Keep The Change
NZ Liquidations At A 15-Year High: What’s Really Happening? w Brent Norling
20 May 2026
Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
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It's the highest liquidation numbers in 15 years. It's the highest since the GFC. I actually think it's going to be a real hard next couple of years. National tax debt, we've gone from 2.5 to 9.5 and I think the next update will start with a 10. How often do the employees get burnt in this process? Yeah, it's a big mix.
I had someone recently who left a stable employment, moved to a company, they headhunted her, and then six weeks later, that company went into liquidation. And she's sitting there going, what the hell? I have seen countless cases where KiwiSaver's being deducted and not paid. If you're going to continue to trade, you need a solid plan, and it can't be some pie in the sky.
Today, we're going to learn more about what happens when people really get into trouble in business.
Chapter 2: What are the reasons behind the rise in liquidations in New Zealand?
And the man sitting across from me is fielding 160 calls a month at the moment from businesses who are struggling with tax debt and debts in general. Brent, it is good to see you, but almost a little bit scary. Thanks for having me. Now, normally I'm helping business owners grow and go the other way.
Whereas for you, you can be at the end where you're trying to show them what options they have or get them out of the hole so they can get going again. And things are very busy at the moment.
yeah yeah so do you want to talk to us about what a liquidation is to start with just so we can educate the audience and then secondly what why are there so many at the moment yeah maybe i'll start with what liquidation isn't so because a lot of people get confused between bankruptcy and liquidation so liquidation isn't about your personal insolvency that's bankruptcy liquidation is about a corporate entity that
Chapter 3: How does IRD debt impact businesses facing liquidation?
Is insolvent and has had a formal liquidator appointed either by court or shareholders.
So when you say insolvent, so they're not going to be able to meet their debts. Yeah. Yeah. Okay. So how does that process start? And then again, how come there is so much of it at the moment?
Yeah, I mean, how does the process start? It's usually creditor-driven. I mean, I think in New Zealand, it's definitely a bit of a she'll be right. And, you know, if you lose money on a job, you do the next job, try and pay the previous job. So a lot of the time, the shareholders are appointing a liquidator only when they have to, when they've got no other options left. And so...
Usually that process is commenced by creditors. Right now, the IRD is the majority of creditor appointments. So they're making up about 70% of high court liquidations right now. And it's the highest liquidation numbers in 15 years. It's the highest since the GFC. Wow.
So the IRD go to the high court and say, hey, we need to action this process. This business is not paying their debts, GST, PAYE, so they owe money to the IRD.
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Chapter 4: What happens to employees when their employer goes into liquidation?
Yep. And they set about saying you either need to pay this or shut this business down at a high level? Yep, absolutely. Okay. And why is it important for employees to think about this as well? Because I think people could get
in the trap of thinking, hey, this really only just applies to business owners, but employees, I'd imagine, sit and are vulnerable based on the business being vulnerable, right?
Yeah, there's a few considerations for employees. I mean, I had someone recently who left a stable employment position Moved to a company. They headhunted her. And then six weeks later, that company went into liquidation. And she's sitting there going, what the hell? I moved from a job into this job. And she had a family and things to sort.
So I think from an employment perspective, I don't know how you actually tackle that because no business is going to open their books for an incoming employee. But the other consideration is around PAYE. So if your employer doesn't pay your PAYE, that can have impacts downstream for you. The IID actually has the ability to hold employees liable for that.
I don't see them doing it, and there's probably some really good reasons why they don't, because they weren't responsible for the non-payment. But, you know, also things like KiwiSaver. I mean, if they see it on their payslips as being deducted, I have seen countless cases where KiwiSaver is being deducted and not paid.
You know, one, probably one of the worst that I saw, that's probably a few years ago now, but the business had received 250 demand letters from the IRD. They had not paid every single tax type you could imagine, including their staff's KiwiSaver deductions.
um and they did that for seven years and um finally it went into liquidation um and we actually acted for some creditors to hold those directors personally liable but you know it's a long process and it's a lot of cost and it's usually outside of what employees will pursue
I think I remember reading somewhere that if that is the case, that the employee still has their KiwiSaver paid into and the government, i.e. the taxpayer, then foots the bill.
Oh, really?
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Chapter 5: What is the difference between liquidation and bankruptcy?
Then I get to a point where I want to restructure because I know that I'm running into trouble. So I seek support.
to start in a new entity and start trading through that entity let's say burn the current entity and then the rules state or potentially that the me the the director of that business could be held liable for that what you're saying is very um few on very few occasions the director of that company is then having to pay those outstanding amounts yep okay yeah
that would i reckon would infuriate like a lot of people listening right because they probably think well hang on like how can they do that and and get away with that yeah you know it would um and it's one of those things where like and i understand that as well it's um right now the id just does not have the resources and i suppose the
Putting it into perspective of, you know, in early 2020, tax debt was around $2.5 billion. They didn't have the resources back then to prosecute every director who didn't pay tax. It's now $9.5 billion, and that was from September last year, and it's been continuing to rise. So I'm expecting the next update, national tax debt will sit at about, you know, above $10 billion.
Yes, they received some extra resources in the last budget and they've hired some resources, but it's not enough to combat that problem. And so generally what I see is the people who get prosecuted for nonpayment are generally the people who have done it multiple times.
They've done this, trade a company, incur tax debt, liquidate, start again, and just keep doing that, you know, four or five times. And there are people who do that. Do you think they do it deliberately? Nah. Um, most of the time, no. Um, most of the time it's not deliberate. Most of the time it's actually, um, probably just very poor business owners.
A lot of it in certain industries like construction, they might be great on the tools, but just terrible at pricing. That's one that we see all the time. And so they make genuine business mistakes that result in this debt being accumulated. Yeah.
You're getting 160 people roughly every month at the moment reaching out saying, hey, what are they saying? Are they saying I need help or are they saying what do I do?
Yeah. I mean, it's hard to generalize, but I'll probably the bulk of them are, um,
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Chapter 6: How do creditors initiate the liquidation process?
Uh, sometimes, uh, yes. Um, sometimes no. Um, but I'd say majority of the time it will include interest and penalties. Yeah.
Yeah. And all of this information or a lot of it becomes publicly available once you enter liquidation, right? Because you have to file publicly accessible, uh, updates of what assets there are, what liabilities there are?
Yeah, the liquidator, they have to do a report when they're appointed and then every six months after that. So in there, they'll talk about the reasons for the failure. They'll talk about the things that they're investigating. So it could be, you know, direct duty breaches, that kind of stuff. Then they'll talk around the assets and the likely realizations.
And then probably the most useful part, because a lot of it's just templated, the most useful part is there's a table in there which details the realizations and distributions. So you get to see a breakdown of everything that's come in and everything that's gone out.
Yeah. And going back to the people that are getting in touch with Norling Law, those people, so have they probably known that they've got some outstanding tax, but it's, oh, this doesn't seem to be an issue. And then I'll wait until I get that letter. And that's what is then prompting them going, okay, this is actually quite serious.
Yeah. Yeah. I think a big part of it is the IRD is notoriously slow in its collection process, and it will span years. And so I think people get a sense of false confidence around that, that it's been a couple of years, they're going to have a couple more. The reality is it's just a matter of time until the IRD get to. They do have a long list. But they are, they're in catch up mode.
I mean, I said highest liquidations in 15 years and the IRD make up 70% of those core applications.
And why is it that they are so slow or take so long? Is it again, just a resource thing, do you think? Yeah. Yeah. I think it's resource. Yeah. Okay, so they know that there's more people that they should be reaching out to, but they don't have the resource to do that.
And then I'm the business owner, I haven't paid my GST, my PAYE, and I get a bit of false confidence that, okay, I'm small fry, they're not even going to come for me. But at the same time, my GST and my PAYE is compounding with interest and penalties, and that figure is just getting larger and larger. Yeah.
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Chapter 7: What are the common pitfalls for business owners in managing debts?
Um, but you know, you say that and then someone will go, oh, that I can do it again. Um, that's not what I'm suggesting. Um, because, um, just cause someone did it doesn't mean, um, everyone's going to get away with that.
Well, there'll be people listening to this that are in debt to the IRD or even worried about their employees being in debt to the IRD. For those who may be burying their head in the sand or know that they've got some IRD debt, what should they be thinking about to ensure that they don't get one of those letters?
Yeah, look, one of the pet peeves that I have is most people who book in with us book in far too late. So they book in a consultation with us when it's, you know, they've got the statutory demand sometimes, but most of them already have the liquidation proceedings. What's the difference of those two, just so for the audience? So I'll step back another step again.
So the IOD will run a fairly informal collection process, demand letters, calls. Hey, Luke, you owe us money. When are you going to pay? Get us under an arrangement. Yeah. And then once that runs its course and someone makes a decision, we need to enforce this, the first thing they'll do for a company is issue a statutory demand. That gives 15 working days to pay.
And if the taxpayer doesn't pay, then the IRD will always then issue liquidation proceedings. So it's the step prior to liquidation. Once liquidation proceedings are filed, and that's at the high court level, So the taxpayer has 10 working days to liquidate themselves if that's what they want to do, or that option is removed. And so the earlier people engage, the more options there are.
So, you know, like for example, it's much easier to negotiate with the IID in the early stages because if we have to negotiate and we're dealing with statutory timelines and having to go to court and get adjournments, The risk goes up and cost goes up as well because now you've got a lawyer in court. And there's not very good communication between the case officers and the lawyers for the IRD.
So often the lawyers who are standing up have a long list of files that they're working through and their kind of go-to is we need to liquidate. So if you've agreed to an adjournment, it might not actually be communicated to the lawyer. So there's just all these kind of little niggles that I mean, the earlier people engage the better, um, but also there's more options.
So, um, yes, you can negotiate, but also, um, if it's a, you know, if it's a, if it's a $1 million debt and there is, you know, five grand of assets, um, you know, it might be worth actually just restructuring, liquidating the entity and starting again.
I always add to that because people look at that and I get the outrage where people look at that kind of liquidate and restart as just we should stop it. In certain cases we should where it's repetitive type conduct. But there's also some real upsides to doing that because, um, if they were to just liquidate and walk away, a lot of these businesses have employees.
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Chapter 8: What trends should business owners be aware of in the current economic climate?
How often do the employees get burnt in this process?
Yeah, it's a big mix. Actually, I find a lot of cases employees are looked after. So, for example, if the director has restructured and moved to a new entity, staff will come across, but they'll always take their leave balances and everything across with it because ultimately no one's going to stay and they have a bad culture if they don't. So they generally get looked after. But
Um, it just depends on the liquidation and what's there. Um, and the rest is a bit of a mixed bag.
So just the employer typically tell the staff, Hey, this is what's happening. And we're going to have to, you're going to have to sign a new contract under a new entity, that sort of thing. Like surely that would raise some alarm bells for some employees and they go, I don't know if I want to be involved in this or is that not typically what you see?
I don't see that. I actually see pretty much everybody signs a contract and keeps going. I think in my experience dealing with the employer side of it, I always tell the employer to just remain radio silent until the day. because the longer that period where you're talking to staff about it, the more unsettled that they're going to be. And I think employees really value that security.
So my preference is tell them on the day, tell them on the day because you can give them certainty, not just here's the decision, but here's this new entity and it's going to pick up your employment. And that certainly... I think is actually helpful for employees because if you drag that over a few weeks, there's a few weeks of just uncertainty and stress and sleepless nights.
So that's usually what we advise.
So going back to the knock-on effect, so people are then impacted by someone ahead of them not paying, then they can't potentially pay their creditors and it just flows as that. I'd imagine the exposure to that would be very large in an industry like construction because there's so much subcontracting that goes on. Yeah, it is.
You know, it's one of the things we always see is there's a lag between the event that caused the insolvency and then the formal insolvency event. And it is really common in the construction space in particular. And it does become a little bit like falling dominoes.
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