According to Inland Revenue around one in five road freight businesses have overdue tax debt. The average amount of that debt is around $25k. For a sizeable business, that level of debt won’t be too concerning. But for many owner drivers it could be quite significant. In total, this adds up to more than $70 million in unpaid taxes – a lot of which is PAYE and GST, which Inland Revenue have indicated they are focused on recovering.
Inland Revenue say they have also significantly increased their investigations and auditing. They have indicated they’re focused on those who are actively trying to avoid their taxes – rather than the majority of owners who are trying to do things right.
Hundreds of tip-offs received
Somewhat surprisingly, Inland Revenue say they have received hundreds of tip-offs about road freight businesses. These can come from a range of sources, including;
- drivers, sometimes relief drivers, saying they are being paid in cash and PAYE isn’t being withheld – this often comes to light when one of those employees needs proof of income, and Inland Revenue has no record of it
- ex-employees complaining about the use of cash to pay migrant labour under-the-table at below minimum wage, in exchange for visas, or not withholding PAYE
- someone who knows about the finances of the business noting that GST wasn’t returned on the sale of a truck, or private expenses are being claimed
Poor record keeping often to blame
For owner-drivers and smaller businesses, Inland Revenue suggest that getting into trouble is often a result of not keeping up with record-keeping, or, when cashflow management has become a challenge. Inland Revenue say they understand provisional tax can be hard to get right sometimes, but if GST and PAYE isn’t being passed on businesses should seek financial advice – noting that not paying PAYE is a criminal offence with some severe consequences.
How to deal with tax debt
If anyone is struggling to pay tax debts right now, Inland Revenue have indicated they’re willing to help. Options available include:
- Setting up an instalment arrangement to pay the debt off over time – this can be done by going to your myIR account and selecting ‘Request an instalment arrangement’ under the ‘I want to …’ column.
- If there’s no way a debt can be paid off, talk to your accountant as they may be able to negotiate something with Inland Revenue, or provide other options for managing the debt.
If you’re concerned about being able to meet tax obligations, the key is to act early rather than hoping the problem will resolve itself when things get better. Inland Revenue has indicated they’re willing to work with businesses that engage proactively about their situation. So, if you do find yourself in difficulty the sooner you reach out – whether directly or through your accountant – the more options that will likely be available.
