Rising Costs and Your Tax Position: What Households and Businesses Should Consider

Rising Costs and Your Tax Position: What Households and Businesses Should Consider

The latest Statistics New Zealand data shows what many households and business owners are already experiencing: costs are rising faster than wages. Annual inflation has lifted to 2.7%, with core inflation (excluding petrol) at 3.2% – above the Reserve Bank’s target range.

The biggest increases have been in essential areas:

• Household energy up 9.1% (gas up 15.4%)
• Dairy and eggs up 9.9%
• Insurance up 10%
• Local rates up 12.2%

For families, these are unavoidable costs. For businesses, they flow through into operating expenses and wage negotiations.

For households:

Wage growth isn’t keeping up: Almost half of workers received pay rises below 2%, which means many are going backwards in real terms. It’s important to check how much relief you’re actually getting from recent tax threshold changes – and whether other allowances (such as Working for Families or Independent Earner Tax Credit) apply to your situation.

Indirect costs matter: Rates, insurance levies, and energy bills often contain tax elements. Reviewing these regularly – and ensuring you’re claiming legitimate deductions where available (for example, home office costs) – can soften the blow.

For businesses:

Cash flow planning is critical: Rising input costs (insurance, energy, compliance) need to be factored into tax instalments to avoid unexpected shortfalls.

Retention pressures: Employees may seek higher wages to offset inflation. Structuring remuneration packages tax-efficiently can help balance business sustainability with staff wellbeing.

Investment decisions: With growth softening, making use of available depreciation deductions, R&D tax credits, and loss carry-forward rules may provide breathing space.

How We Can Help.

In tough economic conditions, staying on top of tax compliance is more important than ever. Missed payments or late filings can quickly escalate into penalties and mounting interest. If you’re already struggling, proactive engagement with Inland Revenue is key.

We support clients by:

Managing tax arrears: Negotiating instalment arrangements with Inland Revenue to spread payments and ease cash flow pressure.

Penalty and interest relief: Making applications to reduce or remit penalties and interest where circumstances allow.

Voluntary disclosures: Assisting with disclosures to minimise potential penalties and protect your position.

Final Word:

Inflation and rising costs aren’t just an economic headline – they directly affect your household budget or your business’s bottom line. If tax debts or compliance worries are adding to that pressure, the right advice and negotiation strategy can make all the difference.

If you’d like confidential advice on managing tax obligations or negotiating with Inland Revenue, get in touch.

What You Need to Know

If you’re behind on your tax, have undeclared income, or are part of a sector IR has spotlighted (such as property or cash-heavy industries), now is the time to act. Inland Revenue is ramping up both its people power and technology to find and address non-compliance faster.

This funding boost means:

• Increased chances of an audit
• Less time before missed payments turn into enforcement action
• More focus on old debts, including Small Business Cashflow Scheme loans in default

If you’re concerned about your tax position, whether it’s past non-compliance, unpaid debt, or confusion about obligations, now is the time to seek professional advice.

Voluntary disclosure options remain available, and acting before IR contacts you can substantially reduce penalties and avoid prosecution.

Need help getting back on track with the IRD? We assist individuals and businesses with disclosures, audits, and managing tax arrears. The earlier you act, the more options are available.

Disclaimer: This blog is for general informational purposes only and does not constitute legal or financial advice. Always seek professional guidance tailored to your situation.