IRD debt in construction and the trades

Construction runs on other people’s money and other people’s timing. You buy materials, pay your team every week and invoice in stages, then wait while the client or head contractor processes the claim. When one large payment slips, the first bill that gets pushed back is often the one that doesn’t ring you: IRD.

Why do construction and trade businesses fall behind with IRD?

The patterns are familiar to anyone who’s run a building, plumbing, electrical or civil business:

• GST on claims not yet paid. If you’re registered on the invoice basis, GST generally falls due for the period in which you issue the invoice, whether or not you’ve been paid. A big progress claim paid 60 days late can leave you funding IRD’s share yourself.
• Retentions. Money held back for defects can sit for months, but the income and GST on the work may already be counted.
• Slow and disputed payments. One stalled claim can wipe out a month’s cash flow.
• Wages first. Crews have to be paid, so PAYE gets squeezed, which is the most dangerous debt to let slide. See PAYE arrears.
• Growth. A bigger contract means more materials and labour upfront, and higher provisional tax a year later.

Is IRD paying special attention to the sector?

Yes. IRD’s quarterly debt report for October to December 2025 said its campaigns targeted construction, plumbing and taxi or ride-share operators, and found that one in six plumbers owe overdue tax (IRD).

The consequences are visible. Credit bureau Centrix counted nearly 3,000 company liquidations in 2025, with construction the largest sector at 751 (reported by interest.co.nz, 3 February 2026). Many good builders are caught in that wave because a debt that could have been cleared was left until a statutory demand arrived.

What are the options for a trade business?

Situation	Route worth looking at
Small GST gap from one late claim	Instalment arrangement or a short cash-flow loan
Larger debt across GST, PAYE and income tax	Property-secured loan to clear it in one payment
Statutory demand or liquidation application	Urgent: funding, legal advice, and a decision inside the deadline
Business losing money on fixed-price jobs	Accountant first; a loan may not fix the underlying problem

Property-secured loans run from $20,000 to $5,000,000, using residential or commercial property. Many trade owners hold equity in a home, a yard or a workshop. Cash-flow options for trading businesses are typically $5,000 to $500,000.

Builder or tradie with an IRD balance? Talk to a funder first. There’s no credit check to enquire.

What will a lender want to understand?

Construction is seen as higher risk by many lenders, so a clear picture helps:

• your myIR balance by tax type and period;
• your current pipeline: signed contracts, claims submitted and expected payment dates;
• retentions held and when they’re due for release;
• any disputes or claims you’re chasing;
• whether current GST and PAYE are being paid; and
• any property you could offer as security.

A schedule of upcoming claims is especially useful. It shows how a loan will be repaid and helps a lender plan the exit.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Hamilton residential builder with eight staff owes IRD about $230,000 across GST and PAYE after a developer client went quiet on two progress claims. IRD has started calling and the directors fear a deduction notice that would freeze wages. One director owns a home with good equity. A property-secured loan pays IRD in full, wages continue, and the loan term is set to match expected retention releases and the developer’s settlement. The company moves to a weekly tax transfer from then on.

How can you protect the business going forward?

1. Ring-fence GST and PAYE into a separate account every time a claim is paid.
2. Ask your accountant about the payments basis for GST if you’re eligible.
3. Chase claims hard and early, and track retention release dates.
4. Don’t fund growth from tax money. If a bigger job needs working capital, borrow for it properly.
5. Talk to IRD or a funder at the first missed payment, not the fourth.

What about subcontractors and schedular payments?

Many trade businesses use labour-only subcontractors. Depending on the work, schedular payments may require tax to be deducted from what you pay them, and those deductions belong to IRD in the same way PAYE does. If you’ve been withholding tax from subcontractors and not passing it on, treat it with the same urgency as PAYE. Your accountant can confirm which rules apply to your contracts.

The reverse is also common. If you’re a subcontractor whose head contractor withholds tax, check your myIR account so you know what’s been credited. Mismatches between what was deducted and what IRD shows can make your balance look worse than it is.

Is liquidation the answer when a builder can’t pay IRD?

Sometimes it is, if the business has no realistic future. But many builders are steered toward it when the problem is a timing gap rather than a broken business. Before you agree to anything, read before you liquidate and check what happens to your personal guarantees, your shareholder current account and your ability to run a company again. Directors of construction firms often have guarantees with suppliers and landlords that survive liquidation.

Clear it while you’re still in control

If your building or trade business owes IRD, start your enquiry here. We don’t run a credit check when you first get in touch, your details aren’t scattered across lenders, and a person who understands construction cash flow will call you. Please tell us honestly about the debt, your pipeline and any property you own, so the first conversation is about a real plan.