IRD and your Credit Rating

IRD and your Credit Rating

IRD is now permitted to disclose information about overdue tax with credit reporting agencies. Credit reporting agencies report on individuals and businesses. In New Zealand, the two most common are Dun & Bradstreet and Baycorp, although there are others.

A new clause has been inserted into the Tax Administration Act 1994 (TAA) which permits sharing information if certain preconditions are met. These are:

  1. that Inland Revenue has made reasonable efforts to recover unpaid tax from the taxpayer
  2. that the amount due is greater than the ‘amount prescribed’. This amount is set by regulation.
  3. that the amount has been unpaid for over a year
  4. that the amount is at least 30% of the taxpayer’s assessable income.

The Inland Revenue must notify the taxpayer at least twice in the year prior to referring the matter to a credit reporting agency.

The amount prescribed has been set at $150,000. This comes into force on 29 June, 2017, and is subject to change.

Importantly, Inland Revenue must consider the following when deciding to refer the matter to a credit reporting agency:

  • The matter must not be disputed or being challenged in any way
  • The matter is not already being dealt with by an instalment arrangement requested by the taxpayer, and agreed with the Commissioner.

Overdue tax is a serious matter. If you are unable to pay your tax on time, or need to make arrangements to pay off tax, our advice is always to front-foot this with the IRD. Taxpayers who ignore reminder letters or phone calls from Inland Revenue will usually make matters worse. Interest and penalties can be severe. As we can see, there is now the potential to have your credit rating impacted, severely limiting your ability to borrow or arrange credit with suppliers.

The main issues are canvassed above but you can read the precise legislation by clicking here. A background paper from IRD is also available here.

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