Tax Debt in New Zealand — The Numbers

Tax Debt in New Zealand — The Numbers

Inland Revenue publishes more figures about the money it is owed than most people realise, and they do not all agree. The headline number moves depending on the date it is taken, what has been counted, and how much of the balance the department believes it can recover.

This guide sets out those figures and what sits behind them. Every number is taken from Inland Revenue's own published reporting, with the date it applies to stated alongside it.

Together they describe a debt book that has stopped growing quickly, is ageing, and is concentrated in small business.

How We Researched This Guide

The figures here come from Inland Revenue's quarterly managing overdue tax debt reports, its tax and entitlement debt statistics, and the debt pages of its 2025 annual report. We have also used Inland Revenue's August 2025 tax debt report to the Minister, released under the Official Information Act, which quantifies parts of the debt that the quarterly reporting only describes.

Where a report showed a figure only as a chart, we left it out rather than reading it off a graph. Nothing here is estimated or carried forward from an older report.

The Quick Summary (60-Second Version)

Six figures to hold on to.

• Tax debt stood at $9.4 billion as at 31 March 2026, up from $9.3 billion a year earlier.
• Inland Revenue classified $5.9 billion of that — 62 per cent of the total — as collectable.
• 556,000 customers had a tax debt as of 31 March 2026, 23,000 fewer than in March 2025.
• Micro-businesses and small-to-medium businesses account for 65 per cent of the outstanding balance among them.
• Penalties of $1.7 billion and interest of $1.5 billion make up roughly a third of the total.
• Annual growth slowed from 14.7 per cent in the year to March 2025 to 1.6 per cent in the year to March 2026.

How Big the Tax Debt Is, and How Fast It Is Growing

Inland Revenue's quarterly report puts total overdue tax and entitlements debt at $9.4 billion as at 31 March 2026, up from $9.3 billion as at March 2025. The department says this money accumulated over several years, reflecting the economic pressure that followed the pandemic.

The more revealing number is the rate of change. Annual growth in tax debt was 14.7 per cent in the year to March 2025. In the year to March 2026 it was 1.6 per cent — a slowdown Inland Revenue attributes to less new debt being created alongside faster resolution of the debt that does arise.

The number of customers in debt has fallen. As of 31 March 2026, 556,000 customers owed something, 23,000 fewer than a year earlier, and collectable tax debt was $140.8 million lower than in March 2025.

Collectable, Non-Collectable, and Why the Split Matters

Not all of the $9.4 billion is money anyone expects to see again. Inland Revenue divides the book in two. Collectable debt can be worked on directly with the customer. Non-collectable debt is tied up in insolvency, disputes or legal action, and may become collectable again if circumstances change.

As at 31 March 2026, $5.9 billion, or 62 per cent of the total, was assessed as collectable. The department notes that its definition broadly aligns with other tax jurisdictions and OECD benchmarking.

Why the headline figure depends on the definition

Tax debt is not a fixed quantity, and the total moves when the department changes what it counts. During 2024, technical adjustments reclassified $867 million as overdue debt. In 2025, Inland Revenue changed the point at which debt becomes overdue to "straight after the due date", where previously it was treated as overdue only once collection action began. Had the previous definition still applied, the overdue balance at 30 June 2025 would have been $163 million lower.

A forecast is not a balance. Inland Revenue's August 2025 report to the Minister put tax debt at $9.3 billion and forecast it to reach $10.7 billion by June 2026, against a backdrop in which the ratio of tax debt to tax revenue was 5.9 per cent in 2021 and was expected to reach 8.0 per cent in 2025. Reported totals and projected totals answer different questions.

Where the Debt Sits: Customer Segments

The balance is heavily concentrated in small business. Inland Revenue reports that micro-businesses and small-to-medium businesses together hold 65 per cent of outstanding tax debt — a group it describes as particularly exposed to cost pressures and cash-flow constraints.

Splitting the $9.4 billion by customer group at 31 March 2026: micro-businesses account for $3.6 billion, small-to-medium businesses $2.5 billion, individuals $1.2 billion, families $1.2 billion, and significant enterprises $968 million. The department rounds these components.

An alternative cut of the same debt book, by entity type, as at 30 June 2025, shows companies owing $5.7 billion, individuals $3.1 billion, and other entities $471.3 million.

What the Debt Is Made Of

Two-thirds of the balance is the tax itself. The rest is the cost of not paying it. As at 31 March 2026, the $9.4 billion breaks down into $6.2 billion of tax assessed, $1.5 billion of interest and $1.7 billion of penalties.

Penalties and interest are not static padding. The quarterly report records that they "continue to accrue, contributing to growth in the value of overdue debt". Inland Revenue's August 2025 tax debt report puts a figure on how far that runs: by the time a debt has reached five years of age, penalties and interest make up 65 per cent of it.

The taxes behind the balance

GST is the single largest component, at $3.4 billion of the $9.4 billion at 31 March 2026. Employer activities account for $2.0 billion, individual income tax for $2.3 billion, non-individual income tax for $1.2 billion, tax credits and entitlements for $335 million, and other taxes for $160 million.

Inland Revenue points out that GST and employer deductions together account for 57 per cent of the overall debt, "despite these being taxes that businesses must collect and pass on to government". That is the awkward part: some of what is owed was deducted from wages, or charged to a customer, and never forwarded.

What Gets Repaid, and What Gets Written Off

In 2024–25, Inland Revenue collected $4.3 billion of tax and entitlements debt, $252 million more than in 2023–24. For the year to 31 March 2026, it had collected $2.9 billion in overdue tax, against an annual target of $4.2 billion.

Repayment plans sit between the two extremes. As at 31 March 2026, $1.3 billion — 22.7 per cent of collectable tax debt — was under an active plan, up from $1.2 billion, or 19.9 per cent, a year earlier. Inland Revenue counts a plan as active only when no payment has been missed.

Write-offs are the other end of the process. The department wrote off $804.7 million in 2024–25, against $889.9 million in 2023–24. For the year to 31 March 2026, write-offs had reached nearly $768 million, up from $545 million at the same point a year before.

What It Costs to Collect, and Where It Is Heading

Efficiency is measured in two ways. In 2024–25, Inland Revenue collected $53.08 of cash for every dollar spent on debt activity. For the year to 31 March 2026, the same measure was $34.10.

The department explains the fall plainly: more has been spent on resourcing and upskilling staff, and better on-time payment has left less new debt to collect, leaving an older, costlier debt profile behind.

Ageing is the metric to watch. Inland Revenue aims to keep collectable debt older than two years at 40 per cent or less. At 31 March 2026, it stood at 42.7 per cent, reflecting debt incurred during 2023. The same August 2025 report explains why that matters financially: debt under two years old is impaired on average by 51 per cent, while debt over two years old is impaired by 88 per cent.

Questions You Might Have

Is student loan debt included in the tax debt figure?

No. The $9.4 billion covers tax and entitlements debt, excluding student loans, child support, and Small Business Cashflow Scheme loans. Overdue student loan repayments were $2.51 billion at 30 June 2025. Counting every product, Inland Revenue's overdue debt was $13.1 billion at that date, 14 per cent higher than a year earlier.

Does tax debt ever get written off completely?

Yes, but only in defined circumstances. Inland Revenue can write off debt where a liquidation or bankruptcy has been finalised with no funds available, where a customer is in serious hardship, or where pursuing the debt is not economic. In the year to 31 March 2026, 275,000 customers had amounts written off, or had penalties and interest remitted.

Are these figures comparable with earlier years?

Only if you check what changed. The 2024 reclassification of $867 million and the 2025 change to the overdue definition each lifted reported debt without any taxpayer owing more. That is why the growth rate is a better guide than a simple year-on-year subtraction.

How often is this data published?

The quarterly report on overdue tax debt is published at least two months after each quarter ends; the most recent covers January to March 2026. The underlying debt statistics are updated once a year at the June year-end.

What happens if a large debt is simply not paid?

Inland Revenue escalates. In the year to 31 March 2026, it issued 1,525 statutory demands, liquidated 605 companies and bankrupted 118 individuals. It also issued more than 64,000 deduction notices, 61 per cent more than the year before, and was actively managing around 4,500 cases covering $1.4 billion of debt.

What Matters Most

The tax debt book is best read as a set of numbers rather than a single number. $9.4 billion is the total; $5.9 billion is what the department thinks it can get; $3.4 billion of that is GST; and 65 per cent of it goes to small businesses. Any of those alone tells you less than the four together.

The encouraging part is that growth has flattened and new debt is being resolved faster. The caution sits in the ageing — 42.7 per cent of collectable debt is now more than two years old, and debt that old is both harder to recover and heavier with penalties and interest.