Falling behind with Inland Revenue is one of the most common and stressful problems a New Zealand business owner can face. It usually doesn't start with bad management. It starts with a slow-paying customer, a quiet season or a big one-off cost, and then GST and PAYE get pushed back a month, then another. If you need to pay IRD debt and get the business back on an even keel, fundU can help. We lend $20,000 to $1m to pay off tax debt, secured on property, so Inland Revenue is paid in full and you can focus on trading.
You're not alone. Inland Revenue reported in October 2025 that New Zealand's tax debt to tax revenue ratio was 7.7%, and that around 27,000 businesses had defaulted on or missed repayments on Small Business Cashflow Scheme loans at 30 June 2025. We're a direct lender, and IRD arrears are something we look at every day.
Why is IRD debt so expensive to leave unpaid?
Because penalties and interest start almost immediately and keep building. Unpaid tax doesn't sit still.
According to Inland Revenue, a 1% late payment penalty applies the day after the due date, and a further 4% is added on the seventh day on any tax still unpaid. For some tax types a 1% monthly penalty can also apply, and interest is charged on overdue tax on top of penalties. On a large GST or PAYE balance, that adds up quickly, and it's money that does nothing for your business.
The bigger cost is often the pressure. IRD calls and letters, the risk of deductions from your bank account and the worry of what comes next take up headspace you need for running the business.
What types of tax debt can a loan pay?
A tax debt loan can pay out any overdue business tax owed to Inland Revenue. Common types we fund:
- GST — often the biggest balance, especially for businesses with large sales and slow debtors
- PAYE and employer deductions — including amounts deducted from wages for KiwiSaver and student loans
- Income tax and terminal tax — the final tax bill after year-end
- Provisional tax — instalments that fall due during the year
- Penalties and interest — the accumulated charges on top of the core tax
Your myIR account shows the full amount, broken down by tax type and period. That statement is one of the most useful documents you can bring to the first conversation.
Is IRD stepping up enforcement?
Yes. In January 2026, Inland Revenue announced a campaign focused on overdue GST and employer (PAYE) debt and unfiled returns. It said it will contact customers, may then visit, can make deductions from bank accounts and may take other enforcement action, which can include bankruptcy or liquidation. It also encouraged people to set up instalment arrangements through myIR.
In other words, doing nothing is the most expensive option. If Inland Revenue has already issued a statutory demand, a company has 15 working days to pay, settle or apply to set it aside under the Companies Act 1993, so speed really matters. Our guide on what happens if you ignore IRD debt explains the stages in more detail.
Liquidation is rarely the best first step. Liquidators charge fees, directors lose control of the outcome, and a business with property equity can often be funded out of trouble instead.
Instalment arrangement or tax debt loan: which is better?
Both are legitimate ways to deal with IRD debt, and the right choice depends on the size of the debt, your cash flow and how much certainty you want.
| IRD instalment arrangement | fundU tax debt loan | |
|---|---|---|
| How it works | You agree to pay the debt to IRD over time | We pay IRD in full, and you repay us |
| Who decides | Inland Revenue | fundU's own credit team |
| Upfront cash | Instalments start straight away | None needed from the business |
| Ongoing obligations | Instalments plus all current tax on time | Loan repayments as agreed, which can be capitalised |
| Penalties and interest on the tax | Interest continues on overdue tax until it's cleared | Tax debt is cleared at settlement, so IRD charges stop |
| Security | Usually none | First or second mortgage over property |
| Best for | Smaller debts that trading can comfortably cover | Larger debts, tight cash flow or ending IRD pressure fast |
An instalment arrangement is worth exploring through myIR, and for smaller amounts it may be all you need. The challenge for many businesses is paying instalments on old debt while also meeting every new GST and PAYE deadline. If trading can't carry both, the arrangement can fail, and that often leads to stronger action. Our guide comparing an IRD instalment arrangement vs a business loan goes deeper.
How does paying IRD with a loan work?
The process is designed to clear the debt quickly and cleanly.
- Get your IRD statement. Download the balance from myIR so we know the exact amount, including penalties and interest.
- Start your enquiry. It takes a couple of minutes and doesn't affect your credit score.
- Talk to a lending specialist. We discuss the debt, the property you're offering as security and how the loan will be repaid.
- Assessment and approval. Our credit team decides directly, without needing financial statements for the first look.
- Documents and settlement. Your lawyer works with ours on the mortgage documents.
- IRD is paid. Funds can be paid straight to Inland Revenue at settlement, clearing the debt.
Funding can happen in as little as 24 hours once approved in some cases. Once the debt is gone, it's much easier to keep current returns and payments up to date.
What if I'm also behind on returns or other creditors?
That's common, and it doesn't rule you out. Tax debt rarely travels alone. When cash is tight, returns get filed late, suppliers get stretched and the overdraft sits at its limit.
A few things help us move quickly in that situation:
- Get outstanding returns filed. Inland Revenue can estimate tax where returns are missing, and an estimate may be higher than the real figure. Filing gives everyone an accurate number.
- Put everything on the table. Tell us about overdue suppliers, other lenders and any demands you've received. Surprises slow things down; honesty speeds them up.
- Think about the whole picture. If IRD is one of several pressures, it may make sense to clear more than one debt in the same loan. Our business debt consolidation page explains how that works.
Your accountant can often pull the numbers together in a day or two. With a clear view of what's owed and a property to secure the loan, we can usually tell you quickly whether we can help.
How is a tax debt loan repaid?
Tax debt loans are usually repaid from a planned exit, such as refinancing to a bank once the IRD arrears are off your record, selling a property or asset, or improved trading cash flow.
Repayment options, depending on the approved terms, include capitalised interest with no scheduled monthly repayments during the term, interest-only, or principal and interest. Capitalised interest is popular here because it frees the business to focus on paying current GST and PAYE on time, which is what keeps IRD off your back for good.
Security can be your home, a rental, commercial or industrial premises or some land, owned by you, your company, your family trust or a supporting party. If you have a bank mortgage, a second mortgage lets you keep it.
Example scenario
An Auckland plumbing company had grown quickly, taking on bigger commercial jobs with long payment terms. Over 18 months it fell behind with GST and PAYE, and the balance owed to Inland Revenue, including penalties and interest, reached about $185,000. An instalment arrangement was on offer, but the instalments on top of current tax would have left nothing for wages.
The director owned his home in Albany, valued at around $1.45m, with a bank mortgage. fundU lent $190,000 on a second mortgage with capitalised interest, paid directly to Inland Revenue at settlement. With the arrears cleared, the company kept up with its current tax and refinanced the loan with its bank about a year later.
What you'll need
For the first conversation, gather:
- Your IRD statement from myIR showing the total owed by tax type
- Any letters from Inland Revenue, including a statutory demand if one has been issued
- Details of the property offered as security, who owns it, its approximate value and any mortgage
- Your business name and NZBN or company details
- A short explanation of how the debt built up and what's changed
- Your plan for keeping current tax on track and repaying the loan
If returns are outstanding, tell us. Getting them filed is usually part of the plan. Our guide on how to pay off IRD debt with a business loan walks through each step.
Clear your IRD debt and move forward
A tax debt doesn't have to define your business. If you have property to offer as security, fundU can pay Inland Revenue in full and give you a clean slate to trade from. If your business is under wider pressure, our business rescue finance page explains how we help owners avoid liquidation.
Enquiring is free and won't affect your credit score. Call 09 875 4577 or see if you qualify today.
Frequently asked questions
Can I get a loan to pay off IRD debt?
Yes. fundU lends $20,000 to $1m to New Zealand businesses to pay tax debt to Inland Revenue, including GST, PAYE, income tax, provisional tax and terminal tax. The loan is secured on property by a first or second mortgage, and IRD arrears on your record don't rule you out. We look at the property, the purpose and the exit.
Is it better to set up an IRD instalment arrangement or take a loan?
It depends on the size of the debt and your cash flow. An instalment arrangement can work well for smaller debts you can clear from trading. A tax debt loan suits larger debts, businesses that can't meet instalments on top of current tax, or owners who want IRD paid in full and the pressure gone. Many owners compare both.
What happens if I don't pay my IRD debt?
Inland Revenue charges late payment penalties and interest on overdue tax. It will contact you, and can then take steps such as deductions from your bank account or other enforcement action, which may include bankruptcy or liquidation. Acting early gives you far more options than waiting.
Can a tax debt loan pay GST and PAYE arrears together?
Yes. fundU can fund the full amount owed across different tax types, such as GST, PAYE, employer KiwiSaver deductions and income tax, in one loan. Your IRD statement from myIR shows the total, and the loan can be paid directly to Inland Revenue at settlement so the debt is cleared in one step.
Will IRD debt stop me getting approved?
Not with fundU. IRD arrears are one of the most common reasons businesses come to us, and we consider them case by case. What matters most is the equity in the property offered as security, a sensible plan for repaying the loan and a business that can keep its current tax obligations up to date.
Do I need up-to-date tax returns to get an IRD debt loan?
Not for the initial assessment. fundU doesn't need financial statements or tax returns to start. If you're behind on filing, we'll talk about getting returns in as part of the plan, because Inland Revenue can estimate tax on missing returns. Your IRD statement, bank statements and an accountant's letter often support the application.
A practical next step
Ready to see what's possible?
Tell us what the business needs, when you need it and what property is available. A fundU lending specialist will call you back to talk it through — enquiring is free and won't affect your credit score.