Inland Revenue is focused on collecting debt from the hospitality sector, as around one in five hospitality businesses has overdue tax.
It seems like every week there is another story in the news about a restaurant or café going out of business. So it will come as no surprise that Inland Revenue is focused on collecting debt from the sector.
Around one in five hospitality businesses have overdue tax, with an average debt of more than NZD 30,000, adding up to over NZD 170 million in total. Much of this debt is PAYE and GST, which Inland Revenue prioritises for recovery.
When tax debt is left to grow for too long, it can become impossible to repay. In those cases, Inland Revenue may liquidate the business to stop it continuing to trade and building up more debt. Hundreds of hospitality businesses were liquidated last year.
However, liquidation is a last resort. Inland Revenue prefers to work with businesses where there is a realistic way forward. If you have tax debt, they recommend acting early and following these steps.
What to do if you have tax debt
- Act quickly. Penalties and interest grow fast. If you miss payments, contact your accountant or Inland Revenue as soon as possible to make a plan.
- Use instalment arrangements. In myIR, you can set up an instalment arrangement to pay the debt off over time. As long as you stick to it, no further late payment penalties will be added.
- Always pay PAYE on time. PAYE penalties grow faster than other tax debts. PAYE belongs to employees, and Inland Revenue takes a strict approach when it isn’t paid. This makes negotiations harder.
Hospitality businesses are under real pressure, but Inland Revenue will work with businesses that engage early. The sooner you ask for help, the more options you are likely to have.
