Christchurch Company Director Sentenced to Prison Over Nearly $1.4 Million in Unpaid PAYE and GST
A Christchurch company director has recently been sentenced to two years and three months in prison after failing to pay nearly NZ$1.4 million in PAYE and GST over an extended period.
What makes this case particularly concerning is not just the amount of unpaid tax, but the court's finding that the company was not entirely without funds. Instead, the director chose to use money that should have been paid to Inland Revenue (IRD) for other business expenses and personal purposes.
For businesses already facing IRD tax debt, this case is another reminder that cash flow difficulties, breached payment arrangements and prolonged failure to pay PAYE and GST can lead to increasingly serious consequences.
IRD Tax Debt Case: Over $770,000 in Unpaid PAYE
The company involved primarily operated in the property maintenance industry. Between January 2023 and June 2025, the company continued paying wages to its employees and deducting PAYE, student loan repayments and KiwiSaver contributions. However, these amounts were not paid to IRD as required across 22 payment periods. The total unpaid amount reached approximately NZ$778,852.
The court heard that the company actually had sufficient funds in its bank accounts to pay these taxes when they became due. This was one of the key factors contributing to the seriousness of the case. Businesses need to be particularly careful with PAYE because these amounts have already been deducted from employees' wages, and the employer is responsible for withholding and paying them to IRD.
Over $610,000 in Unpaid GST
In addition to PAYE, the company also had significant GST arrears. Between January 2023 and May 2025, GST payments were not made for 15 taxable periods, totalling approximately NZ$610,005. The court found that the director had deliberately chosen to use the funds for other purposes, including:
Employee wages;
Payments to other creditors;
Business operating expenses;
Personal living expenses;
Home renovations.
Company Funds and Personal Expenses Are Also Key Areas of IRD Tax Investigations
Case records also revealed that between January 2023 and July 2025, the director personally received approximately NZ$1.952 million from the company. Some of these funds were used for living expenses and home renovations. The proceeds from the subsequent sale of the property were also not used to reduce the outstanding IRD debt.
During an IRD tax investigation, financial transactions between a company and its shareholders or directors are often an important area of review. If a company continues to have outstanding tax liabilities while significant amounts of money are transferred to directors, shareholders or related individuals, IRD may examine the nature and actual purpose of those transactions more closely.
Nine IRD Payment Arrangements Were All Breached
The director had previously entered into nine payment arrangements with IRD, but all nine were breached. The company eventually went into liquidation in July 2025, and the director was declared bankrupt in April 2026.
Payment arrangements need to be based on a business's actual cash flow. If the instalment amounts are not sustainable, or if the business continues to accumulate new GST and PAYE liabilities, the overall tax debt may continue to increase.
What Is the Difference Between IRD Tax Debt and Deliberate Tax Evasion?
Being temporarily unable to pay tax in full does not automatically constitute tax evasion. In practice, many businesses experience GST, PAYE or income tax arrears due to cash flow difficulties, unpaid customer invoices or challenging trading conditions.
In these situations, businesses can generally approach IRD early to discuss potential solutions, including:
Instalment payment arrangements;
Adjustments to existing payment plans;
Penalty or interest remission;
Reviews of historical tax returns;
Other tax debt solutions appropriate to the business's circumstances.
However, the situation may be very different if a business has sufficient funds but deliberately chooses not to meet its tax obligations over an extended period, using the money for other business or personal purposes instead. In this case, the court ultimately sentenced the director to two years and three months in prison.
What Should Businesses Do If They Have GST or PAYE Arrears?
If your business already has outstanding GST, PAYE or income tax liabilities, it is important to review the situation as early as possible and establish:
The actual amount owed to IRD;
The breakdown of outstanding tax, interest and penalties;
Whether any tax returns are missing or contain errors;
Whether existing payment arrangements are sustainable;
Whether the business is continuing to accumulate new tax liabilities;
Whether financial transactions between the company, shareholders and directors are clearly recorded.
The earlier these issues are identified and reviewed, the easier it becomes to determine whether a payment arrangement, correction of historical tax returns or another approach may be appropriate.
Ysquared Reminder: Do Not Leave IRD Tax Debt Unresolved
If your business has outstanding IRD tax debt, GST arrears or PAYE arrears, or has received a debt collection notice, audit notification or investigation request from IRD, it is important not to wait until the situation escalates before taking action. Ysquared Chartered Accountants can assist with:
Reviewing historical IRD tax debt;
Checking GST, PAYE and income tax returns;
Negotiating payment arrangements with IRD;
Applying for penalty and interest remission where appropriate;
Addressing missing or incorrect historical tax returns;
Assisting with IRD tax investigations and audits;
Reviewing financial transactions between companies and their shareholders or directors.
Having outstanding tax debt does not necessarily lead to criminal proceedings. However, deliberately failing to meet tax obligations over an extended period despite having the ability to pay can result in significantly more serious consequences.
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