What is an IRD instalment arrangement?
An instalment arrangement is an agreement with Inland Revenue to pay overdue tax over time rather than all at once. It’s available for most tax types, including GST, PAYE and other employer deductions, income tax and provisional tax.
IRD’s position is consistent: contact them early. In its own words on its debt and insolvency pages, if you know ahead of time that you won’t be able to pay your tax, get in touch. Businesses that engage early have far more options than those that wait for IRD to come to them.
Instalment arrangements are common. IRD established around 207,000 of them in the 2024–25 year, according to reporting on its annual results, and it reported that 22 percent of collectable tax debt value was under an active plan at 30 June 2025.
How to set one up
You can apply through myIR, or by phone. Before you apply, IRD suggests you know:
- how much you can afford to pay towards the debt;
- how you’ll pay, for example by direct debit;
- when you want payments to start.
For larger debts or business debts, IRD may want more information, such as a cash flow forecast (IRD’s IR591 form) and details of your income, expenses, assets and other liabilities. If the minimum repayment isn’t affordable, IRD will talk to you about other options.
What it costs
An arrangement isn’t free money. Two things keep running:
- Interest. IRD charges interest on overdue tax. IRD says this interest is included as part of your instalment amounts, so the total you repay is more than the original debt.
- Current obligations. Your next GST return, PAYE and provisional tax still have to be filed and paid on time. The instalments sit on top.
Late payment penalties work in stages: 1 percent the day after the due date, a further 4 percent at the end of the seventh day, and for some tax types, such as employer deductions, a monthly penalty while the debt remains unpaid. An arrangement can limit further penalties, so setting one up early helps.
What IRD expects from you
- Keep every instalment. Missed payments can lead IRD to cancel the arrangement and resume collection, which can include deduction notices to your bank or customers.
- File and pay current returns on time. A business that adds new debt while repaying old debt is a red flag.
- Tell IRD early if something changes. A short conversation before a missed payment is much better than silence after one.
Is an instalment arrangement the right choice?
| Situation | Arrangement suits? |
|---|---|
| Small debt, one-off cause, steady cash flow | Usually yes |
| Moderate debt, business recovering | Often yes, with a realistic instalment |
| Large debt, growing each month | Only if cash flow genuinely supports current tax plus instalments |
| IRD has issued deduction notices | Possibly, but check whether cash flow can carry it |
| IRD has applied to liquidate the company | Legal advice needed; paying in full may be needed |
| Already missed an arrangement | IRD may be less flexible second time around |
The honest test is a 13-week cash flow forecast. Put current GST, PAYE and provisional tax in, then the proposed instalment. If the cash runs out, the arrangement will probably fail.
Arrangement vs paying IRD out with a loan
For some businesses, an instalment arrangement is exactly the right answer. For others, particularly where the debt is large, interest is compounding, or IRD has escalated, paying IRD out in full with a property-secured loan can be cleaner.
| Instalment arrangement | Paying out with a loan | |
|---|---|---|
| IRD still a creditor | Yes | No |
| Interest on the tax debt | Continues | Stops, because the debt is paid |
| Risk of cancellation | Yes, if instalments are missed | Not applicable |
| Effect on bank lending | Arrears may still count against you | Cleared arrears generally help |
| Security needed | None | NZ property (or unsecured for smaller amounts) |
A property-secured business loan from $20,000 to $1m can pay IRD directly at settlement. No financials are needed for the initial assessment, and arrears and bad credit are considered case by case.
Tips for a successful arrangement
- Be realistic. Offer an amount you can keep paying in a bad month, not just a good one.
- Use direct debit so payments don’t get missed.
- Separate the tax money. Put GST and PAYE into a separate account as it comes in.
- Get the returns filed. If returns are outstanding, IRD’s figure may be estimated. File them so the arrangement is based on the real number.
- Keep records of every call and letter.
When to talk to us
If the arrangement you can afford won’t clear the debt in a reasonable time, or IRD has already started collection action, it’s worth checking whether funding could pay IRD in full. See refinancing IRD debt or start an enquiry.