Tax Debt Guide — IRD Collection, Payment Plans, and Hardship Relief in NZ
the tax debt and the IRD collection in New Zealand. The guide covers the payment options for the overdue tax, the instalment arrangements, the financial hardship relief applications, and the penalties and the interest charges.
IRD Collection and Payment Options
When the tax debt arises, the IRD provides several payment options: (a) the instalment arrangement — the agreement to pay the debt in the regular instalments over the manageable period, (b) the full payment within the due date to avoid the penalties, and (c) the late payment with the interest and the penalties. The IRD charges the use of money interest (UOMI) on the unpaid tax at the prescribed rate (currently 10.52% for the underpayments). The late payment penalty starts at 1% on the first day and increases to 4% after the 7 days. The IRD's debt collection includes the deduction from the wages, the bank account deductions, and the legal action.
Financial Hardship Relief
The taxpayers experiencing the financial hardship may apply to the IRD for the relief. The options include: (a) the writing off of the penalties and the interest, (b) the extended instalment arrangement with the reduced payments, (c) the compromise — the acceptance of the partial payment in the full settlement, and (d) the temporary suspension of the collection. The hardship application requires the detailed financial disclosure (the income, the expenses, the assets, the liabilities). The IRD may also refer the taxpayer to the budgeting advisory services. See our Penalties Guide → for the full penalty schedule.