IRD has issued a deduction notice. What now?

You check the business account and a chunk of money has gone to Inland Revenue — or your bank has called to say IRD has sent them a notice. It’s a jolt. A deduction notice means IRD has moved from asking to collecting, and it can disrupt wages, suppliers and everything else that runs through that account. Here’s how to respond in the first 24 hours.

What is an IRD deduction notice?

The power comes from section 157 of the Tax Administration Act 1994, and IRD’s standard practice statement (SPS 21/01) sets out how it’s used. In short:

• The notice goes to whoever holds your money or owes it to you. Usually that’s your bank, though employers and customers can receive one too.
• IRD can ask for a single lump sum, or for amounts to be taken on a regular basis.
• There’s no court process first — IRD doesn’t need a judge’s order.
• You get a copy of the notice.
• Joint accounts aren’t automatically safe: if you can withdraw from one without the other holder signing, it can be caught.
• IRD’s own description is that these notices are generally a last resort.

One point in your favour: according to the same statement, IRD won’t issue a deduction notice while you’re keeping to an agreed instalment arrangement.

What should I do in the first 24 hours?

1. Get the facts. Log into myIR and download your current statement of account — the full debt by tax type.
2. Call IRD. Find out exactly what the notice covers and what would stop it.
3. Protect the essentials. Work out what you need for wages, PAYE and critical suppliers this week.
4. Choose your route. Pay in full (often with a loan) or propose an instalment arrangement.
5. Move quickly. Every day the notice runs, money leaves the account.

If paying in full is the cleanest option, start your application immediately and note the deduction notice in the purpose field.

Pay in full or set up an arrangement?

	Pay in full with a loan	Instalment arrangement
Ends the notice	Yes, once the debt is cleared	Discuss with IRD
Speed	Often within 24 hours	Depends on IRD
Penalties and interest	Stop on the cleared debt	Late payment penalties generally stop while kept; interest continues
Ongoing obligation	Repay the lender	Keep to the arrangement and stay current on new tax
Bank relationship	Account back to normal	Notice may stay until resolved

For larger debts, or where the business can’t afford regular IRD instalments on top of everything else, a single payment funded by a loan often gives the cleanest reset. Our page on IRD tax debt funding covers this in detail.

How fast can funding clear the debt?

Deduction notice cases are treated as urgent. With the IRD statement, six months of bank statements and ID ready, our aim of funding within 24 hours of your first application is realistic. Unsecured options can move very quickly for smaller debts. For larger debts, property-secured funding — including caveat loans — can have $20k to $250k possible the same day, with larger amounts possible within 24–48 hours. Funds can often be paid directly to IRD at settlement.

Lenders will want to see that once the debt is cleared, the business can stay current with new GST and PAYE.

An illustrative example

A Hamilton cleaning company owes $54,000 in PAYE and GST after losing a major contract. Despite several calls from IRD, it hadn’t set up an arrangement, and a deduction notice is issued to its bank. Wages are due in three days. The director applies for a short-term loan secured by a caveat over her home; it’s funded within a day and paid straight to IRD. With the notice resolved, wages are paid on time, and the loan is repaid over the next eight months from new contracts. (Illustrative only.)

How do I avoid a repeat?

• Talk to IRD early — before due dates, not after notices.
• Separate tax money into its own account each time you’re paid.
• Know your dates — see our 2026–27 tax calendar.
• Understand the cost of delay — our guide to what paying IRD late really costs sets it out.

What should I tell staff and suppliers?

A deduction notice can leave less in the account than you expected, so communicate early:

• Staff — if wages could be affected, prioritise them and fund the gap quickly; paying staff on time is essential.
• Key suppliers — a short, honest call buys goodwill if a payment will be a day or two late.
• Your bank — ask exactly what the notice covers and when deductions will be made.

Most of these conversations become unnecessary once the debt is cleared, which is why speed matters so much in deduction notice cases.

Can a deduction notice affect other accounts or people?

IRD’s standard practice statement explains that deduction notices can be sent to anyone holding or owing money to the taxpayer, and can reach joint accounts where the debtor can withdraw without the other holder’s authority. If you share an account with a partner or business associate, talk to them early — their funds in that account may be affected too. Clearing the debt quickly is usually the simplest way to protect everyone involved.

Get the notice lifted and your account back

A deduction notice is serious, but it’s fixable — fast. Apply in about 60 seconds and we’ll aim to have the debt cleared within a day. There’s no credit check to enquire, your details are kept with one specialist rather than spread across lenders, and a real person who deals with IRD debt will call you straight away. Please give the full IRD balance from myIR on the form, so the loan clears everything in one go.