Rising Liquidations highlight the need to engage early with the IRD

Recent trends show a sharp increase in company liquidations across New Zealand, with a significant contributor being Inland Revenue’s renewed focus on debt enforcement. This shift in approach is having a real impact on businesses, particularly those already grappling with cashflow pressures.

Inland Revenue (IRD) has historically been slower to pursue overdue debt than private creditors, but that's changing. Since late 2023, the IRD has dialled up its enforcement efforts considerably, initiating a growing number of winding-up proceedings. This trend is expected to continue, signalling a tougher stance on compliance.

Unlike smaller creditors who may lack the resources or appetite to chase debts aggressively, IRD has both the tools and the legal backing to act swiftly. While commercial creditors may be more willing to engage in negotiation or staged repayment plans, IRD isn’t always showing the same flexibility and increasingly following through with legal action once deadlines are missed.

This reinforces the need for businesses to prioritise tax debt alongside other obligations.

One key takeaway is that silence or delay can be fatal. If you are struggling to meet tax obligations, early and open communication with IRD is crucial. While they may be less accommodating once formal enforcement begins, IRD can be pragmatic when engaged early, particularly where a realistic proposal is put forward.

It is important not to ignore early warning signs.

Falling behind on GST, PAYE (critical), or income tax payments often signals deeper financial stress. Addressing these issues proactively not only provides more options - it may be the key to the business’s survival.

If your business is under pressure, or if you’ve received communication from IRD regarding arrears, don’t wait. Contact us, or your usual accountant or advisor, to discuss the best path forward. In many cases, we can assist in negotiating manageable payment terms or restructuring debt in a way that avoids escalation.

The bottom line: the IRD is no longer the passive creditor it once was. By acting early and getting the right advice, businesses can avoid the more severe consequences of inaction.

Lincoln Sharp, Director

 

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This article contains general information only and based on information available at the date of publication. You should obtain advice for your personal circumstances.