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There has been a significant change with regard to Inland Revenue policy on overdue taxes owed by New Zealand and overseas owned companies.

Previously this was considered a confidential matter between Inland Revenue and the taxpayer.

In order to protect creditors, New Zealand legislation has been altered to allow Inland Revenue to provide information to credit reporting agencies on companies who have outstanding taxes that exceed a “tax threshold”.

At the moment that tax debt threshold is set at $150,000. By the way, the legislative change only relates to company structures.

This means that other structures such as trusts, partnerships and the like will not have their financial situation reported to the credit agencies.

Once a company’s tax debt reaches the tax debt threshold it typically means that options to resolve the debt have been unsuccessful and Inland Revenue may be considering insolvency and legal proceedings.

The move has been made to protect smaller creditors who may be completely unaware that the customer they were dealing with had a significant tax debt and this lack of knowledge may have encouraged them to extend credit which puts their own business at risk.

With this information, small businesses can now make a better assessment of the total credit risk when making decisions about extending credit to companies.

This legislation applies equally to Australian companies who are training in New Zealand and have GST or income tax debt owing.

The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.