Most people want to do the right thing when it comes to paying tax. Over 90% of customers either paid on time this year or negotiated a repayment plan if they could not. However there has been a notable net growth in overdue tax debt.. Through multiple campaigns and interventions, we are addressing debt issues and collecting unpaid tax.
Economic conditions this year impacted many New Zealanders, particularly small businesses, although the number of customer in debt at 30 June 2024 remained about the same as last year. We know that those experiencing cash flow problems sometimes stop paying their tax as a way to manage immediate financial difficulties.
Overdue tax debt, including Working for Families debt, has increased significantly and consistently over the year to $7.94 billion at 30 June 2024 (the amount excludes COVID-19 product debt, child support, student loans and debt related to Small Business Cashflow Scheme loans.)
The increase is mainly due to the impact of the global environment on New Zealand, especially the growing debt relating to employer activities/PAYE and GST, which is an early signal that businesses are experiencing cashflow issues. Almost half of the customers with GST or employer debt only had debt relating to 2023–24, indicating this year has been tougher than previous years.
IR also made technical adjustments to our definitions of overdue tax debt to include the following in the overall amount at 30 June 2024:
- $366 million of provisional tax relating to the 2023 tax year and earlier that remains unpaid and where the customer also has an overdue annual tax return for the period.
- $357 million of mostly income tax debt from customers who are currently using tax pooling for the current period but who have overdue tax debt from previous periods not covered by tax pooling.
- Tax pooling clients pay their provisional tax to registered intermediaries who then deposit payments into an account with IR. We hold the payments until intermediaries tell us where to transfer them.
- $144 million of overdue debt that has previously been omitted from debt collection activity and reporting as most of it is due to customers being deceased, undischarged bankrupts or in liquidation.
Total overdue tax and Working for Families debt increased by $2.15 billion (37%) from $5.80 billion at 30 June 2023 to $7. 94 billion. Excluding the $867 million in reclassified overdue tax debt noted above, the increase from 2023 to 2024 was $1.28 billion.
Overdue tax debt at 30 June 2024
- $7.94b in overdue tax debt
- 69% of total tax debt is collectable.
- 31% of the total tax debt is made up of penalties and interest.
- 512,000 customers had a tax debt. 2023: 518,000 customers.
Overdue debt by tax type at 30 June 2024
- Individuals income tax: $2.04b.
- Non-individuals income tax: $1.10b.
- GST: $2.84b.
- Employer activities: $1.51b.
- Working for Families: $273.5m.
- Other: $175.7m.
Non tax overdue debt at 30 June 2024
- Student loans $2.37b. 2023: $2.21b.
- COVID-19 products $167.1m. 2023: $104.1m.
- Child support $1.01b. 2023: $1.10b.