GST is due and you can't pay it: what to do next

It’s a familiar feeling for many New Zealand business owners: the GST return is ready, the amount payable is larger than expected, and the account simply doesn’t have it. You’re not alone, and you’re not out of options. This guide sets out a clear plan for the days before and after a GST due date when cash is short.

First, understand why the gap happened

Before deciding what to do, take five minutes to understand the cause. It shapes the right solution. A one-off spike — a big month, a large contract or a seasonal peak — produced a bigger bill than usual, and the business is otherwise fine. Timing: customers haven’t paid yet, but the GST on those sales is still due because you account for GST on an invoice basis. A spending leak: GST money was used for wages, stock or other bills because it sat in the main account. Or an underlying problem: the business isn’t making enough to cover its costs, and GST is simply where the shortfall shows up first.

The first three are timing or habit problems, and funding can solve them cleanly. The fourth needs a deeper look, ideally with your accountant.

Step 1: File your return on time

This is the single most important step, and it costs nothing. Filing on time avoids a late filing penalty and shows Inland Revenue you’re engaging. Returns and payments are generally due on the 28th of the month after the GST period ends, with exceptions for the period ending in November (due 15 January) and the period ending in March (due 7 May).

Even if you can only pay part of the amount, file the full return. Paying what you can reduces the balance on which penalties and interest are calculated.

Step 2: Work out exactly how short you are

Take the GST payable from your return and subtract what you can genuinely pay today without leaving wages, rent or essential suppliers short. That’s your gap. Then look ahead two to four weeks: if paying the GST would leave the account negative before more money arrives, add that to the gap. Our Cash Flow Gap & Fast Loan Matcher does this quickly with your own numbers.

Step 3: Compare your options

Option	How it works	Best when	Watch out for
Pay in full from cash	Clear it now	The gap is small and a buffer remains	Leaving yourself short for wages
Instalment arrangement	Agreed payments with Inland Revenue	The debt is moderate and cash flow is steady	Interest may continue; future returns must stay current
Short-term business loan	Lump sum to pay GST, repaid over months	A one-off spike with clear repayment	Total cost of finance
Line of credit	Draw for GST, repay as sales come in	GST gaps recur every period	Not clearing the balance between periods
Property-secured loan	Larger amount against property	GST combines with other tax debts	Using long-term debt for a short-term need

Instalment arrangement

Inland Revenue can agree to let you pay a tax debt over time. It’s a sensible option for many businesses, especially when the amount is manageable from future cash flow. But understand the conditions: interest may continue to accrue, and new returns must be filed and paid on time, or the arrangement can be cancelled. If you already have other arrears, an arrangement may be harder to keep.

Short-term funding

A short-term loan to pay GST clears the bill in one go, leaving you with one predictable repayment to a lender rather than a tax debt. For smaller unsecured amounts, same-day funding is possible when bank statements are ready. If several tax debts have built up, an IRD debt loan secured against property can consolidate them.

If you want to know quickly whether funding is an option, you can check your eligibility without any credit check.

Step 4: Talk to Inland Revenue early

Whatever you choose, don’t go quiet. If you’re arranging funding that will take a few days, let Inland Revenue know. If you’re applying for an instalment arrangement, do it before the debt grows. Engaging early generally leads to better outcomes than waiting for reminder letters.

Step 5: Fix the habit so it doesn’t happen again

Once the immediate bill is handled, set up systems so the next return is easy. Open a separate GST account and move three twenty-thirds of every GST-inclusive deposit into it, weekly or even daily; some owners automate this with a scheduled transfer. Consider filing more often, because monthly or two-monthly returns mean smaller bills and earlier warnings. Watch the period after your busiest months, since peak trading creates peak GST one period later. Review your accounting basis with your accountant — if you’re on an invoice basis and customers pay slowly, a payments basis (where eligible) may better match GST to cash received. And forecast your cash; our guide to a 13-week cash flow forecast shows how to spot tax squeezes weeks ahead.

A worked, illustrative example

An illustrative Wellington events business files GST two-monthly. A busy September–October period of conferences produces a large GST bill due on 28 November, but two major clients pay on 20th-of-the-month terms and won’t pay until December. The owner files the return on time, pays what the account can spare, and uses a short-term unsecured loan to cover the rest. The loan is repaid from the December client payments. The owner then sets up a separate GST account and a small line of credit for future peaks.

When GST trouble signals something bigger

If GST shortfalls happen every period, if other bills are also behind, or if the business is borrowing to pay old debts, it may be a sign that the business isn’t generating enough cash. In that case, talk to your accountant about pricing, costs and structure before taking on more debt. A responsible lender will tell you if they think funding won’t solve the problem.

A note on the January and May dates

The two exception dates catch many businesses out. The 15 January date lands just after Christmas closures, when cash is often at its lowest, and the 7 May date can coincide with a provisional tax instalment. Mark both in your calendar well ahead of time.

Get your GST sorted this week

If your GST is due and the cash isn’t there, a short conversation can clarify your options fast. We won’t run a credit check when you first enquire, your details won’t be sent around to a heap of lenders, and an actual person will call you to work out what makes sense.

Please give accurate figures on the form — the GST amount, due date, your monthly turnover and any property — so we can match you properly the first time. Talk to us about your GST bill.