NZ Tax Debt Reaches $9.4 Billion
More than half a million New Zealanders owed money to Inland Revenue as of March, with total tax debt reaching $9.4 billion. Of that, Inland Revenue considers $5.9 billion, or 62%, collectable. That compares with total tax debt of less than $6 billion in 2023.
Micro, small and medium-sized businesses account for 65% of outstanding tax debt, while GST and employer deductions such as PAYE make up 57%.
There are signs the growth in debt is slowing. Tax debt increased 1.6% in the year to March, compared with 27.1% in the previous year.
Simplicity chief economist Shamubeel Eaqub said the figures raise questions about how businesses have been able to accumulate significant tax debts and continue trading. He said businesses unable to pay GST and PAYE should recognise this as an early warning that they may be experiencing serious financial problems.
Chartered Accountants Australia New Zealand lead John Cuthbertson said much of the increase could be traced back to the softer approach taken by government agencies during and following Covid.
More recently, the Government has provided Inland Revenue with additional funding for compliance and debt collection, with a greater focus on reducing outstanding debt.
Cuthbertson said GST and PAYE debt was particularly concerning because some struggling businesses may be using money intended for tax obligations to support everyday cash flow.
Insolvency practitioner Keaton Pronk said acting quickly can make a significant difference to Inland Revenue's chances of recovering unpaid tax.
When debts are older, businesses may have stopped trading or disposed of their assets, leaving little or nothing available for creditors.
Inland Revenue said tax debt can only be written off in certain circumstances, including completed liquidations or bankruptcies where no further funds are available, cases of serious hardship, or when a taxpayer has died.
It also has discretion to write off debt when pursuing it would be uneconomic.
While the rate of growth has slowed, Inland Revenue expects the total amount of tax debt to continue increasing in the near term as further payments fall due.
For business owners, the message is simple: if you're struggling to meet your GST, PAYE or other tax obligations, address it early.
The sooner you understand what you owe and get professional advice, the more opportunity you have to work through your options before the problem becomes harder to manage.
Micro, small and medium-sized businesses account for 65% of outstanding tax debt, while GST and employer deductions such as PAYE make up 57%.
There are signs the growth in debt is slowing. Tax debt increased 1.6% in the year to March, compared with 27.1% in the previous year.
Simplicity chief economist Shamubeel Eaqub said the figures raise questions about how businesses have been able to accumulate significant tax debts and continue trading. He said businesses unable to pay GST and PAYE should recognise this as an early warning that they may be experiencing serious financial problems.
Chartered Accountants Australia New Zealand lead John Cuthbertson said much of the increase could be traced back to the softer approach taken by government agencies during and following Covid.
More recently, the Government has provided Inland Revenue with additional funding for compliance and debt collection, with a greater focus on reducing outstanding debt.
Cuthbertson said GST and PAYE debt was particularly concerning because some struggling businesses may be using money intended for tax obligations to support everyday cash flow.
Insolvency practitioner Keaton Pronk said acting quickly can make a significant difference to Inland Revenue's chances of recovering unpaid tax.
When debts are older, businesses may have stopped trading or disposed of their assets, leaving little or nothing available for creditors.
Inland Revenue said tax debt can only be written off in certain circumstances, including completed liquidations or bankruptcies where no further funds are available, cases of serious hardship, or when a taxpayer has died.
It also has discretion to write off debt when pursuing it would be uneconomic.
While the rate of growth has slowed, Inland Revenue expects the total amount of tax debt to continue increasing in the near term as further payments fall due.
For business owners, the message is simple: if you're struggling to meet your GST, PAYE or other tax obligations, address it early.
The sooner you understand what you owe and get professional advice, the more opportunity you have to work through your options before the problem becomes harder to manage.
Source: RNZ https://www.rnz.co.nz/news/business/957513/over-half-a-million-people-owe-tax-how-did-this-happen?mkt_tok=OTc4LVJKQy0wMTgAAAGjv_KTcAEqc23CGdKbXTm3nlwCn37yo2Dlaz5vnmpcztSJv_0GCDYSwE5OFqfsDi5r4A21rXrRunDNajj-GCe8-WeTNYH9kFo58FbhpawDqTvUqNk
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