Social services call for flexibility on tax debt

The NZCCSS made a submission on options for relief from tax debt in a consultation run by Inland Revenue on updating a standard practice statement (SPS).

The NZCCSS, which includes Catholic Social Services as a foundation member, noted that individual income tax debt has more than doubled over the past five years to $2.3 billion in June 2025.

With the “increase in living costs reported by households across Aotearoa, the ability for many to settle these debts has reduced”, the NZCCSS stated.

The updated SPS allows for an indebted taxpayer at risk of serious hardship to have debt wiped or payments delayed, at the discretion of the Commissioner of Inland Revenue. However, the NZCCSS said there is a lack of clarity regarding what is considered risk of serious hardship.

“For those whose applications to the Commissioner are declined, this lack of clarity provides barriers to request reassessment or whether an application should have been accepted.”

The NZCCSS recommended a clearer definition of serious financial hardship. It also called for flexibility in repayment instalment arrangements to ensure these can be adapted to changing financial situations.

The updated SPS notes than instalment arrangements are to be set at a minimum of $20 per week, $40 per fortnight or $80 per month.

“While we recognise that low repayments extend the duration of the instalment period, flexibility is needed in adjusting the repayment amount over the course of the repayment period in response to changes in an individual’s financial situation,” the submission said.

“Research indicates that people often set repayments higher than they should in an attempt to become debt-free sooner, increasing risk of financial hardship.”

The NZCCSS also recommended that in instances where repayment instalments for tax debt cannot be started because of the risk of placing customers in serious hardship, debt should be wiped, rather than delayed, as this could add further financial stress in the long term.

The submission also argued for options to establish support for tax debt beyond the existing requests to the Commissioner through the MyIR secure online service, as this represented a barrier for those who lack access to devices or the internet or have limited digital literacy.

FULL STORY

Options for relief from tax debt (New Zealand Council of Christian Social Services)

Options for relief from tax debt (Inland Revenue Department)