GST debt: why it builds so easily, and how to clear it

GST is the most common tax debt in New Zealand businesses, and it’s easy to see why. Every sale brings in 15% that belongs to IRD, but it lands in the same account as everything else. When cash is tight, it gets used for wages, rent and stock, and the return arrives weeks later with nothing set aside.

Why does GST debt build so easily?

• It doesn’t feel like IRD’s money. It sits in your trading account, so it’s spent like any other income.
• Timing gaps. On the invoice basis, GST is generally due for the period you invoice in, even if the customer hasn’t paid yet.
• Growth. More sales mean more GST, often while cash is tied up in stock and wages.
• Seasonality. A busy period’s GST can fall due in a quiet month.
• One bad period. Missing one return makes the next one harder, because you’re paying two at once.

GST is a big share of New Zealand’s tax debt. IRD’s report for the nine months to March 2026 put GST at $2.3 billion of collectable debt (IRD).

When is GST due?

GST is generally due on the 28th of the month after your GST period ends. There are two exceptions: the period ending March is due on 7 May, and the period ending November is due on 15 January (IRD). If a due date lands on a weekend or public holiday, it moves to the next working day.

Period ends	Usually due
January	28 February
March	7 May
May	28 June
September	28 October
November	15 January

Your filing frequency (monthly, two-monthly or six-monthly) decides which periods apply to you. Our tax due-date timeline builds your next 12 months.

What happens when GST is paid late?

IRD charges a 1% late payment penalty the day after the due date and a further 4% on the seventh day if the tax is still unpaid. The monthly 1% penalty that applies to some taxes doesn’t apply to GST (IRD). Use-of-money interest is charged daily on top. Late filing penalties also apply if the return itself is late: $50 on the payments basis or $250 on the invoice or hybrid basis, with a warning first in some cases.

If you keep missing returns, IRD’s process escalates: notices, calls, a possible visit, then a deduction notice to your bank. IRD’s 2025 campaign on overdue GST and employer debt followed exactly that pattern.

GST piling up? See if a loan can clear it in one payment. No credit check to enquire.

How can you clear a GST backlog?

Route	Suits
Pay from cash or an asset sale	Small backlogs, or when funds are coming
Instalment arrangement	Moderate debt, steady cash flow, can stay current
Cash-flow loan (typically $5,000 to $500,000)	Trading businesses with visible takings
Property-secured loan ($20,000 to $5,000,000)	Larger backlogs, or GST mixed with PAYE and income tax

Whatever you choose, the next GST return still has to be paid on time, or the backlog will rebuild.

How do you stop GST debt coming back?

1. Open a separate GST account and move the GST portion of every receipt into it, weekly at least.
2. Check your filing frequency. Monthly filing means smaller, more frequent bills, which some businesses find easier.
3. Ask about the payments basis if you’re eligible, so GST follows cash received.
4. Diarise the due dates, including the 7 May and 15 January exceptions.
5. Chase debtors. Late customers are one of the biggest causes of GST stress on the invoice basis.

An illustrative example

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

A Hamilton furniture retailer files GST two-monthly on the invoice basis. A large commercial order was invoiced in March but paid in June, so the GST on it fell due on 7 May before the money arrived. Combined with a slow April, the business couldn’t pay $38,000 of GST. A short cash-flow loan cleared it within a week of the due date. The owner now moves GST into a separate account every Friday and has asked the accountant about switching basis.

Is it ever OK to pay suppliers before GST?

It’s tempting, and in a crunch many owners do it. But it’s worth understanding the trade-off. A supplier who isn’t paid can stop supplying; IRD can take money straight from your bank account with a deduction notice, add penalties and interest, and, for a company, eventually apply to liquidate. GST is also money your customers paid for IRD, which is how IRD views it when deciding how firmly to act. If you’re choosing between bills, talk to your accountant and to IRD early rather than letting GST quietly slide.

What if your GST returns are behind as well as the payments?

File them first, even if you can’t pay. An unfiled return means IRD doesn’t know the true amount and may estimate it, and late filing penalties keep stacking. Once the returns are in, you’ll know the real balance and every option, including an arrangement or a loan, becomes easier to set up. If the books are a mess, a bookkeeper can often get several GST periods up to date in a few days.

Clear the GST, keep the business moving

If you’re behind on GST, send us a quick enquiry. There’s no credit check to ask, your enquiry isn’t passed along to a crowd of lenders, and a real person will call you back. Tell us how many periods are owing and roughly how much, as accurately as you can, so we can tell you quickly whether a loan, an arrangement or both makes sense.