Can you get a loan to pay off IRD debt in New Zealand?
Yes. It’s one of the most common reasons business owners come to us. Many banks won’t lend to a business that’s in arrears with Inland Revenue, even when the whole point of the loan is to clear that debt. Our lending partners take the opposite view: a business that owes IRD is carrying a creditor with extensive collection powers, and paying it out often makes the business safer, not riskier.
With a property-secured loan, the lender pays IRD directly at settlement. The debt is cleared, the penalties on it stop, and IRD’s collection action on that debt ends.
Why IRD debt gets harder the longer it sits
Inland Revenue’s approach has changed markedly since 2023. Its 2025 annual report records overdue tax debt of $9.3 billion at 30 June 2025, with GST and employer (PAYE) debt both growing fast. In the same year IRD referred 650 cases to court for liquidation orders, up 49 percent, and issued more deduction notices to take money directly from bank accounts.
On top of the collection activity, overdue tax keeps growing:
- Late payment penalties. An initial penalty of 1 percent the day after the due date and a further 4 percent at the end of the seventh day. Some tax types, such as PAYE, can also attract monthly penalties.
- Interest. IRD charges interest on overdue tax for every day it remains unpaid.
- Late filing penalties if returns are behind as well.
The result is that a manageable debt can become an unmanageable one within a year or two.
Instalment arrangement vs paying IRD out with a loan
| IRD instalment arrangement | Paying IRD out with a secured loan | |
|---|---|---|
| Who you owe | Still IRD | Your lender |
| Penalties and interest | Interest keeps accruing on the overdue balance | Stop on the cleared debt |
| If you slip | IRD can cancel the arrangement and resume collection | Normal loan terms, with room to talk to your lender |
| Effect on current tax | Instalments sit on top of new GST, PAYE and income tax | One repayment; IRD only needs current obligations |
| Bank lending later | Arrears can still count against you | Cleared arrears generally help a later refinance |
An instalment arrangement can be a sensible choice when the debt is small and cash flow is steady. When the debt is large, keeps growing, or IRD has already taken action, paying out in full is usually cleaner.
What types of IRD debt can be refinanced?
Any business tax debt, including:
- GST arrears and GST returns assessed but not paid
- PAYE, KiwiSaver and other employer deductions
- Income tax and provisional tax
- Penalties and interest already charged
- Debt that’s under an instalment arrangement you’re struggling to keep up
If returns aren’t filed, IRD may have issued default assessments. Those can be higher than the real figure, so it’s worth getting the returns filed so the loan pays the correct amount.
How the process works
- Enquiry. Tell us roughly how much you owe IRD, what property is available as security, and whether IRD has taken action, such as deduction notices, a statutory demand or a liquidation proceeding.
- A call with a lending specialist. We’ll go through the numbers and the property, and flag anything time-sensitive.
- Valuation and documents. The lender arranges a valuation and confirms the existing mortgage balance. Financials aren’t needed for the initial assessment.
- Confirm the IRD figure. Your accountant or you get a payout figure from IRD.
- Settlement. The lender pays IRD directly. In some cases funding happens within 24 hours of approval.
Example scenario
Example scenario — for illustration only. A Christchurch transport company had fallen around $210,000 behind on GST and PAYE after losing a major contract. IRD had issued a deduction notice to its bank, which was starving the business of the cash it needed for fuel and wages. The bank declined new lending because of the arrears. The directors owned a rental property with a small mortgage. A first mortgage over the rental paid IRD in full and cleared two supplier accounts. The deduction notice was released and the business went back to paying tax on time.
Next step
If IRD is chasing, don’t wait for the next letter. Start an enquiry and a lending specialist will call you back to talk through your options.