Inland Revenue (IR) cautions employers that deducting money from employees’ pay without forwarding it to IR constitutes a grave offence, potentially resulting in imprisonment.
Employers are required to remit PAYE and other deductions from employees’ salaries or wages to Inland Revenue by the due date, including amounts for KiwiSaver and student loans.
Failing to pay deductions to Inland Revenue after making them carries a maximum penalty of up to 5 years in prison.
IR also warned that anyone who aids, abets, incites, or conspires with another person to commit this offence also commits a criminal offence.
Inland Revenue has successfully prosecuted numerous individuals for this,, with several receiving prison sentences.
In a recent sentencing, the judge cited the 2010 James case, where a Wellington property developer was warned that “there is nothing more corrosive to a society than an individual earning high levels of income and avoiding tax.”
In a Christchurch case dubbed “the worst tax offending of its kind,” a woman was sentenced to three years in prison for deducting $1,602,864.17 from employees’ wages without remitting it to Inland Revenue.
Robyn Walker, tax partner at Deloitte, described IR’s move as a timely reminder that failing to pay PAYE is a grave error with potentially severe consequences.
“Historically, it was always the case that not paying PAYE was an extremely frowned-upon action, as this is tax which is being deducted from the employee’s pay and held on trust by the employer. This is conceptually different to if a business is having trouble paying its own company tax bill because it is other people’s money.”
“Rightly or wrongly, during the Covid years there was more leniency applied to PAYE payments, and so some employers may have begun taking a more casual approach to paying PAYE.”
“This can be seen in the statistics of what makes up tax debt – in September 2000 there was $800m of ’employer’ tax debt; the June 2025 statistics put this at $2 billion now.”