IR turns to tax pooling to tackle historic income tax debt
- Inland Revenue is introducing a new debt‑recovery pilot that will allow eligible taxpayers with historic income tax debt for the 2023 and 2024 tax years to use tax pooling at scale.
- The programme sets clear eligibility criteria and deadlines, creating a legislated pathway to reduce interest and eliminate late payment penalties while ensuring tax is paid in full.
- This marks the first time tax pooling is being explicitly enabled at scale for closed income years as part of Inland Revenue’s debt recovery framework.
Inland Revenue (IR) is rolling out a new debt-recovery pilot from the start of next month that will allow eligible taxpayers with historic income tax debt for the 2023 and/or 2024 tax years to use tax pooling at scale.
The pilot – which is designed to support IR’s broader debt recovery efforts, while giving qualifying taxpayers a structured way to address outstanding income tax – is part of the Taxation (Annual Rates for 2025–26, Compliance Simplification, and Remedial Measures) Bill currently before Parliament.
The benefit to taxpayers
From 1 April 2026, eligible taxpayers will be able to enter a payment arrangement with Tax Traders to address historic income tax debt for the 2023 and/or 2024 tax years.
Where IR’s eligibility criteria are met, tax pooling can be used to:
- Reduce a taxpayer’s exposure to interest
- Eliminate late payment penalties on qualifying income tax debt.
Eligibility criteria
To qualify for the programme, taxpayers must meet all IR-set eligibility criteria below.
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The debt must be for provisional tax (excluding AIM), terminal tax or associated interest for the 2023 and/or 2024 tax year.
- All income tax and GST returns, and employment income information must be filed.
- There must be no overdue GST or employment-related tax.
- The taxpayer must not be bankrupt or liquidated, not be subject to IR legal recovery proceedings for unpaid tax and not be presumed unable to pay their debts in the previous 12 months.
In limited circumstances, IR may waive some of these criteria where the Commissioner has accepted a request for financial relief.
Key deadlines
There are clear entry and settlement timeframes under the pilot.
Eligible taxpayers have until 1 October 2026 to set up a payment arrangement with Tax Traders to address their 2023 and/or 2024 income tax arrears.
Any payment arrangement entered with Tax Traders under the programme must be fully settled and transferred to IR by 1 October 2027.
Legislative amendment
A new section containing the eligibility criteria and deadlines – RP 17C – will be added to the Income Tax Act 2007 to reflect this once the Bill receives Royal Assent.
Tax Traders’ view
This pilot marks the first time tax pooling has been explicitly enabled at scale to help IR address historic income tax debt.
Currently, income tax for historic tax periods can only be settled with Tax Traders in certain reassessment or voluntary disclosure situations.
IR data shows there is $1.2 billion in income tax debt across these two tax periods. By allowing eligible taxpayers to use tax pooling, the pilot provides a legislated and structured pathway to resolve older income tax liabilities, while reducing the ongoing impact of interest and penalties.
For taxpayers who qualify, this creates greater certainty and affordability, while ensuring the underlying tax is paid in full.
Tax Traders acknowledges the work of Inland Revenue policy officials and members of the Finance and Expenditure Select Committee in recognising the role tax pooling can play in supporting effective debt‑recovery outcomes.
Further information
If you would like to discuss Inland Revenue’s debt‑recovery pilot programme, eligibility criteria or how tax pooling works in practice, please contact the Tax Traders team.