Audit activity rises as unpaid tax mounts
A total of 2,934 companies entered liquidation in 2025, the highest number since 2010, as Inland Revenue intensified enforcement of unpaid tax debt across New Zealand.
The liquidation spike follows additional government funding to IRD for debt collection, according to tax specialists, who say the department’s multi-year crackdown is accelerating business failures alongside the lingering recession.
Credit reporting company Centrix reported the 2025 figures, while the NZ Government Gazette has published a steady stream of liquidation applications since the start of 2026, The Post reported. About $9.3 billion in tax was overdue to Inland Revenue in June last year, including approximately $3 billion in penalties and interest, with the debt forecast to increase.
IRD data shows the department has significantly increased enforcement and audit activity in recent years, closing thousands of audits and acting on hidden economy and non-compliance cases. Increased enforcement has not only driven liquidations but also voluntary wind-ups by directors seeking to mitigate risk, and IR has prosecuted tax evasion and related offences.
A survey from Chartered Accountants Australia and New Zealand and Tax Management New Zealand revealed 82% of tax agents’ clients carry unpaid tax debt. The survey of 549 respondents showed a clear rise in IRD audit and review activity, with increased attention across GST, PAYE and land transactions.
Debt accrued since Covid
In late 2024, IR opened about 3,600 audits – roughly 50% more than the previous year – uncovering more than $600 million in undeclared tax from large enterprises and adding about $859 million to revenue through screening, audits, and voluntary disclosures, 1News reported.
“During Covid the Government flushed money out the door to assist business, and a light touch, hands-off model was employed to help businesses through and out the other side,” Tax Management New Zealand strategic adviser Chris Cunniffe said.
Cunniffe explained that IRD had reduced staff numbers following the introduction of a new IT system, with many experienced workers departing.
“So there was a perfect storm of Covid pressures, tough economic times, growing tax debt, and under-resourcing,” he said.
“In hindsight, the softly, softly approach was left in place for too long. There are companies whose tax debt should have been addressed several years ago but wasn’t, and they were allowed to keep struggling along,” Cunniffe said.
“Inland Revenue is now taking the initiative to pick up the liquidation process and wrap companies up. That’s why we are seeing the liquidation numbers grow, and why Inland Revenue is at the forefront of it.”
Micro-businesses and SMEs account for 65% of the tax debt.
Licensed insolvency practitioner Larissa Logan, from Fixity Limited, identified poor financial oversight as the primary cause of business failure in New Zealand.
“Only 15% of businesses had cash flow forecasts, for example, and in many small businesses limited financial experience meant they did not have appropriate reporting mechanisms in place,” Logan said.
“So they don’t understand their cash position, and they miss obligations, and that leads to their tax debt not being paid and spiralling. And Inland Revenue is cracking down on debt.”
The construction industry shows particularly high insolvency rates. Logan attributed much of this to structural pricing problems, with businesses pricing jobs at rates that fail to cover costs.
“If it comes down to it, most people will choose to pay wages before Inland Revenue and the tax debts build,” she said.
