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Tax Penalties Guide — Late Filing, Late Payment, and Shortfall Penalties in NZ

the tax penalties in New Zealand. The guide covers the late filing penalties (the "late filing penalty"), the late payment penalties (the "late payment penalty"), the shortfall penalties (the "not taking the reasonable care", the "unacceptable tax position", the "evasion"), and the interest charges (the "use of money interest").

Late Filing and Late Payment Penalties

The IRD imposes the penalties for the late filing of the tax returns and the late payment of the tax. The late filing penalty is $50 for the first day the return is late plus $4 per day (up to $250 for the GST returns and up to $500 for the income tax returns). The late payment penalty is 1% of the unpaid amount on the day after the due date, plus the further 4% if the amount remains unpaid after 7 days (the "initial late payment penalty"). The use of money interest (UOMI) is charged on the underpaid tax at the rate of 10.82% (for the 2025-26 year) and paid on the overpaid tax at the rate of 4.39%.

Shortfall Penalties

The shortfall penalties apply when the taxpayer's assessed tax is less than the "correct tax" (the "tax shortfall"). The penalty rates depend on the taxpayer's behaviour: (a) the not taking the reasonable care — 20% of the shortfall, (b) the unacceptable tax position — 20% of the shortfall (if the position is not "about as likely as the not" to be correct), (c) the gross carelessness — 40% of the shortfall, (d) the abusive tax position — 100% of the shortfall (the "tax avoidance" of the "more than the merely incidental" purpose), and (e) the evasion — 150% of the shortfall (the "intentional evasion" with the criminal prosecution potential). The evasion may also result in the criminal conviction and the imprisonment.