Why do so many businesses end up owing IRD?
Because tax is the easiest bill to put off. GST and PAYE sit in your account between collection and payment, and when a customer pays late or a quiet month hits, that money quietly becomes working capital. It’s one of the most common situations we hear about — and it’s become more pressing.
Inland Revenue’s own 2025 annual report shows overdue tax and entitlement debt climbed to around $11.1 billion by mid-2025, with overdue GST and employer-related debt both growing strongly. IRD has also stepped up enforcement, referring 650 cases to court for liquidation in 2024–25 — up 49% on the year before. In its November 2025 Financial Stability Report, the Reserve Bank noted that roughly 70% of recent company liquidations were initiated by tax authorities.
None of that is meant to scare you. It’s the reason a good friend would say: deal with it now, while you still have choices.
What does IRD charge when tax is paid late?
According to Inland Revenue, late payment penalties generally work in stages:
- a 1% penalty the day after the due date;
- a further 4% penalty on anything still unpaid (including penalties) on day seven;
- for some tax types, an ongoing monthly penalty — though this no longer applies to GST or income tax.
On top of that, interest is charged on overdue amounts. Penalties aren’t usually charged on unpaid tax of $100 or less, and first-time late payers may get a grace period. The point is simple: the longer it sits, the more it grows.
What are my options for paying it?
Option 1: An IRD instalment arrangement
You can request an instalment arrangement in myIR if you can’t pay in full. You’ll need to say what you can afford and when payments start. Interest continues while you pay it off, and you’ll need to keep new returns and payments up to date. For a modest debt with a clear path to repayment, this is often the right move and costs nothing to ask.
Option 2: A property-secured business loan
If you, your company, or a supporting party own New Zealand property — your home, a rental, commercial premises or land — you may be able to borrow from $20,000 up to $1m secured against it, as a first or second mortgage even if there’s already a mortgage in place. Lenders on our panel can pay IRD out directly, and no financials or tax returns are needed for the initial assessment. That matters, because owners with tax debt often have accounts that are behind.
Option 3: An unsecured business loan
For smaller balances, an unsecured loan based on your turnover and bank statements can clear the debt without putting property on the line. It usually needs six months or more of trading, and weaker credit is considered.
| IRD arrangement | Property-secured loan | Unsecured loan | |
|---|---|---|---|
| Clears IRD in one go | No | Yes | Often |
| Needs security | No | NZ property | No |
| Needs up-to-date financials first | Depends on IRD | No, not at initial assessment | Bank statements |
| Best for | Smaller, manageable debts | Larger debts or multiple tax types | Smaller debts, steady turnover |
Is borrowing to pay tax a good idea?
It can be — when it turns a pile of penalties, interest and stress into one planned repayment, and when the cause of the shortfall has been fixed. It isn’t a good idea if you’re likely to fall behind again next period.
Before you borrow to pay IRD, open a separate bank account and move GST and PAYE into it every time you’re paid. It’s the single habit that stops this happening twice.
How LendFriend helps
Tell us how much is owing, which tax types, and what you’ve got to work with. We’ll look at your situation, match you with a lender from our panel that handles IRD refinancing, and explain the offer in plain English — so you can decide calmly. Every loan is priced on your circumstances, and we’ll find the sharpest option available for yours.
Our longer guide on what happens when you fall behind with IRD walks through the timeline step by step. When you’re ready, start your enquiry.
The honest bit
Tax debt is a symptom. If GST and PAYE got spent because cash was tight, the same thing will happen next period unless something changes — a separate tax account, a different GST filing frequency, or tighter credit control. We'll ask about this, because a loan that doesn't fix the leak isn't doing you any favours.