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In the recent tax case of Singh v The commissioner of Inland Revenue [2017] NZCA 506, the court of appeal held the Commissioner can ignore sections 176, 177, 177c of the Tax Administration Act 1994 when pursuing bankruptcy due to non-payment of tax.

Facts of the case.

Mr. and Mrs Singh financial relief application was declined by the IRD. On several occasions they tried to enter into payment arrangement and seeking financial relief. However, the settlement and write off was not accepted by the IRD. Taxpayer decided to seek judicial review and challenged the commissioner decision.


The principal issue in the case was can the commissioner still pursue bankruptcy when the recovery of tax can cause serious financial hardship.

Court decision

The Hight court held the decision in favour of the commissioner. The court of appeal upheld the decision.

It was discussed the taxpayer did not have sufficient and supportive documents to prove the source of income. Their living expense and general household expenditure were missing from bank statements. Hence this issue raised a red flag that there must be an undisclosed source of income.

The request for financial relief did not involve any arrangement of payment. The commissioner was faced with an option of either write off everything of purse bankruptcy. The commissioner was entitled to pursue bankruptcy which will give control to official assignee over assets of taxpayer.

Court mentioned, it is unlikely for court to say that once financial hardship is established then the commissioner must grant relief as the two-step approach still stands intact (P v Commissioner of inland Revenue, [2015], which states:

  • would payment of tax result in serious hardship
  • Compliance history of taxpayer is paramount in seeking financial relief. It shows taxpayer commitment to sort out the tax debt. The two-step approach clearly states the commissioner can consider the previous non-compliance before granting any relief.
  • When seeking financial relief, your case must be genuine. All information must be presented to the commissioner.
  • You need to act in good faith and disclose the required information. You need to ensure maximum recovery is offered to the commissioner.


For any assistance required in setting up the payment arrangement for tax debt, get in touch with IBBZ Accounting.

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