Unpaid tax is no longer just a compliance issue. The Inland Revenue Department (IRD) can now share overdue tax information with credit reporting agencies, making it visible to lenders and financial institutions.
When will IRD credit report your business
The IRD may report your business if:
• GST, PAYE, or income tax debt exceeds $150,000 and is more than 90 days overdue, or
• Tax debt is more than 12 months overdue and is 30% or more of your assessable income
What this means for your business
If your business meets the thresholds, it could:
• Negatively affect your credit rating
• Reduce your ability to secure finance
• Lower your credit limits with lenders
• Impact your ability to grow and invest
Lenders may now take unpaid tax into account as part of their standard credit assessments.
How you’ll be notified
If IRD intends to credit report your tax debt, they will notify you via:
• myIR, or
• standard post (not courier)
These notices are not redirected to us as your tax agent. However, we can access your account and review any notifications if required.
How we can help you avoid credit reporting
Taking early action is essential. At Graham Brown & Co, we will work with you to:
• Actively manage your tax obligations
• Ensure filings are completed on time
• Engage early with IRD if any payment issues arise
• Put payment arrangements in place before thresholds are reached
Businesses using Tax Traders have a tax pooling indicator on their income tax account, which prevents IRD treating income tax debt as overdue, unless it remains unpaid 85 days after the terminal tax date. All Tax Trader deposit transfers are ordinarily completed in this timeframe. The pooling indicator is only applied for the entities for which Tax Traders have a record, so if you make deposits in the name of one entity that will be used by other entities or people, make sure your client manager knows this so they can have the indicator applied to them too (eg. deposits are in the name of a Company, but all shareholders and a related Trust will also use these deposits).
If you have any concerns about your current position, please get in touch with us – as always, we’re here to help.