Can't pay your tax bill? IRD payment plans, tax pooling and loans

What happens if you can't pay your tax on time?

If your business can't pay a tax bill on time, Inland Revenue adds penalties and interest from the day after the due date. You can limit the cost by asking IRD for an instalment arrangement before the due date, by using tax pooling if it's provisional tax or by borrowing to pay it. The cheapest option depends on the tax, how much you owe and how soon you can pay.

Here's what IRD charges on late tax:

• **1% penalty** on the day after the due date.
• **4% penalty** on the 7th day after the due date, on whatever is still unpaid, including the first penalty.
• **1% a month** for as long as the tax stays unpaid. IRD doesn't charge this monthly penalty on GST or income tax, including provisional tax.
• **Use-of-money interest** of 8.97% a year since 16 January 2026, down from 9.89%. IRD works it out daily, and it doesn't compound.

If this is your first late payment in 2 years, IRD may give you a grace period and a new due date before charging penalties. If you miss the new date, penalties apply from the original due date.

IRD payment plans (instalment arrangements)

An instalment arrangement lets you pay a tax debt in set amounts each week, fortnight or month. IRD offers it for debt you can't pay in full by the due date or debt that's already overdue. Keeping to the plan may prevent further collection action.

To apply in myIR, select 'Request an instalment arrangement' under 'I want to ...'. IRD will show you the minimum weekly payment, and you can choose to pay fortnightly or monthly as long as the total is the same. If you can't afford the minimum, IRD will call you to discuss your options.

Interest still applies to overdue tax and is included in your instalments. Penalties may also apply. You can ask for an arrangement as soon as you know you can't pay in full, so you don't have to wait until the tax is overdue.

Tax pooling

Tax pooling lets you pay provisional tax late without IRD treating it as late. Registered intermediaries hold a pool of tax paid by many businesses. If you underpay, you can buy tax from the pool that was paid on the original due date, so IRD counts your provisional tax as paid on time.

Inland Revenue lists five registered tax pooling intermediaries: Bailey Ingham, Provisional Tax Finance, TMNZ, PwC Tax Pooling Solutions and Tax Traders. According to TMNZ, you can use tax pooling for provisional tax, for income tax that's been reassessed, and for other taxes like GST and PAYE when they increase after an audit or voluntary disclosure. It says you can settle up to 75 days after your terminal tax date, and that its interest is lower than IRD's.

Going by that list, tax pooling doesn't cover ordinary GST or PAYE that's simply paid late. For those, you can use an instalment arrangement or a loan. Your accountant can usually set up tax pooling for you.

Using a business loan to pay tax

You can use a business loan to pay a tax bill, and Fundme, a broker, can arrange tax funding. It's only a good idea if the loan costs less than the penalties and interest you'd otherwise pay.

Compare both options on the same basis. IRD's interest is 8.97% a year, plus penalties of 1% and 4% in the first week if you don't have an arrangement. Online business loans usually cost more once you include fees. For example, Pioneer Finance charges 9.95% to 22.95% a year, and Line Capital's rates start at 16%. Use the true cost calculator to compare any loan offer's true annual rate with what IRD would charge.

A loan might still be a good option if IRD won't agree to instalments you can afford.

Setting tax aside

If you move GST and part of each payment into a separate account as money comes in, the tax will be ready when it's due. If your income is uneven, setting up a line of credit or an overdraft in advance usually costs less than borrowing at the last minute.

Common questions