What IRD Looks at Before Approving a Payment Plan in New Zealand
Before approving a payment plan, Inland Revenue evaluates income, expenses, assets, liabilities, and compliance history. The goal is to ensure the repayment arrangement is realistic and sustainable while allowing taxpayers to meet essential living or business costs.
Many taxpayers apply for instalment arrangements when they cannot pay tax in full. Understanding what IRD looks at before approving a payment plan helps individuals and businesses prepare properly and increase their chances of approval.
What Documents IRD May Request Before Approving a Payment Plan
When reviewing an application, Inland Revenue may request supporting documents to verify financial circumstances. Providing these documents promptly can speed up the approval process.
Common documents may include:
- Recent bank statements
- Income records or payslips
- Business financial statements (if applicable)
- Details of regular expenses
- Loan or mortgage statements
Having these records ready before applying often helps taxpayers complete applications more efficiently.
Why IRD Reviews Payment Plan Applications
Payment plans are designed to help taxpayers repay debt over time while maintaining compliance. Inland Revenue must ensure that any arrangement is realistic and that future tax obligations will also be met.
What an IRD Instalment Plan Is
Income and Expenses Assessment
One of the first things IRD reviews is income and expenses. This helps determine how much a taxpayer can reasonably afford to pay each week or month.
Essential living costs or business operating expenses are usually considered when evaluating affordability.
Assets and Liabilities
IRD may review assets such as property, vehicles, investments, or business equipment, as well as liabilities like loans or mortgages. This helps Inland Revenue understand the overall financial position.
Providing accurate and transparent information is important, as incomplete details may delay or affect approval.
Compliance History
Compliance history plays a significant role in approval decisions. Inland Revenue may review whether returns have been filed on time and whether previous payment arrangements were followed.
What Happens If You Default on an Instalment Plan
Realistic Repayment Ability
Another key factor in what IRD looks at before approving a payment plan is whether repayments are realistic. Plans that are too ambitious may fail, which increases financial pressure and administrative effort.
Taxpayers are generally encouraged to propose amounts they can consistently maintain.
Future Tax Obligations
Inland Revenue also considers whether the taxpayer is likely to meet future tax obligations while repaying existing debt. Staying current with filings and new payments improves approval chances.
Common Reasons Payment Plans Are Declined
- Incomplete or inaccurate financial information
- Unrealistic repayment proposals
- Failure to file tax returns
- Previous defaults on arrangements
Understanding these factors helps applicants avoid common mistakes.
How to Improve Approval Chances
Taxpayers can improve their chances by preparing financial information in advance, proposing affordable repayment amounts, and maintaining communication with Inland Revenue.
How to Apply for an IRD Instalment Plan
When Professional Advice May Help
In complex cases, professional advice may help assess repayment strategies and prepare accurate financial details.
For example, firms such as DFK ORB360 Chartered Accountants provide accounting and advisory services that may assist taxpayers managing IRD obligations.
Official IRD Guidance
IRD Debt and Insolvency Guidance
Frequently Asked Questions
What does IRD check before approving a payment plan?
IRD reviews income, expenses, assets, liabilities, and compliance history to ensure repayments are realistic.
Can a payment plan be declined?
Yes. Plans may be declined if information is incomplete or repayment amounts are not realistic.
How can I improve approval chances?
Providing accurate financial information and proposing realistic repayments improves approval chances.
Does IRD review compliance history?
Yes. Filing history and previous payment arrangements are commonly reviewed.
Conclusion
Understanding what IRD looks at before approving a payment plan helps taxpayers prepare effectively and improve their chances of approval. Accurate information, realistic repayments, and early communication are key to successful arrangements.