Why Tax Debt Is No Longer Safe to Ignore

Why Tax Debt Is No Longer Safe to Ignore What NZ Businesses Need to Know Right Now

Inland Revenue has made it clear that no level of unpaid tax is being left alone anymore. Even businesses with relatively small overdue GST or employer tax can now expect to be contacted and, in some cases, visited as Inland Revenue ramps up its debt recovery efforts.

For many years, IR took a softer approach to overdue tax. But with an estimated 10 billion dollars in unpaid tax across the country, the department is now taking firm action to prevent debt from growing and becoming unmanageable.

Small tax debts now trigger phone calls

Since 9 October, Inland Revenue has been calling customers with GST and Employer Tax debt of more than $1,000 if that debt is between six months and five years old. The aim is simple: to stop the balance from ballooning.

During these calls, IR:

• Tells the customer how much they owe
• Explains that penalties and interest are already adding up
• Encourages the business to pay in full or set up an instalment plan

If the overdue amount is more than $10,000, businesses are being reminded of the legal consequences if the debt continues to be ignored.

If businesses do not respond, the pressure escalates

The recent communication pattern from IR shows a clear escalation path:

1. Phone call

2. Follow-up message

3. A second call attempt

4. A possible in-person visit

5. Final actions, including bank deductions or insolvency proceedings

Since mid June IR has:

• Issued 16,500 planned bank deduction notices, which is 25% more than all of last year
• Completed 8,181 actual deductions, recovering 17 million dollars in tax debt

AI is now shaping how tax debt is collected

A major shift behind the scenes is the use of artificial intelligence to manage debt and compliance.

AI tools are already helping IR:

• Predict which debt recovery action is most likely to work for each customer
• Issue pre-approved instalment plans or bank deduction notices
• Analyse customer call recordings to improve service quality

In just a 10-week trial period, AI helped recover:

• $39 million through instalment arrangements
• More than $12 million through bank deductions

Why this matters for NZ businesses

Many businesses are still navigating tight cash flow conditions. However, ignoring tax debt will now make the situation worse and faster than before.

Inland Revenue is making active contact, and if that fails, it now has both the digital tools and the legal authority to step in.

The key message is clear: Tax debt will not go away on its own. The sooner you engage, the more options you have.

What to do if you have overdue GST or Employer Tax

To prevent penalties and interest from building up and to avoid forced recovery actions, make contact early.

You can:

• Answer the call when Inland Revenue reaches out
• Use myIR to make a payment or set up an instalment plan
• Contact your tax advisor or accountant for help managing communication with IR

Our advice

If you are worried about tax arrears, do not wait to be contacted. Taking the first step gives you more flexibility, more control and more time. Even if you cannot pay the full amount, an instalment arrangement is far better than letting the debt build up.

As business advisors we are helping many clients right now to:

• Review overdue GST and PAYE
• Contact Inland Revenue on their behalf
• Secure manageable instalment plans
• Put cashflow systems in place to stop debt recurring

Final word

The Government’s message is unmistakable: tax debt is being taken seriously regardless of the balance. Engaging early is now the smartest financial move a business can make.

If you are unsure where to begin, we are here to help. A confidential conversation with one of our advisors can make all the difference. Give us a call today.

Together we can achieve more.