IRD penalty remission: when IRD can remove penalties, and how to ask

Penalties can make an IRD debt feel unfair. You fell behind for a reason, and now the balance is bigger than the tax you actually owed. In some cases, IRD can take those penalties off. This page explains when, and how to ask well.

What is penalty remission?

Remission means IRD cancels a penalty that has been charged. It applies to penalties, such as late payment and late filing penalties. It doesn’t reduce the tax itself. If you need the core debt reduced, that’s a different process with much narrower rules (see IRD debt write-off).

On what grounds can IRD remit penalties?

IRD’s practice statement on relief describes two main grounds (SPS 18/04):

1. Reasonable cause (section 183A of the Tax Administration Act). Broadly, all three of these need to be true:

• an event or circumstance beyond your control caused the late payment or filing;
• as a result, you had a reasonable justification or excuse; and
• you put things right as soon as practicable once you were able to.

Examples that may fit include a serious accident or illness, a death in the family, a natural disaster, or a bank or system failure outside your control. Ordinary cash-flow problems or forgetting a date generally don’t.

2. Highest net revenue (section 183D). IRD can remit where doing so is consistent with collecting the highest net revenue over time. Importantly, under this ground IRD must not consider a taxpayer’s financial position. So “we can’t afford it” isn’t a reason under 183D.

How do penalties build in the first place?

For most taxes, a 1% penalty the day after the due date and a further 4% on the seventh day. A further 1% applies each month on some taxes, but not on GST or income tax, including provisional tax. Employer deductions such as PAYE have their own steeper structure (IRD). Our late payment penalties page explains each one.

Penalties and interest add up. IRD’s own figures show they made up 35% of all overdue tax debt at the end of 2025. Even if remission isn’t available, stopping further penalties, by paying or setting up an arrangement, is worth a lot.

How do you make a strong remission request?

Include	Example
The tax type and periods	GST for the March and May 2026 periods
What happened, and when	The director was hospitalised from 2 to 30 April
Why it was beyond your control	No other director could access the bank account
What you did once you could	Returns filed and tax paid by 12 May
Evidence	A letter from the hospital, bank records, emails
What you’re asking for	Remission of the late payment penalties for those periods

Send it through myIR, keep a copy, and note the date. If your accountant handles your tax, ask them to prepare or review it.

Penalties piling up while you wait? Clearing the tax stops more being added. See whether funding fits, with no credit check to enquire.

Should you wait for remission before paying?

Usually not. A remission request doesn’t stop the tax being due, and use-of-money interest keeps running on unpaid tax. If you pay the tax now, by your own funds, an instalment arrangement or a loan, you stop further penalties and interest. You can still ask for remission of penalties already charged.

What about penalties on an instalment arrangement?

If you set up an arrangement before the due date, only the initial 1% penalty applies; if you set it up after, the penalties already charged stay, but no more late payment penalties are added while you keep to it (IR240). Breaking the arrangement can bring penalties back. So the timing of when you act matters as much as any remission request.

What doesn’t count as reasonable cause?

Usually not enough on its own:

• general cash-flow pressure or a slow month;
• a customer paying late (unless truly extraordinary and documented);
• relying on someone else who forgot, if you could have checked;
• not reading myIR notices; or
• being busy.

These are real problems, but they’re normally addressed through arrangements or funding rather than remission.

An illustrative example

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

A Hawke’s Bay orchard services company missed two GST payments after flooding cut access to its depot and office for six weeks. Its accountant files a remission request with photos, council notices and the dates access was restored, showing the returns were filed and paid within days of reopening. IRD remits the late payment penalties for those periods. The company still owes earlier GST from before the flood, which it clears with a short cash-flow loan.

Can late filing penalties be remitted too?

The same reasonable-cause principles generally apply to late filing penalties. IRD’s penalties guide sets late filing penalties for income tax at $50, $250 or $500 depending on income, and for GST at $50 on the payments basis or $250 on the invoice or hybrid basis, with a warning letter first in some cases (IR240). If an event beyond your control stopped you filing, include those periods in your request and explain the timing for each one.

Stop the clock while you ask

If penalties are growing on your IRD debt, talk to us about clearing the tax while you pursue remission. You won’t face a credit check just for enquiring, your enquiry isn’t circulated to a list of lenders, and a real person will call. Accurate figures, including how much of the balance is penalties and interest, help us show you what you’d save by paying now.