When Scott contacted us to get his tax debt sorted out he was stressed as he watched the IRD charging interest and penalties.
He admitted that he should have addressed the overdue tax earlier, but life and work got in the way.
What surprised Scott was when his bank were not willing to help.
Getting Tax Debt Sorted
Scott had tax arrears both within his business and personally.
- His total business tax arrears was about $80,000 which included the core tax debt, penalties and interest. The IRD were most concerned about the arrears of PAYE and GST which were included in the total tax arrears.
- His personal tax debt was about $20,000 and again included the penalties and interest.
Like many small business owners Scott’s business had good months and not so good months and this year was particularly erratic; however overall it is a good and profitable business. In the past year Scott had also been building a new home and he openly admitted that he had taken more money out of the business to help fund the build.
Of course in hindsight he could have raised extra finance for the new build from his bank, but he was sure at the time that he would catch up on the IRD debt so was not too concerned.
But tax debt has a habit or growing fast when the IRD starts to pile on the penalties and interest.
Often You Expect That Your Bank Will Help
Most people think that they can get help from their bank.
After all. banks are in the business of lending money to people who need it.
But … banks generally don’t like to lend to people with tax debt.
When we got contacted by Scott he was not very complimentary about his bank. He had banked with the same bank for his 8-years in business and had personally used the same bank for many years before that.
As a loyal bank customer he really expected that they would be able to help.
Scott has a nice home and quite a small mortgage, so even with the money to get his tax debt sorted he would still have a smaller mortgage than most people.
The Solution For Scott …
When we looked at Scott’s situation we decided to leave his mortgage with his main bank.
It was at a very good interest rate and therefore it was better to leave that as it was.
Instead we arranged a separate loan for Scott so he could get his tax debt sorted out.
The loan had the ability to repay lump-sums without penalty.
This enabled Scott to negotiate a settlement with the IRD where they forgave the penalties and that saved him over $20,000!
Straight away he could repay that money and reduce this loan.
This was exactly the outcome that Scott wanted and he can now sleep at night knowing he has the tax debt sorted out now.
