New Zealand's Inland Revenue has cut its use-of-money interest rates for the second time in eight months, lowering the underpayment rate from 9.89% to 8.97% and the overpayment rate from 3.27% to 2.25% effective 16 January 2026, alongside new guidance on how penalties and interest apply across income tax, GST, and a broad range of other levies.
New Zealand’s Inland Revenue (IRD) has reduced interest rates on tax payments effective 16 January 2026.
The underpayment rate dropped to 8.97% from the previous 9.89%, while the overpayment rate decreased to 2.25% from 3.27%.
The earlier rates had been in place since 8 May 2025, making this the first adjustment in over eight months.
To accompany these changes, Inland Revenue released fresh guidance on penalties and interest in February 2026, providing taxpayers with current information on how these rates apply to their tax obligations. This guide covers reasons why penalties and interest are charged, the penalties and interest charged, ways to reduce or avoid penalties, what to do if tax cannot be paid on time, and a glossary to help understand the tax terms used.
New Zealand’s Inland Revenue applies interest to most major taxes and duties, covering income tax, GST, fringe benefit tax, KiwiSaver contributions, PAYE deductions, various withholding taxes, and a range of levies including casino duty, gaming machine duty, and lottery duty.
However, certain exemptions apply: interest is not charged on amounts under NZD 100 or on child support payments, while FamilyBoost and Fees Free are excluded from credit interest — meaning Inland Revenue will charge interest on overdue amounts for these but will not pay interest on overpayments. Student loans sit outside the general framework and are governed by their own interest rules.
Earlier, New Zealand’s Inland Revenue reduced its use-of-money interest (UOMI) rates on 28 May 2025, with the rate charged on underpayments falling from 10.88% to 9.89% and the rate paid on overpayments dropping from 4.30% to 3.27%.
