay a lump sum now, via cash or a loan, to reduce the debt to a level where a short arrangement comfortably clears the rest.
Comparing the options
| Instalment arrangement | Relief | Pay from own funds | Refinance with loan | |
|---|---|---|---|---|
| Speed to resolve | Days to weeks to agree | Weeks+ | Immediate | Days |
| Ongoing IRD interest | Yes, on balance | Depends | Stops | Stops (loan costs instead) |
| Enforcement risk | Low if kept | Depends | None | None from IRD |
| Cash flow impact | Instalments | Varies | Large one-off | Loan repayments |
| Best for | Modest, manageable debt | Genuine hardship | Businesses with spare cash | Large or escalated debt, property equity |
What happens if you do nothing?
IRD’s escalation path can include reminder letters, phone contact, deduction notices to your bank, statutory demands, and applications to liquidate companies. The later you engage, the fewer options remain. For sole traders and partners, personal assets can be exposed.
Talking to Inland Revenue: practical tips
- Call before the due date if you know a payment will be late.
- Know your numbers: what you owe, by tax type and period, and what you can realistically pay each week.
- Offer something now, even a partial payment, to show good faith.
- Keep new returns filed on time, even if you can’t pay in full. Unfiled returns lead to default assessments.
Fixing the cause
Whichever option you choose, prevent a repeat:
- Separate tax money. A dedicated account for GST and PAYE, topped up every time you’re paid.
- Right-size provisional tax. Talk to your accountant about the methods available.
- Check margins. If tax regularly can’t be paid, pricing may not be covering costs.
- Forecast. A simple 13-week cash flow forecast shows tax crunches coming.
Where we fit
We arrange property-secured business loans that can pay out IRD debt, from $20,000 to $1m, and unsecured loans for businesses usually trading 6+ months. Contact Inland Revenue first; then, if refinancing looks worth comparing, a 60-second enquiry starts the conversation.