IRD debt in hospitality: getting a café, bar or restaurant back on track

Hospitality is a cash business with thin margins and long hours. When costs rise faster than menu prices, or a winter is quieter than planned, the money that should go to IRD is often the money that keeps the lights on. It’s an understandable choice. It’s also how a manageable GST bill turns into a debt that threatens the business.

Why does tax debt build so fast in hospitality?

• GST on every sale. Takings include GST that belongs to IRD, but it lands in your trading account with everything else.
• Wage-heavy costs. Staff are a big share of spend, so PAYE and KiwiSaver deductions are large and frequent.
• Seasonality. Busy summers fund quiet winters, but tax doesn’t follow the seasons.
• Rising costs. Food, energy and rent rises can wipe out margin before you’ve adjusted prices.

The sector’s stress shows in the numbers. Centrix reported 376 hospitality company liquidations in 2025, up 50% (interest.co.nz, 3 February 2026).

How does IRD collect overdue GST and PAYE?

IRD’s 2025 campaign on overdue employer and GST debt followed a set pattern: up to three contact attempts, then a Community Compliance visit, then a bank deduction “when other collection options are not suitable” (IRD).

For a café or restaurant, the deduction notice is the step that hurts most. The bank is required to pay IRD from your account, and no court order is needed (SPS 21/01). If that lands on a Wednesday, Thursday’s wages might not.

PAYE carries extra weight. IRD charges a 10% penalty on unpaid employer deductions and another 10% for each month the amount stays unpaid, reduced to 5% once you pay or set up an arrangement. A director who decides not to pay deductions can be prosecuted personally. Read PAYE arrears before deciding which bill to pay first.

Café, bar or restaurant behind with IRD? Tell us what you owe. No credit check to enquire, and a real person calls back.

What funding works for hospitality?

Funding type	How it’s assessed	Fits when
Cash-flow loan	Turnover and bank statements; typically $5,000 to $500,000	Smaller GST or PAYE catch-ups with steady takings
Property-secured loan	Equity in residential or commercial property; $20,000 to $5,000,000	Larger debts, multiple tax types, or a deadline
Instalment arrangement	IRD decides; UOMI continues	The debt is small enough to clear in a reasonable term

Card takings make hospitality income easy to see, which helps with cash-flow lending. Repayments can sometimes be matched to your busier trading days.

When should a hospitality business not borrow?

If the venue loses money every month even in season, a loan only adds a repayment to a business that can’t carry it. Look first at the fundamentals: menu pricing, rostering, rent and supplier terms. Talk to your accountant. If the business can’t be turned around, a licensed insolvency practitioner can explain your formal options, and our before you liquidate hub covers what to ask first.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Queenstown restaurant owes about $68,000 in GST and PAYE after a short winter season and a kitchen fit-out that ran over budget. IRD has called twice and booked a visit. Summer bookings are strong. The owners don’t hold property, but card takings over the past six months are steady. A cash-flow loan clears the PAYE and GST in one payment, the visit becomes a non-event, and repayments are set weekly through the peak season. GST is now transferred to a separate account every Monday.

Keeping it from coming back

1. Move GST and PAYE out of the trading account every week.
2. Review menu prices whenever a major cost changes.
3. Build a winter buffer during summer.
4. Answer IRD’s calls. Silence is what moves you down the escalation path.
5. If a bad month hits, act within weeks, not quarters.

What does IRD look at when a hospitality business asks for time?

If you apply for an instalment arrangement, IRD wants to know the plan is realistic. For a café or restaurant, that usually means showing:

• that GST and PAYE for the current period are being paid on time;
• a short cash-flow forecast covering your quiet and busy months;
• what changed to cause the debt and what you’ve done about it; and
• what you can reliably pay each week or month.

IRD’s relief form for companies even asks whether you’ve tried to get a loan to pay the debt (IRD). Knowing what funding is available puts you in a stronger position whichever way you go. Remember that use-of-money interest keeps running during an arrangement, and penalties can be charged back if it breaks down, so a winter dip that causes a missed instalment can undo the benefit. See what happens if an arrangement breaks.

What about the landlord and suppliers?

Tax debt rarely travels alone in hospitality. Rent arrears, supplier accounts on stop and a merchant facility under strain often sit alongside it. If you’re borrowing to clear IRD, be upfront about these too. A lender needs the whole picture to size a loan that leaves you able to trade, and a plan that clears IRD but leaves the landlord unpaid doesn’t keep the doors open.

Ask before the next return is due

If your hospitality business is behind with IRD, send us a 60-second enquiry. It doesn’t involve a credit check, we don’t broadcast your details to a crowd of lenders, and someone who understands hospitality cash flow will call you. Accurate figures for takings and the amount owed mean we can tell you quickly whether a loan helps or whether another route is better.