Why GST and PAYE arrears are different
Of all the debts a struggling business can carry, GST and PAYE arrears are the ones to deal with first. They’re not like a supplier account. GST is collected from your customers on IRD’s behalf, and PAYE, KiwiSaver and other employer deductions are taken from your staff’s wages. When a business keeps that money to cover wages, rent or stock, IRD sees it as the business trading on money that was never its own.
Employer debt is growing fast in New Zealand. IRD reported employer activity debt of $2.0 billion at 30 June 2025, up 34 percent on the year before, and GST debt of $3.3 billion. These are the categories IRD prioritises.
What IRD can do about unpaid GST and PAYE
When GST or PAYE goes unpaid, IRD’s options escalate. A typical path looks like this:
- Penalties and interest start straight away. Employer deductions can also attract monthly penalties that GST and income tax don’t.
- Letters, calls and texts asking you to pay or arrange to pay.
- Deduction notices under the Tax Administration Act, requiring your bank, or customers who owe you money, to pay IRD directly.
- Statutory demand or a liquidation application to the High Court for companies that don’t engage or don’t keep arrangements.
Our guide on what IRD does when GST and PAYE go unpaid walks through each stage and the timeframes involved.
Your realistic options
| Option | Suits | Watch for |
|---|---|---|
| Pay from cash flow | Small, one-off shortfall | Don’t starve the business of cash to do it |
| IRD instalment arrangement | Moderate debt, steady cash flow | Interest continues; missed instalments can end the arrangement |
| Unsecured business loan | Smaller arrears, 6+ months trading | Repayment must fit weekly cash flow |
| Property-secured business loan | Larger arrears, or IRD has escalated | Uses your property as security |
| Complete refinance | IRD plus several other creditors | Needs enough equity to cover everything |
How a loan clears GST and PAYE arrears
With a property-secured loan, the process is straightforward. The lender values the property, confirms what’s already owing on it, and pays IRD directly at settlement using a payout figure you get from IRD. There’s no need for financials or tax returns for the initial assessment, which matters because businesses behind on GST are often behind on their accounts too.
For smaller arrears, an unsecured business loan sized on your turnover and bank statements may be enough, particularly if the shortfall came from a one-off event such as a big customer paying late. Weaker credit is considered.
Keeping it from happening again
Clearing the arrears only helps if the business doesn’t fall straight back in. A few habits make a real difference:
- Separate the tax money. Move GST and PAYE into a separate account each time you’re paid or run payroll.
- File on time even if you can’t pay. Late filing adds penalties and signals to IRD that you’re not engaging.
- Watch the 13-week view. A simple 13-week cash flow forecast shows tax obligations coming before they bite.
- Talk to IRD early if a payment is going to be short. It’s far easier before a debt is overdue than after.
A note for directors
Directors have duties under the Companies Act 1993 not to trade recklessly and not to take on obligations the company can’t meet. Continuing to trade while building up unpaid PAYE and GST can raise questions about those duties, particularly if the company later fails. That’s not a lecture, just a reason to fix tax arrears sooner rather than later. Our guide to directors’ duties when a business is struggling covers the basics.
Getting started
Have a rough figure for what’s owed and whether IRD has sent a deduction notice or any court papers. Start an enquiry and a lending specialist will call you back.