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Navigating your way around tax debt can be particularly challenging for dairy farmers in New Zealand. With fluctuating milk prices and costs and unpredictable weather conditions, maintaining steady cash flow is often difficult. Accumulating arrears with the Inland Revenue Department (IRD) can add another layer of stress. However, understanding your options and having a clear strategy can make a significant difference. 

Under the new government, IRD was given further funds to allow them to chase and collect debt and we have seen a large increase in action in this area. This has generated another level of stress for our farming community, of which many have been behind on their tax payments. 

Understanding IRD Arrears 

IRD arrears occur when you owe taxes that you haven’t paid by the due date. This can include Income Tax, GST, or PAYE. Falling behind on tax payments can result in penalties and interest, further exacerbating your financial situation. 

If you find yourself in this situation then the first thing you should do is to seek Professional Advice from your Chartered Accountant, they can help you understand your options and represent you in negotiations with the IRD. Once you have contacted your professionals there are several steps that will need to be followed. 

Assess Your Financial Situation 

Begin by taking a good look at your financial situation, complete a statement of position. Evaluate your current income, expenses, and outstanding debts. This step is crucial for determining your current financial position. And completing a business and personal cashflow will help establish what you can and cannot afford.  

Like most things in life, you need an honest approach here, the IRD do not like to re-negotiate payment arrangements.  

Explore Payment Options 

Full Payment: If feasible, paying the full amount immediately will stop interest and penalties from accruing. 

Instalment Arrangements: If full payment isn’t possible, propose a payment plan that fits your budget. 

Lump Sum Payments: If you can make a partial lump sum payment, this may help with negotiating a favourable payment arrangement. 

Apply for Relief: If you meet specific criteria, you might be eligible for relief from penalties or interest. This can significantly reduce your overall debt. Be prepared to provide documentation to support your application. 

Consider Hardship Provisions: If you’re experiencing severe financial hardship, IRD may grant further concessions. This might include reducing the debt or extending payment terms. 

Contact IRD 

Don’t wait for the IRD to contact you. Proactively reach out to discuss your situation. IRD officers can provide guidance and may be more willing to negotiate favourable terms if you show initiative, we have several wins in this regard over the past few months. Inland Revenue have a duty to recover the most amount of tax possible and promote tax compliance. 

Conclusion 

Handling IRD arrears can seem like a daunting prospect, but it doesn’t have to be. Engaging a professional, using a structured approach, you can find a solution that fits your financial situation. Taking timely action and communicating openly with the IRD will increase your chances of a favourable outcome. 

If you need personal advice that is tailored to your unique circumstances, consider booking a consultation with one of our team. We’re here to help you manage your tax obligations efficiently and get back on track. 

Remember, you’re not alone in this. Many farmers have successfully navigated IRD arrears and come out stronger on the other side. Together, we can achieve the same for you.